Page 1
© 2014, Genscape Incorporated. All rights [email protected] US: +1 502 583 3435 | EU: +31 20 524 4089
Revealing Demand Segments and
Specifications to Identify and Quantify Market
Opportunities for Different Condensate Grades
Jodi Quinnell, Manager, Crude Oil Analytics – Genscape
Eric Peterson, Senior Business Analyst – ARB Midstream
October 22, 2014
Page 2
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades2
Agenda
Condensate Supply
• Supply Regions
• Quantity and Quality of the Production
• Impact of Recent Price Drop on Production
Condensate Demand
• Splitters, Refining Demand and Diluent
• Eagle Ford and Corpus Balance
• Additional Demand Needed to Balance Market
Page 3
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades3
Genscape’s Mission: Providing Transparency
Genscape’s mission is to
ensure greater transparency
in the commodities and energy
markets by providing the most
accurate and complete
fundamental data possible.
Price
Quantity
Supply
Demand
Fundamental Data includes:
• Production and Production Capacity
• Storage Levels and Storage Capacity
• Transportation Capacity and Volumes
Page 4
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades4
Genscape: Crude Oil Supply Chain
Supply &
Production
Acquisition &
Storage
Primary
Distribution
Product
Storage
End Consumer
Demand
Secondary
Distribution
How much oil will
be produced?
How much oil is
already sitting in
storage?
How much oil is
going to this port?
How much oil is
ready for export?
How much oil is
sitting on tankers?
How much do
customers want?
While others estimate, Genscape monitors and measures real-time production at every point of the supply chain.
Page 5
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades5
What is Condensate?
Condensate is a low-density mixture of hydrocarbon liquids that are present as gaseous components
in the raw natural gas produced from many natural gas and oil fields. It condenses out of the raw gas
if the temperature is reduced to below the hydrocarbon dew point temperature of the raw gas.
Condensate is also referred to as gas condensate, or sometimes natural gasoline because it contains
hydrocarbons within the gasoline boiling range.
• Lease Condensate- Light liquid hydrocarbons recovered from lease separators or field facilities at
associated and non-associated natural gas wells. Mostly pentanes and heavier hydrocarbons.
Normally enters the crude oil stream after production.
• Plant Condensate- Liquid hydrocarbons recovered at inlet separators or scrubbers in natural gas
processing plants at atmospheric pressure and ambient temperatures. Mostly pentanes and heavier
hydrocarbons.
Source: Wikipedia, EIA
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© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades6
Oil and Horizontal Rigs At Near All Time Highs
Source: Spring Rock, Rig Data
Total U.S. Rigs Total Rigs by Play
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
No
. o
f R
igs
Gas Oil Horz
0
100
200
300
400
500
600
No
. o
f R
igs
Eagle Ford Permian Bakken Niobrara
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© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades7
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
0
200
400
600
800
1000
1200
1400
1600
1800
$/b
bl
No
. o
f R
igs
Oil Rig Forecast 9/19 Oil Rig Forecast 10/10 Oil Prices 9/19 Oil Prices 10/10
Rigs Forecasted to Decline Through Forecast Period..
But Will Still Be Sufficient To Grow Production
Source: Spring Rock, Rig Data
Forecast
Page 8
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades8
U.S. and Canadian Crude Oil Production (Year-on-Year Changes)
0
200
400
600
800
1,000
1,200
1,400
2010 2011 2012 2013 2014 2015 2016 2017 2018
Mb
/d
U.S. CanadaSource: Spring Rock, Forecast as of Oct.10, 2014 Crude Oil and Gas Prices
Page 9
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades9
U.S. Production (crude oil + lease condensate) over 11 million b/d by year
end 2019, 65% of that is light and condensate
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Mb
/d
Heavy (<22°) Intermediate (>22° and <38°) Light (>38° and <45°) Condensate (>45°) Not Reported
~65%
Source: Spring Rock, Forecast as of Oct.10, 2014 Crude Oil and Gas Prices
2.8
MM
b/d
Page 10
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades10
Higher the crude API generally the more light end material yields
0
5
10
15
20
25
30
35
40
45
50
API C1 to C4 Naphtha Middle Distillates Gas Oil AtmosphericResidue
% Y
ield
or
AP
I
Venez Merey
Canadian Heavy
Mexican Maya
Bonny Light
Angola Soyo
Bakken
Eagle Ford
Page 11
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades11
Eagle Ford region largest contributor to overall condensate growth, but
other areas also producing condensate
-59
+281
+2,067
+614
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Heavy(<22°)
Intermediate(>22° and
<38°)
Light (>38°and <45°)
Condensate(>45°)
Mb
/d
2014
2019
0
50
100
150
200
250
300
350
400
Mb
/d
2014 to 2019 Growth By Play
Source: Spring Rock, Forecast as of Oct.10, 2014 Crude Oil and Gas Prices
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© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades12
S. Texas Production (crude oil + lease condensate).. Over 2.7 million b/d by 2019, 88% of
that is light and condensate, suited for refining and or/splitting
-
500
1,000
1,500
2,000
2,500
3,000
Mb
/d
Heavy (<22°) Intermediate (>22° and <38°)
Light (>38° and <45°) Condensate (>45°)
Source: Spring Rock, Forecast as of Oct.10, 2014 Crude Oil and Gas Prices
1.1
MM
b/d
~88%
0
200
400
600
800
1,000
1,200
1,400
1,600
Mb
/d
2014
2019
Page 13
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades13
“We’re working on options to handle the growing light
crude production in the Delaware Basin in Southeast New
Mexico in order to preserve the Permian crude qualities in
the Midland Basin.” –OXY 2Q Earnings Call
“In the Delaware Basin, we commenced production on
two high rate oil wells targeting the Delaware Sands.
Initial 30 day production from these two wells averaged in
excess of 1,000 BOE per day and consisted of nearly 90%
light oil.” –Devon 1Q Earnings Call
Is Permian production getting lighter with increased horizontal drilling?
0%
10%
20%
30%
40%
50%
60%
70%
Perc
en
tag
e o
f P
rod
uc
tio
n
Horz
Ver
0%
10%
20%
30%
40%
50%
60%
70%
Perc
en
tag
e o
f P
rod
uc
tio
n
Delaware-Horz
Midland- Horz
Page 14
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades14
Wattenberg Field in DJ Basin main source of condensate production
-
50
100
150
200
250
300
350
400
450
500
Mb
/d
DJ Basin Crude + Condensate
Heavy (<22°) Intermediate (>22° and <38°)
Light (>38° and <45°) Condensate (>45°)
19
0 M
b/d
~67%
Source: Spring Rock, Forecast as of Oct.10, 2014 Crude Oil and Gas Prices
Page 15
© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades15
Natural Gasoline competing with higher API condensates and expected to
add +100 Mb/d climbing to over 500 Mb/d by end of 2018
0
100
200
300
400
500
600M
b/d
PADD 1 PADD 2 PADD 3 PADD 4 PADD 5
10
0 M
b/d
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© 2014, Genscape Incorporated. All rights reserved.Revealing Demand Segments and Specifications to Identify and
Quantify Market Opportunities for Different Condensate Grades16
What could impact the Condensate outlook?
900
1,100
1,300
1,500
1,700
1,900
2,100
Mb
/d
$90 Oil and $4 Gas
$80 Oil and $4 Gas
$70 Oil and $4 Gas
Current Forecast (as of 10/10 Crude Oil and Gas Prices)
Source: Spring Rock, Forecast as of Oct.10, 2014 Crude Oil and Gas Prices
Page 17
Contact Us:
USALouisville
Genscape, Inc.445 E. Market Street Suite 200Louisville, KY 40202
EuropeAmsterdam
Genscape International, Inc.Damrak 20A1012 LH AmsterdamThe Netherlands
© 2014, Genscape Incorporated. All rights [email protected] US: +1 502 583 3435 | EU: +31 20 524 4089
Chris Shea
Sales Director, Oil
[email protected]
Tom DeMartino
Sales Director, Oil
[email protected]
To request a free trial or learn more, visit:
Genscape.com
Page 18
Introduction to ARB Midstream
• Denver based infrastructure development company providing midstream solutions
• Strong financial support from private equity
• Utilize in-depth fundamental analysis to identify value propositions of our assets
• Emphasis on early stage development opportunities
• Developing a new crude-by-rail terminal• Niobrara Connector “NiCon”
• Centrally located in the DJ Basin
• Unit train capable
• Scheduled in-service date: Q3 2015
18
Page 19
A look at current Eagle Ford takeaway infrastructure
19
776
247
1,469Houston
Texas City
Sweeney
Three Rivers
Corpus Christi
Page 20
Majority of Eagle Ford production suited for refining and/or splitting
0
200
400
600
800
1,000
1,200
1,400
1,600
Intermediate Light 45°-55° 55°-65° 65°-75° 75°+
Mb
pd
2014 2019
20Source: Genscape
Page 21
Refining and Blending
Page 22
Gulf coast waterborne imports of light crude nearly pushed out entirely
2,360,064
1,934,527
1,102,223
1,794,404
1,567,247
127,322
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
Heavy Intermediate Light
Wa
terb
orn
e Im
po
rts (
bp
d)
PADD 3 Waterborne Imports – Q1 2009 vs Q1 2014
Q1 2009 Q1 201422
Imports of Light +
Condensate have
declined by ~1MM bpd
since 2009. U.S.
production over that time
has grown by 2.6MM
Source: EIA
Page 23
790
100
1,469
776
1,440
739642
1,876
247 St. James
Lake
Charles
Houston
Texas CityPort
ArthurSweeney
Corpus
Christi
Three
Rivers
Baton
Rouge
Over 8 MMbpd refining capacity in the gulf, but refinery configuration and competition from other basins limits market size for Eagle Ford
Source: Company Information, EIA
Page 24
Imports into Corpus ~350,000 bpd, outbound movements have grown to over 720,000 bpd
(600,000)
(400,000)
(200,000)
-
200,000
400,000
600,000
800,000
Imp
ort
s v
s E
xp
ort
s (
bp
d)
Port of Corpus Christi Crude Movements
Condensate - In Condensate - Out Crude - In Crude - Out
24Source: Port of Corpus Christi
Page 25
Most barged volumes out of Corpus going to Gulf refiners, but a small percentage is heading to eastern seaboard
25
Texas City
HoustonPort Arthur St. James
Baton
Rouge
Corpus
ChristiEast Coast
Source: Clipper Data, EIA
Exports
Page 27
Co
nd
en
sa
te S
plitt
er
Condensate
LPGs
3-7%
Naphtha
30-35%
Distillate
30-35%
Bottoms
20-25%
Splitters separate the condensate feedstock into several streams
Page 28
Gulf Coast splitter capacity reaches 460,000 bpd by 2018
28
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
Ca
pa
city (
bp
d)
BASF/Total KM1 Castleton KM2 Martin Targa Trafigura
Source: Company Information, Argus
Page 29
The Corpus market can handle another 400,000 bpd of additional demand above and beyond current exports and splitters that have been announced to date
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
Supply Demand
Su
pp
ly &
De
ma
nd
(b
pd
)
Corpus Christi Supply-Demand Balance(2018)
Additional Demand
Houston Pipes
CC Barge/Ship
CC Splitters
CC Refining
29
Page 31
MT
MI
UT
WA
OR
NV
CA
AZ NM
KSCO
ID
ND
SD
NE
OKAR
LA
MS
AL
GA
FL
SC
NC
VA
WV
ME
VT
NY
PA
MN
IA
MO
WI
TN
OH
NH
MA
RIWY
KY
INIL
TX
Routes to Edmonton:
1. Capline to Chicap, Chicap to
Southern Lights, Southern
Lights to Hardisty or
Edmonton
2. KMCC to Explorer to Cochin
3. Rail: Mont Belvieu to
Edmonton
Edmonton
123
Diluent Routes to Edmonton
Page 32
Canadian Imports of diluent to exceed 500,000 bpd by 2017
32
-
100
200
300
400
500
600
700
Can
ada
Sup
ply
/De
man
d (
Mb
/d)
Canada Diluent Supply/Demand
Canadian Production Enbridge Southern Lights KM Cochin Imports - Rail Demand - Diluent
Page 33
Conclusions
• U.S. Condensate Supply Continues to Grow Rapidly
• Crude oil and lease condensate production from South Texas forecast to exceed 2.45 million bpd by 2018
• Incremental increase of 950kbpd
• U.S. Supply is Mostly Super Light and Condensate
• 65% of the production is superlight crude oil and condensate
• STX Takeaway Capacity Not an Issue
• Plenty of access to the various markets
• Glut Hits Corpus, Various Sources of Demand
• Refining and Blending
• Splitters
• Diluent
• Additional demand required to balance Corpus market by 2018
33
Page 34
Eric Peterson
Senior Business Analyst
[email protected]
(208) 403-3742
www.arbmidstream.com