Pipeline Capacity and the Crude Differential. A Presentation to the Wyoming Pipeline Authority Tuesday, April 25, 2006

Transcription

1 Pipeline Capacity and the Crude Differential A Presentation to the Wyoming Pipeline Authority Tuesday, April 25, 2006

2 Hardisty, AB Regina, SK Great Falls, MT Montana Refining 8,200 Clearbrook, MN Salt Lake City, UT Big West 25,000 ChevronTexaco 45,000 Holly Corp 25,000 Silver Eagle Refining 12,500 Tesoro 60,000 Billings, MT ConocoPhillips 58,000 ExxonMobil 60,000 Cenex 56,000 Reno Jct., WY Casper, WY Sinclair 22,500 Rawlins, WY Sinclair 72,000 Newcastle, WY Wyoming Refining 12,500 Guernsey, WY Cheyenne, WY Frontier 52,000 Denver, CO Suncor 88,000 Mandan, ND Tesoro 58,000 McPherson, KS NCRA 79,000 El Dorado, KS Frontier 110,000 St. Paul, MN Flint Hills Resources 298,000 MarathonAshland 70,000 Chicago, IL ExxonMobil 238,000 BP PLC 399,000 CITGO 159,000 Wood River, IL ConocoPhillips 306,000 Major Pipelines & Refining Capacities Cushing, OK Belle Fourche & Bridger Systems Other Carriers

3 Agenda 1. Problem Definition: Geographic Market Risk Crude production in the Rocky Mountains is at risk of shutting in due to lack of pipeline space Some crude production in the Rocky Mountains receives large discounts because it lacks market access 2. Problem Cause 3. Problem Development 4. Proposed Solutions and the Problems they solve

4 PROBLEM CAUSE Summary of Causes Supply Increased domestic production causes exports to lower paying regions Incremental domestic production and incremental Canadian imports compete for pipeline space Demand Seasonal slack decreases demand Expected and long term unexpected refinery shutdowns shock demand Other Quality differences Pipeline constraints on northern and southern exits from Rocky Mountains

5 Volume Gravity Market Benchmark Two North Dakotas Bowman County All others ~43,000 bpd ~61,000 bpd Guernsey Wyoming Sweet Guernsey, Mandan & Clearbrook North Dakota Light 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 0 Jan-01 Mar-01 May-01 Jul-01 Sep-01 Nov-01 Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Barrels per Month BOWMAN PROBLEM CAUSE Bow man Billings Bottineau Burke Divide Dunn Golden Valley McKenzie Stark Williams

6 PROBLEM CAUSE Volume Trend Market Benchmark Two Montanas Fallon Richland ~20,000 bpd ~56,000 Steady Increase Guernsey Wyoming Sweet Dramatic Increase Guernsey, Mandan & Clearbrook NDS or LS RICHLAND 30,000,000 25,000,000 20,000,000 FALLON 15,000,000 10,000,000 5,000,

7 PROBLEM CAUSE Wyoming Topics Two Markets: Casper/ Guernsey Wyoming produces 140,000 bpd of General Sour, Asphaltic, Condensate and Powder River Basin sweet Salt Creek CO2 Flood mbpd Billings, MT Southwest Wyoming Condensate Production Future tertiary projects in the Big Horn and horizontal plays in the Powder River Reno Basins Jct., may WY be in jeopardy Casper, WY Sinclair 22,500 Salt Lake City, UT Big West 25,000 ChevronTexaco 45,000 Holly Corp 25,000 Silver Eagle Refining 12,500 Tesoro 60,000 ConocoPhillips 58,000 ExxonMobil 60,000 Cenex 56,000 Rawlins, WY Sinclair 72,000 Wyoming Production Newcastle, WY Wyoming Refining 12,500 Guernsey, WY Cheyenne, WY Frontier 52,000 Denver, CO Suncor 88,000 Mandan, Tesoro 58,000

8 PROBLEM CAUSE Montana Enbridge 80,000 Alexander North Dakota IN THE PAST YEAR, BOTH NORTHERN AND SOUTHERN ROCKY MOUNTAINS EXITS Billings HAVE CURTAILED NOMINATIONS Express 282,000 Enbridge becomes apportioned on February 2005 Wyoming Powder River Platte becomes apportioned on December 2005, seven months after completing Express expansion RMPL 40,000 Casper RMPL 15,000 Poplar 40,000 Osage Baker Little Missouri Newcastle Mandan South Dakota Frontier 65,000 Rawlins RMPL 15,000 Cheyenne Ft. Laramie/ Guernsey Platte 144,000 Nebraska

9 PROBLEM CAUSE Montana North Dakota Montana Production A general statement Richland County s problem is Billings lack of space on Enbridge and lack of access to Salt Lake Wyoming s, Bowman County s and Fallon County s problem is lack of capacity Wyoming leaving Guernsey, WY Newcastle North Dakota Production without Bowman County Mandan South Dakota Bowman County Production Casper Wyoming Production Rawlins Sources: Montana Oil & Gas Commission; North Dakota Industrial Commission, Energy Information Administration Cheyenne Ft. Laramie/ Guernsey Nebraska

10 PROBLEM CAUSE Supply 800, , , , , , ,000 14% Overall Increase due to : -50,000 bpd or 17% increase in PADD IV Production 100, ,000 bpd or 73% increase in PADD II Imports -13,000 bpd or 5% increase in Canadian Imports Processed in PADD IV Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Source: Energy Information Administration PADD IV Production PADD IV Foreign Imports (Canadian) PADD IV Domestic Imports

11 SOLUTIONS Hardisty, AB Near Term Regina, SK Solutions Great Falls, MT Montana Refining 8,200 Cle Segregate Quality Streams to Guernsey Currently in effect Butte segregates Light Sweet Stream (LS) (.2%wt S 38+ API) Segregate LS to Salt Lake City 6 months Belle Fourche creates a new route for delivering LS to RMPL for delivery into Frontier PL at Casper Salt Lake City, UT Big West 25,000 ChevronTexaco 45,000 Holly Corp 25,000 Silver Eagle Refining 12,500 Tesoro 60,000 Billings, MT ConocoPhillips 58,000 ExxonMobil 60,000 Cenex 56,000 Reno Jct., WY Casper, WY Sinclair 22,500 Rawlins, WY Sinclair 72,000 Newcastle, WY Wyoming Refining 12,500 Guernsey, WY Cheyenne, WY Frontier 52,000 Denver, CO Suncor 88,000 Mandan, ND Tesoro 58,000 McPhers NCRA 79,000 El Dor Frontier 11 Cushi

12 SOLUTIONS Long Term Solutions Hardisty, AB Regina, SK Enbridge increases capacity on North Dakota system (18 Months). Great Falls, MT Montana Refining 8,200 Helps Richland County, MT production and proposed Bakken production in N.D. If Enbridge loops line from Alexander to Tioga, Belle Fourche could deliver more CCA barrels to Clearbrook Market. Build new pipeline leaving Guernsey to Cushing (2-3 Years) or other Midwest Destination Salt Lake City, UT Big West 25,000 ChevronTexaco 45,000 Holly Corp 25,000 Silver Eagle Refining 12,500 Ties all Rocky Mountain production Tesoro directly 60,000 to NYMEX contract and reduces geographic market risk Many rumored projects Billings, MT ConocoPhillips 58,000 ExxonMobil 60,000 Cenex 56,000 Reno Jct., WY Casper, WY Sinclair 22,500 Rawlins, WY Sinclair 72,000 Newcastle, WY Wyoming Refining 12,500 Guernsey, WY Cheyenne, WY Frontier 52,000 Denver, CO Suncor 88,000 Mandan, ND Tesoro 58,000 Cle McPhers NCRA 79,000 El Dor Frontier 11 Cushi

13 Pipeline Capacity and the Crude Differential A Presentation to the Wyoming Pipeline Authority Tuesday, April 25, 2006