Eric Peterson
14
Canadian Crude Access into the U.S. Market Pipeline Infrastructure
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Transcript of Eric Peterson
Canadian Crude Access into the U.S. MarketPipeline Infrastructure
Current Footprint of ARB Midstream
2
Permian Gateway Project
Niobrara Connector
Existing/proposed storage
Terminals
Pipeline capacity
Marketing regions
• Independent, growth-oriented company providing crude oil, gas liquids, and refined products midstream and marketing & logistics solutions in North America
• Developing & acquiring interconnected assets to a marketing platform
• “Analyze, Identify, Execute”
• Quantitative analytics and deep market experience guide investment and development decisions
• Current Projects/Marketing
• Marketing ~20,000 b/d
• DJ Basin terminal: Niobrara Connector (NiCon)
• Midland Basin (Big Spring) terminal: Permian Gateway
Organic Projects – Energy Rail Hubs
3
Permian Gateway
3
Niobrara Connector
• Located in Howard County• 350 acres• Under construction• Pipe connection to new
gathering system• Transloading for crude oil
and drilling materials
• Located in the heart of DJ• 230 Acres• Phase I in service late
March• Transloading for crude oil
(inbound and outbound service), drilling materials, aggregates and other commodities
Observations
• Current western Canadian production is 3.9 million b/d.
• 3.2 million b/d (82% of total production) is exported to the U.S. via pipeline
• 2.6 million b/d (81%) of all pipe imports into the US flow through the Chicago/Patoka/Flanagan/Wood River market
• The Gulf Coast (PADD 3) is the destination for incremental Canadian heavy production growth
• PADD 3 has more than doubled consumption of Canadian crude from January 2014 to January 2016, and is expected to continue to grow
• Currently 233,000 b/d of Canadian supply flows through PADDs 2 and 4 to PADD 3
• Over the next three years, Canadian production is forecast to grow by 820,000 b/d, and most of those volumes will have to squeeze into PADD 3, flowing through the Chicago/Patoka/Flanagan/Wood River market
• Arbs need to widen to make this move work
4
Western Canadian production currently sits at about 3.9 million bpd
5
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
Pro
du
ctio
n &
Tak
eaw
way
Cap
acit
y (b
pd
)
Western Canada Supply (incl. diluent)
Source: CAPP
Pipe = 2,757
Pipe to EC = 500
WC Refining = 432
Rail/Other = 279
Movements of Canadian Crude Through US Markets
6
24
6
3132552,346
Source: Genscape, COLC, EIA
46,000 b/d flows through PADD 4 to other PADDs, 287,000 b/d flows through PADD 2 to other PADDs. The flows through PADD 2 will increase as supply grows
7Source: EIA
Pembina/Neche, ND- 80Dul/Minn MN - 307
Chicago, IL - 792
Peoria, IL -503
Tulsa, OK -167
Superior, WI - 26
Toledo, OH - 75
336
928
151
422
306
161
28
29From PADD 4
23
155
17
53
5
16
Denver, CO - 86
Great Falls, MT- 28
Casper, WY - 23
SLC, UT - 3
Sweet Grass, MT- 160
13
57
3
12
148
33
21
165112
82
187
14
Canadian / US Flow Balance
Western Canadian P1 P2 P3 P4 P5 Total
Flows Into 201 2,629 82 301 277 3,490
Stay In 201 2,342 82 255 277 3,157
Flow Out of - 287 - 46 -
*Based on Dec '15 Company Level Imports, Flows = pipe + rail + barge
St Louios, MS - 325
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
2,200,000
2,400,000
2,600,000
2,800,000
BP
DPADD 2
Crude Entering vs Processed
More Canadian crude than ever is flowing through PADD 2 to GC Markets
8Source: EIA
Over the last 6 months, an average of 225kbpd of Canadian crude passes through PADD 2 to
be processed in PADD 3
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
BP
DPADD 3
Canadian Crude (all grades) Entering vs Refined
PADD 3 has more than doubled Canadian crude consumption from Jan ‘14 to Jan ‘16
9
+2x
PADD 3 processes about 350kbp of Canadian crude, 220kbpd of which arrives via Pipeline from
other PADDs
Source: EIA
Regional Crude Production Forecasts Over the next 2 yrs (Jan ‘16 to Dec ‘18)
10
+820
-128
-213
-273
-6
+35
Source: Genscape, CAPP
Pipelines out of Western Canada will be full, and rail will be required (and must be priced in) to clear the market during periods over the next 2-3 years
11
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
Pro
du
ctio
n &
Tak
eaw
way
Cap
acit
y (b
pd
)Western Canada Supply (incl. diluent) vs Takeaway Capacity
Pipeline
Refinery
Rail
Source: EIA, CAPP, ARB Analytics
Price Spreads – WCS to WCS Cushing, WCS to WCS Houston
12
$0
$2
$4
$6
$8
$10
$/b
bl
WCS arbs to Cushing and USGC ($/bbl)
WCS - WCS @ Cush WCS - WCS @ Houston
252 276 285 290
211 219 220 305
1,679 1,939
2,095 2,085 2,080
195 283 299 305 305
130 198 348 408 468
Source: EIA, CAPP, Argus
Refined Volumes by PADD
PADD 3 needs to accommodate 500 to 800kbpd of Canadian
production
Canadian Pipeline Market Summary
13
• Current western Canadian production is 3.9 million b/d.
• 3.2 million b/d (82% of total production) is exported to the U.S. via pipeline
• 2.6 million b/d (81%) of all pipe imports into the US flow through the Chicago/Patoka/Flanagan/Wood River market
• The Gulf Coast (PADD 3) is the destination for incremental Canadian heavy production growth
• PADD 3 has more than doubled consumption of Canadian crude from January 2014 to January 2016, and is expected to continue to grow
• Currently 233,000 b/d of Canadian supply flows through PADDs 2 and 4 to PADD 3
• Over the next three years, Canadian production is forecast to grow by 820,000 b/d, and most of those volumes will have to squeeze into PADD 3, flowing through the Chicago/Patoka/Flanagan/Wood River market
• Arbs need to widen to make this move work
