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ASPHALT SUPPLY IN A VOLATILE OIL WORLD Bill Haverland ConocoPhillips Company.

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Presentation on theme: "ASPHALT SUPPLY IN A VOLATILE OIL WORLD Bill Haverland ConocoPhillips Company."— Presentation transcript:

1 ASPHALT SUPPLY IN A VOLATILE OIL WORLD Bill Haverland ConocoPhillips Company

2 Issues to be Discussed Crude Oil Supply Crude Oil Supply Crude Oil Pricing Crude Oil Pricing Refining Capacity Refining Capacity Products Supply Products Supply Products Pricing Products Pricing Future of the Industry Future of the Industry

3 CRUDE OIL SUPPLY A WORLD LOOK

4 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

5 Crude Oil Demand Demand has risen by 7 MMBD (9%) since 2002. Demand has risen by 7 MMBD (9%) since 2002. Demand at 85 MMBD or 98% of world daily delivery capacity. Demand at 85 MMBD or 98% of world daily delivery capacity. Vulnerable to supply disruptions caused by storms, accidents, breakdowns, political unrest. Vulnerable to supply disruptions caused by storms, accidents, breakdowns, political unrest. 65% of proven reserves within national oil companies and 16% held by Russia. 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). Traditional companies have full access to 7% of reserves and 12% through partners (if allowed).

6 CRUDE OIL PRICING

7 WTI Price by Year

8 WTI Price by Quarter

9 Current Crude Pricing

10 REFINING CAPACITY

11 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

12 Simple Refinery 650- CRUNHT KHT DHT GASES TO MOGAS JET/KERO 6OIL or ASPHALT (if heavy crude) TO NO.2 DU CRUDE OIL 650+ “Hydroskimming” Refinery, many exist all over the world

13 CCU - “ Complex ” Refinery CRUNHT KHT DHT ALKY CCU DU CRUDE OIL GASES VAC GASES 650- 1050 TO MOGAS JET/KERO TO 2OIL TO MOGAS TO 2OIL 650- 650+ 6OIL ASPHALT GASOLINE GASOIL 1050+

14 CCU/HCU/Coker - “ Very Complex ” Refinery ISOM CRUNHT 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 JET/KERO TO MOGAS TO 2OIL MTBE

15 Refinery Yield (% of Crude Intake)

16 U. S. Refining Capacity Last New U. S. Refinery Built in 1976 Source: Oil & Gas Journal 319 175 158 131

17 U. S. Asphalt Refining Capacity Production Range: 600 B/D to 60,000 B/D Source: Oil & Gas Journal

18 U. S. Refining Coking Capacity

19 U.S. Coker Construction Projects 2005 - 2011 Planning, Engineering, or Construction Phase Planning, Engineering, or Construction Phase Total Refineries: 360 MB per day Total Refineries: 360 MB per day Asphalt Refineries: 197 MB per day Asphalt Refineries: 197 MB per day * Source: Argus Asphalt Report

20 PRODUCTS SUPPLY/DEMAND

21 Supply Source for U. S. Demand

22 U. S. Product Demand, MB/D

23 Historical Asphalt Supply/Demand Millions Tons - Liquid Source: Oil & Gas Journal

24 PRODUCTS PRICING

25 Prices by Quarter

26 Gasoline Price Components

27 Prices by Quarter

28 Asphalt vs Coker Feed Value

29 Current Coking Economics Gasoline/Diesel Pricing Gasoline/Diesel Pricing Aug., 07 Price: $95.00/BBL Aug., 07 Price: $95.00/BBL Less Distribution: 6.00/BBL Less Distribution: 6.00/BBL Net to Refinery: $89.00/BBL Net to Refinery: $89.00/BBL Kansas City Asphalt Pricing Aug 07: $54.50/BBL* ($40/Ton): $7.15/BBL $47.35/BBL Lost Value: $41.65/BBL * Source – Poten & Partners

30 Current Coking Economics 30,000 BBLS/Day Asphalt Production 30,000 BBLS/Day Asphalt Production X 70% Gasoil Production X 70% Gasoil Production 21,000 BBLS Gasoil for Gasoline/Diesel 21,000 BBLS Gasoil for Gasoline/Diesel X $41.65/BBL Gasoline/Diesel diff. To Asphalt X $41.65/BBL Gasoline/Diesel diff. To Asphalt $874,650 per day added margin $874,650 per day added margin $1 Billion / $874,650 = 1,143 days (3.1 years payoff) $1 Billion / $874,650 = 1,143 days (3.1 years payoff)

31 FUTURE OF THE INDUSTRY

32 Current Realities Crude production at maximum rates based on existing infrastructure Crude production at maximum rates based on existing infrastructure U.S. refining running at maximum capacity (less turnaround activity) U.S. refining running at maximum capacity (less turnaround activity) No new refineries in the near term No new refineries in the near term Existing refinery expansions must fill gap Existing refinery expansions must fill gap Increase crude capacity and conversion capabilities to meet light product demand Increase crude capacity and conversion capabilities to meet light product demand Asphalt must keep pace with conversion feed values to encourage production Asphalt must keep pace with conversion feed values to encourage production

33 Factors Influencing Asphalt Price Absolute price of crude (WTI benchmark) Absolute price of crude (WTI benchmark) Light/Heavy crude price differential Light/Heavy crude price differential Light product “crack spread” Light product “crack spread” Coking economics Coking economics Impact of clean fuels (sweet crudes) Impact of clean fuels (sweet crudes) Heavy crude availability (Venezuela/Canadian) Heavy crude availability (Venezuela/Canadian) Transportation costs Transportation costs Supply/Demand Supply/Demand

34 Future For Asphalt More heavy crude being run (availability and price) More heavy crude being run (availability and price) Clean fuels capital behind refiners, up-graders next? Clean fuels capital behind refiners, up-graders next? Asphalt is more expensive in a $70.00 crude world Asphalt is more expensive in a $70.00 crude world Asphalt has to trend faster with crude oil prices Asphalt has to trend faster with crude oil prices Asphalt has to be more competitive with light products Asphalt has to be more competitive with light products Transportation costs rising – Rail, Barge, Terminalling Transportation costs rising – Rail, Barge, Terminalling State asphalt price indexes reduce supplier/contractor risk State asphalt price indexes reduce supplier/contractor risk

35 QUESTIONS


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