ASPHALT PRICING IN A VOLITILE OIL WORLDCrude Oil Pricing Refining Capacity Products Supply Products...
Transcript of ASPHALT PRICING IN A VOLITILE OIL WORLDCrude Oil Pricing Refining Capacity Products Supply Products...
ASPHALT SUPPLY IN A
VOLATILE OIL WORLD
Bill Haverland
ConocoPhillips Company
Issues to be Discussed
Crude Oil Supply
Crude Oil Pricing
Refining Capacity
Products Supply
Products Pricing
Future of the Industry
CRUDE OIL SUPPLY
A WORLD LOOK
Crude Oil Supply (2006)
World Crude Oil Production
Millions of Barrels Per Day
World Proven Crude Oil
Reserves
Billions of Barrels
W. Europe
US/Canada
Asia/Pacific Africa
Middle East
FSU/E. Europe
Latin
America
11.3
6.3
10.6
8.4 9.8
FSU/E.
Europe
W. Europe
15 Latin
America
US/Canada
Asia
/Pacific
Africa
Middle
East
743
201
116 79
102
36
Asia/Pacific
Africa
26.0
12.6
Middle East
Total: 85MMB/D Total: 1,292 BB
Crude Oil Demand
Demand has risen by 7 MMBD (9%) since 2002.
Demand at 85 MMBD or 98% of world daily
delivery capacity.
Vulnerable to supply disruptions caused by
storms, accidents, breakdowns, political unrest.
65% of proven reserves within national oil
companies and 16% held by Russia.
Traditional companies have full access to 7% of
reserves and 12% through partners (if allowed).
CRUDE OIL PRICING
WTI Price by Year
0
10
20
30
40
50
60
70
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
WTI Price by Quarter
0
10
20
30
40
50
60
70
80
1Q 2
001
1Q 2
002
1Q 2
003
1Q 2
004
1Q 2
005
1Q 2
006
REFINING CAPACITY
Topping Refinery
DU CRUDE OIL
GASES NAPHTHA
AND
6OIL or ASPHALT
(if heavy crude)
GASOIL
FEEDSTOCKS
650-
650+
“Tea Pot”
Not A Refinery
Really Just A
Crude
Distiller
Simple Refinery
650- CRU NHT
KHT
DHT
GASES TO MOGAS
JET/KER
O
6OIL or
ASPHALT
(if heavy crude)
TO NO.2
DU CRUDE OIL
650+
“Hydroskimming” Refinery,
many exist all over the
world
CCU - “Complex” Refinery
CRU NHT
KHT
DHT
ALKY
CCU
DU
CRUDE
OIL
GASES
VAC
GASES 650-
1050
TO MOGAS
TO MOGAS
JET/KER
O
TO 2OIL
TO MOGAS
TO MOGAS
TO 2OIL
650-
650+
6OIL
ASPHALT
GASOLINE
GASOIL
1050
+
CCU/HCU/Coker - “Very Complex” Refinery
ISOM
CRU NHT
KHT
DHT
HCU
ALKY
CCU
DU
GASES
CRUDE OIL
GASES
VAC
GASES
650-750
750-1050
COKER
GASES
COKE
H2
PLANT
TCU/VIS
DEASPHALTER
TO
MOGAS TO
MOGAS TO
MOGAS
TO
MOGAS TO
MOGAS TO
MOGAS
TO 2OIL
MTBE
Refinery Yield (% of Crude Intake)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
TOPPING
RFY
SIMPLE
RFY
CCU RFY COKER
RFY
OTHER
MOGAS
JET
LT NAPH
HVY NAPH
GAS OIL
NO.2
NO6 or Asphalt
COKE
U. S. Refining Capacity
14
14.5
15
15.5
16
16.5
17
17.5
18
18.5
1980 1995 2000 2006
more than 30
less than 30
Crude Dist Cap
Last New U. S. Refinery Built in 1976
Source: Oil & Gas Journal
319
175 158 131
U. S. Asphalt Refining Capacity
72
98
60
42
1980 1995 2000 2006
400
450
500
550
600
650
700
750
800
# Refineries
Asphalt Capacity
Production Range: 600 B/D to 60,000 B/D
Source: Oil & Gas Journal
U. S. Refining Coking Capacity
50
58
5681
120
138
46
48
50
52
54
56
58
60
1995 2000 2006
0
20
40
60
80
100
120
140# Refineries w/Cokers
Coke Production, MT/D
U.S. Coker Construction Projects
2005 - 2011 Engineering, Procurement & Const. Phase
Total Refineries: 245 MB per day
Asphalt Refineries: 135 MB per day
Planning or Early Engineering Phase
Total Refineries: 176 MB per day
Asphalt Refineries: 121 MB per day
* Source: Argus Asphalt Report
PRODUCTS
SUPPLY/DEMAND
Supply Source for U. S. Demand
0
2
4
6
8
10
12
14
16
18
20
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
MM
B/D
Domestic Crude Production Imported Crude Imported Products
U. S. Product Demand, MB/D
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Gasoline Diesel Jet Resid Asphalt
1995
2000
2004
2005
Historical Asphalt Supply/Demand Millions Tons - Liquid
0
10
20
30
40
50
60
1980 1995 2000 2003 2005 2006
Supply
Demand
Source: Oil & Gas Journal
PRODUCTS PRICING
Prices by Quarter
20
30
40
50
60
70
80
90
100
1Q 2
000
1Q 2
001
1Q 2
002
1Q 2
003
1Q 2
004
1Q 2
005
1Q 2
006
WTI
Gasoline
Prices by Quarter
0
10
20
30
40
50
60
70
80
90
1Q '0
0
1Q '0
1
1Q '0
2
1Q '0
3
1Q '0
4
1Q '0
5
1Q '0
6
WTI
Gasoline
Asphalt
Asphalt vs Coker Feed Value
0
10
20
30
40
50
60
70
80
90
Jan-0
2
May
-02
Sep-0
2
Jan-0
3
May
-03
Sep-0
3
Jan-0
4
May
-04
Sep-0
4
Jan-0
5
May
-05
Sep-0
5
Jan-0
6
May
-06
Sep-0
6
WTI
P&P MC Avg
gulf coast coker value
Economic Analysis – 2005 YE
Gasoline/Diesel Pricing
Jan., 06 Price: $70.00/BBL
Less Distribution: 6.00/BBL
Net to Refinery: $64.00/BBL
Kansas Asphalt Pricing
12/05 YTD: $32.94/BBL*
($35/Ton): 6.25/BBL
$26.69/BBL
Lost Value: $37.31/BBL
* Source – Poten & Partners
Coking Economics – 2005 YE
30,000 BBLS/Day Asphalt Production
X 70% Gasoil Production
21,000 BBLS Gasoil for Gasoline/Diesel
X $37.31/BBL Gasoline/Diesel diff. To Asphalt
$783,510 per day added margin
$1 Billion / $783,510 = 1,276 days (3.5 years payoff)
Economic Analysis – Recent Update
Gasoline/Diesel Pricing
Jan., 07 Price: $62.75/BBL
Less Distribution: 6.00/BBL
Net to Refinery: $56.75/BBL
Kansas Asphalt Pricing
12/06 MTD: $49.11/BBL*
($35/Ton): 6.25/BBL
$42.86/BBL
Lost Value: $13.89/BBL
* Source – Poten & Partners
Coking Economics – Recent Update
30,000 BBLS/Day Asphalt Production
X 70% Gasoil Production
21,000 BBLS Gasoil for Gasoline/Diesel
X $13.89/BBL Gasoline/Diesel diff. To Asphalt
$291,690 per day added margin
$1 Billion / $291,690 = 3,428 days (9.4 years payoff)
FUTURE OF THE INDUSTRY
Current Realities
Crude production at maximum rates based on
exiting infrastructure
U.S. refining running at maximum capacity
No new refineries in the near term
Existing refinery expansions must fill gap
Increase crude capacity and conversion
capabilities to meet light product demand
Asphalt must keep pace with conversion feed
values to encourage production
Asphalt not as politically charged as fuels
Factors Influencing Asphalt Price
Absolute price of crude (WTI benchmark)
Light/Heavy crude price differential
Light product “crack spread”
Coking economics
Impact of clean fuels (sweet crudes)
Heavy crude availability (Venezuela)
Transportation costs
Supply/Demand
Future For Asphalt
More heavy crude being run (availability and price)
Clean fuels capital behind refiners, up-graders next?
Asphalt is more expensive in a $60.00+ crude world
Asphalt has to trend faster with crude oil prices
Asphalt has to be more competitive with light products
Transportation costs rising – Rail, Barge, Terminalling
Refiners less willing to shoulder price risk
State asphalt price indexes reduce supplier/contractor risk
QUESTIONS
Worldwide Coker Additions
Refinery Coker Additions – 1,570M Barrels
Crude Upgraders - 1,214M
Total Resid Destruction - 2,784M*
*Reduces world asphalt and #6 oil supply
Source – Argus Asphalt Report
Light-Heavy Product Price Spread
Drives Refinery Investment Cycle
0
5
10
15
20
25
30
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
1995-2000 Six New Cokers
60
65
70
75
80
85
90
95
100
1980 1985 1990 1995 2000 2005 2010 2015 2020
Total U.S. Capacity Utilization
Source: U.S. Department of Energy 1
Percent utilization defined as: gross input to refineries /operable capacity.
Perc
en
t u
tilizati
on
1
History
Forecast (DOE)
90%
• Demand growth has outpaced capacity expansion
• Investment focused on clean fuels
• Insufficient global capacity to process more difficult crudes