Petroleum 101—January 2008

California’s Petroleum Industry

January 2008

Western States Petroleum Association


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Oldest petroleum trade association in the nation; formed in 1907

29 member companies that explore, produce, transport, refine and market

Six states (CA, WA, OR, NV, AZ, HI)

511,701 jobs (178,369 direct, 300,397 indirect); 335,000 jobs in California (115,000 direct jobs, 220,000 indirect)

$173 billion in total sales; $143 billion in California

$27 billion annual payroll; $18 billion in California

$6.3 billion annual sales and excises taxes; $5 billion in California


Who we are

Sources: LECG Corp., A Profile of the Petroleum Sector Estimates for 2004


California conventional fuel supplies

Petroleum (2006) In-State - 37% Alaska - 21% Foreign - 42%

Electricity (2006) In-State - 78% Imports - 22%

Natural Gas (2005) In-State - 15% Canada - 23% Rockies - 24% Southwest - 38%

3Source: California Energy Commission


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Underground Oil

Cogeneration

Natural Gas Processing Plant

Onshore Oil & Natural Gas Production

Imports

Oil Pipeline

Offshore Oil & Natural Gas Production

Natural Gas Pipeline

Petroleum 101: From wellhead to pump

Homes and Businesses

Gasoline, Diesel, Jet

Fuel

Refinery


Explore Produce Transport Refine/Process

Storage Tanks

Truck

Market

Cogeneration

Distribution Terminal

Product Pipeline

Natural Gas Wellhead

Distribute

Natural Gas Pipeline

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Produce 650,000 barrels of crude oil per day –

the 4th largest producing state

Produce 812 million cubic feet per day of

natural gas; ¾ of which is associated gas

Operate14 refineries that make gasoline

Refine 46.5 million gallons of gasoline and 8.7

million gallons of diesel fuel per day.


Source: California Division of Oil, Gas and Geothermal Resources

What our members do

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What oil provides

40 percent of the nation’s energy supply

97 percent of the nation’s transportation fuels

Sources: American Petroleum InstituteU.S. Energy Information AdministrationCalifornia Energy Commission

Petroleum Products from a Barrel of Crude Oil in California

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Retail Gasoline Market

Sources: Center for the Study of Energy Markets, University of California;

Authors Severin Borenstein, Jim Bushnell, Copyright 2005

Gasoline Service Stations in California – Ownership 2002


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Supply and Demand

Sources: U.S. Energy Information Administration, International Energy Outlook, July 2005; Annual Energy Outlook 2006

California Energy Commission

World petroleum demand projected to increase from 82 million barrels per day in 2004 to 111 million barrels per day in 2025

U.S. crude production projected to increase from 5.4 million barrels per day in 2004 to a peak of 5.9 million barrels per day in 2014

CA demand for gasoline expected to reach 48.6 to 52.1 million gallons per day by 2025

CA demand for diesel expected to reach 13.6 to 13.8 million gallons per day by 2025


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Supply and Demand

Sources: California Energy Commission

CA now consumes 44 to 45 million gallons of gasoline and 10 million gallons of diesel fuel per day

Demand for transportation fuels increased nearly 50% in last 20 years

Number of refineries producing gasoline in California dropped from 32 in mid-1980s to 14 today

California now imports 3.5 million gallons of gasoline per day

Transportation fuel infrastructure is inadequate and not keeping up with rapidly growing population and demand


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Supply – California Production

California crude oil production has declined 23 percent since 1996

Alaskan production is expected to decline about 1.5 percent per year until 2016

Sources: California Energy Commission

Alaska Department of Revenue

Foreign Crude Oil

California Crude Oil

Alaska Crude Oil

Crude Oil Supplies to California Refineries


Imports: California projected gasoline and diesel demand

In-State Refinery Production Supplied to

California

Demand Without Greenhouse Gas

Regulations

Projected Imports

Demand With Greenhouse Gas

Regulations

Bil

lon

Ga

llo

ns

25

15

20

1.9 Billion Gallons

4.6 Billion Gallons

2003 2025Source: California Energy Commission

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California is an energy Island


Source: California Energy Commission

Time required to ship crude oil or products from

Pacific NW: 8 to 10 days

Gulf Coast: 14+ days

Middle East: 40 days

Far East: 40 days


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California refinery system runs near its capacity limits

California is isolated from other supply sources

The region uses a unique gasoline that is difficult and expensive to make

Marine Infrastructure is at or near the limits of throughput capacity

If marine infrastructure does not expand, crude oil supplies could become even more constrained

Permits can be difficult to obtainSources: U.S. Energy Information Administration, 2003 California Gasoline Price Study

American Petroleum Institute

California Energy Commission, Transportation Fuels, Technologies, and Infrastructure Assessment Report 2003

Supply Issues

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Where do we go from here?

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Emerging energy technologiesU.S petroleum companies invested $98 billion in frontier hydrocarbons and renewable and alternative energy technologies between 2000 and 2005, 73 percent of the total $135 billion invested

Source: American Petroleum Institute, based on data from more than 250 company annual reports for 2000 – 2005 and U.S. Department of Energy, Energy Information Administration

0 20 40 60 80 100 120

Oil & Gas Companies

Other Private

Federal Government

$5 billion

4% of total

$32 billion

23% of total

$98 billion

73% of total


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Shell: wind farm displaces 85,000 tons of carbon dioxide BP: $500 million research to UC Berkeley Chevron: photovoltaic facility to help power operations ConocoPhillips: developing hydrogen infrastructure and

animal fat to renewable diesel process ExxonMobil: exploring new approaches to internal

combustion engine technology Valero: implemented efficiencies that will reduce

greenhouse gas emissions Tesoro: flare gas compressors to reduce flaring Occidental and AERA: cogeneration facilities produce

electric power and steam BP, Chevron, and Shell: members of the California Fuel

Cell Partnership

Renewable and alternative energy California refiners added close to 1 billion gallons of ethanol to gasoline

last year, making California the largest ethanol consuming state in U.S.


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Prices Determined by Supply and Demand, Driven by Crude Oil Costs

Source: American Petroleum Institute: U.S. average price for regular gasoline

Motor Gasoline and Crude Oil Prices: 2001 to 2006


What We Pay For in a Gallon of

Diesel

(November 2007)

Taxes

Distribution and Marketing

Refining

Crude Oil

14%

7%

17%

62%

What We Pay For in a Gallon of Regular

Gasoline

(November 2007)

Taxes

Distribution and Marketing

Refining

Crude Oil

13%

9%

10%

68%

Source: Energy Information Administration

Based on U.S. average price per gallon

Gasoline prices

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Oil and Natural Gas Earnings (cents per dollar of sales)

Sources: American Petroleum Institute, U.S. Census Bureau for manufacturing and Oil Daily for the oil and natural gas industry.

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Sources: Based on company filings with the federal government as reported by U.S. Census Bureau and Oil Daily.

Oil and Natural Gas Earnings

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Oil & natural gas new investments and earnings

Source: American Petroleum Institute


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The energy Americans consume today is brought to us by investments made years ago or even decades ago.

Today’s oil and natural gas earnings are invested in new technology, new production, and environmental and product quality improvements to meet tomorrow’s energy needs.

The petroleum industry’s earnings are very much in line with other industries and often are lower

Oil & natural gas new investments and earnings

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Petroleum 101—January 2008

Documents

california demand

petroleum sectorestimates

california division

california ownership

california projected

states ca

day demand

gallons of gasoline