bjørnar tonhaugen rystad energy marine money geneva forum ... · consulting and business...

Bjørnar Tonhaugen

Rystad Energy

Marine Money Geneva Forum, 28 May 2019

Office locationsRystad Energy: Independent energy

consulting and business intelligence data

firm established in 2004, headquartered

in Oslo with offices across the globe.

Databases: Covering energy

fundamentals, upstream, oilfield services

and renewable energy industries.

Analytics: Alongside the database suite

we offer an extensive library of market

reports, commentaries and fact sheets.

Consulting: A leading advisor on

strategy, markets and business

development within the energy space

globally.

America’s incredible path towards oil dominanceMillion barrels per day of production

*Other liquids includes ethanol, biodiesel and processing gains.

**Kingdom of Saudi Arabia, including 50% of the Neutral Zone (shared with Kuwait)

Source: Rystad Energy UCube, Rystad Energy research and analysis

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US Crude Oil US NGL US Other Liquids* US Total Oil Demand

Aug 2005: US oil products demand peaks beyond 21 million bpd





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Aug 2005: US oil products demand peaks beyond 21 million bpd

Sep 2008: US crude oil production dips briefly below 4 million bpd

Mar 2014: US petroleum supply passes that of Saudi Arabia

Q4 2020: US becomes net exporter of oil and petroleum products in a sustainable mannerQ1 2021: US+Canada becomes self-sufficient in crude oil





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Nov 30th 2018: US briefly becomes net exporter of crude oil and petroleum products

Nov 2017: US crude oil production passes 10 million bpd

Sep 2018: North America (US+CA) becomes self-sufficient in oil products





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Q3 2019: US exports more oil and petroleum products than Saudi Arabia (i.e. when disregarding US oil imports)

Q4 2020: US becomes net exporter of oil and petroleum products in a sustainable mannerQ1 2021: US+Canada becomes self-sufficient in crude oil

2025: US becomes net exporter of crude oil, while shale drillers return more than 50 BUSD to investors

The North American shale revolution dwarfs all other oil supply revolutions

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Years

North American shale (2005-2030E) Offshore (1970-1995) Saudi Arabia (1960-1985) Russia (1960-1985)

Source: Rystad Energy UCube May 2019

Oil supply “revolutions” in perspective

Million barrels per day

2019E

2025E

5 6008 800

16 000

8 300

20 200

11 200

4 200

Bakken Eagle Ford Permian

Midland

Niobrara Permian

Delaware

Marcellus Utica

There’s between 10 and 25 years left of Tier 1 (“best”) drilling locations across US shale plays!

*Based on the drilling pace of 2018Source: Rystad Energy research and analysis

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# of remaining

Tier1 drilling

locations, January

2019

# of Tier1 wells2018

/

Years of Tier1

drilling*

=

Element Drilling Activity

560740

1 180

480

1 210

460

150


Midland

Niobrara Permian

Delaware

Marcellus Utica

10 12 13 17 17 24 28


Midland

Niobrara Permian

Delaware

Marcellus Utica

Breakeven oil prices are sub-$50 now also for Shale..

*The 2019 number as of May 2019

Source: UCube May 2019

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Development in Brent breakeven oil prices by Supply Segment (2014-2019*)

USD per barrel

85

45

69

4747

39

55

37

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20

30

40

50

60

70

80

90

2014 2015 2016 2017 2018 2019*

Supply Segment Group Reduction in breakeven

price 2015-2018

Offshore deepwater 30 %

Offshore shelf 15 %

Shale/Tight oil 44 %

Other Onshore 31 %

And top acreage positions have median breakeven prices below $50 WTI

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CV

X -

De

law

are

TX

SR

CI -

DJ B

asin

(core

)

AP

C -

DJ B

asin

(core

)

BP

- E

agle

Fo

rd E

ast (c

ore

)

ME

W -

Dela

wa

re N

M

ST

E -

Centr

al P

latform

OX

Y -

Dela

ware

NM

XO

G -

Denver

(oth

er)

CV

X -

Mid

land N

ort

h

CH

K -

Ea

gle

Fo

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ore

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CH

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Ea

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entr

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ore

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RO

SE

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wa

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L -

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(core

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EN

D -

Mid

land N

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SM

- M

idla

nd N

ort

h

MR

O -

Bakken (

core

)

FA

NG

- M

idla

nd N

ort

h

CR

O -

Mid

land N

ort

h

EO

G -

Eagle

Ford

East (c

ore

)

JA

G -

Dela

ware

TX

PD

CE

- D

J B

asin

(core

)

MU

R -

Eagle

Fo

rd E

ast (c

ore

)

RD

S -

Dela

ware

TX

AP

A -

Mid

land S

outh

FA

NG

- D

ela

ware

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WP

X -

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(core

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CO

P -

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(core

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PX

D -

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CX

O -

Mid

land N

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h

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M -

Mid

lan

d N

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h

CX

O -

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latform

AP

A -

Mid

land N

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PT

H -

Bakken (

core

)

AP

C -

De

law

are

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GW

E -

DJ B

asin

(core

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CLR

- B

akken (

core

)

DV

N -

Dela

ware

NM

EC

A -

Ea

gle

Fo

rd E

ast (c

ore

)

PX

D -

Mid

land S

outh

CX

O -

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wa

re N

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X -

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AC

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HP

R -

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(core

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CX

O -

Mid

land S

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MT

DR

- D

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ware

NM

CD

EV

- D

ela

ware

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Median

IQR

*Includes acreage positions with at least 30 horizontal oil well completions in 2017-2018, which produced for at least 4 months (for breakeven price validation purposes)

** Combined, acreages from the chart account for 42% of total US Shale oil horizontal activity in 2017-2018

Source: Rystad Energy ShaleWellCube Premium

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WTI breakeven oil prices in 2017-2018 for 50 most commercial acreage positions with significant current activity*

Dollars per barrel

Permian Basin, outbound crude pipelines - with expansions due during 2019-21 highlighted

Source: Rystad Energy research and analysys, Railroad Commission of Texas

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Pipeline capacity will catch up with the Permian in 2019 but developers are wary of an overbuild

Source: Rystad Energy

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Permian Basin: oil production and takeaway capacity outlookThousand barrels per day

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020

Q12021

Q22021

Q32021

Q42021

PAA/XOM

Gray Oak

Cactus II

EPIC

Midland to ECHO II

Recent expansions

Existing

Local refining

Production

• Midland to ECHO ?

• Permian Express 4?

• Voyager?

• ET / MPLX / Delek?

• Expansions to Corpus?

New pipelines will debottleneck Cushing, connect new hubs and bring more barrels to the coast

Cushing

Patoka /

Wood

River

Guernsey/

Platteville

Hub / Supply center

Canadian

Rockies & Bakken

Permian

Hub connections

New connections proposed

Canada

Bakken

Permian

Capline (Marathon, BP, Plains) (FID)

• Q3 2020 light, 2022 heavy

Seahorse (Tallgrass Energy)

• Cushing to St James

• Connect to Pony Express, Tallgrass / KMI

project

Voyager (Magellan and Navigator)

• Cushing and Midland to Houston

• Connect to Saddlehorn and Glass Mountain

Gladiator (SemGroup and DCP)

• Cushing to Houston

• Connect to White Cliffs

Red Oak (P66)

• Cushing to Corpus, Houston, Beaumont

Liberty (P66 and Bridger)

• Cushing to Corpus

VLCC projects will help facilitate export growth, but the market will only support the first movers

Source: Rystad Energy research and analysis

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Port Operator Owners Status In-service date Comment

Louisiana LOOP LLC LOOP LLC In-service Jan-18 Loaded 3 VLCCs in 7 days in Dec 2018, ~850 kbd

Corpus Christi, TX Moda Midstream Moda Midstream In-service Dec-18 Partially loaded VLCC

Corpus Christi, TX Buckeye Buckeye, P66, Marathon Oil FID Dec-19Partially loaded VLCCs—connections to Cactus, Gray

Oak

Corpus Christi, TX Carlyle GroupCarlyle Group, Port of Corpus

ChristiPre-FID 2020+

Army Corps of Engineers has recommended a full EIS,

which could add up to 18 months.

Target 2020 partial loading, 2021 full loading, subject to

EIS delay

Corpus Christi, TX Trafigura Trafigura Pre-FID 2021+Filed federal permits in July 2018. Upon permitting, Trafi

estimates 18 months of construction

Houston, TX Enterprise Enterprise Pre-FID 2021+

Filed federal permits in February 2019, est. processing

time is 356 days. Expect VLCC load speed of 85,000

bbl/hour.

Freeport, TX Enbridge Enbridge, Oiltanking Pre-FID 2021+Filed federal permits in February 2019. Will be fed by

Gray Oak and Seaway pipeline

Louisiana Tallgrass Tallgrass Pre-FID 2021+

Would be fed by Seahorse pipeline (oil from Bakken and

Rockies). Tallgrass did not mention the terminal in latest

earnings call

US crude exports will top 5 million b/d in 2021, with nearly half of exports loaded in Corpus

Source: Rystad Energy

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1.5

1.9 2.0

2.52.8 2.9

3.1

3.6

4.13.9 4.0

4.6

5.1 5.1 5.15.4

5.8 5.7 5.7 5.86.1

5.7

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6

7

8

Louisiana

Nederland

Corpus Christi

Houston

Saudi current exports

US Gulf Coast crude oil exports by hub


Cactus II, Gray Oak and

EPIC support a dramatic rise

in Corpus exports

Capline reversal to

Louisiana

US crude exports expected to continue its climb to +5 mmbbl per day by 2021 mostly to…


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US Gulf Coast oil exports


Europe

Americas

North Asia

3.1

4.2

5.25.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2015 2016 2017 2018 2019 2020 2021 2022Other Africa Middle East Mediterranean, North Africa

Unknown South/South East Asia Europe

Americas North Asia

ForecastHistorical

Where is demand growing? Asia (and Africa/LatAm/ME) drive growth during 2019-2030

1.3

1.4

8.0

0.4

0.9

1.1

-2.1

-0.5

-4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0

Europe

North America, excluding US

Russia

Other, excluding US

Middle East

South and Central America

Africa

Asia

Thousands


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Cumulative change in global oil demand to 2030 (from 2019)


Incremental US light crude exports will mostly go to Asia and Europe with other pockets of

replacement potential

Source: EIA, Rystad Energy

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Cape of Good Hope on VLCCs

likely to be the preferred route

to Asia for many buyers and

traders

Appetite in the European

market, as traditional sources

of crude (e.g. Algeria, Libya)

struggle to maintain production

levels. West and North Africa

crude supply combined will

decline by more than 1.5

million b/d by 2025.

Current flow into

Eastern Canada has

limited upside

Mexico’s weak production

outlook could lead to flows to

Mexico, with import

infrastructure being the major

constraint

By 2025 Asia crude production

will decline by ~1.5 million b/d

vs 2018 levels. While only a

sub-segment of this is light

crude, the refining slates are

flexible

Some small light streams

in Latin America are in

decline and US crude can

play a role in balancing

refinery slates

19

Bjørnar TonhaugenHead of Oil Markets

[email protected]

+47 24 00 42 00

This document is the property of Rystad Energy. The document must not be reproduced or distributed in any forms, in parts or full without permission from Rystad Energy. The information contained in this document is based on Rystad Energy’s global oil & gas databases UCube and OilMarketCube, public information from company presentations, industry reports, and other, general research by Rystad Energy. The document is not intended to be used on a stand-alone basis but in combination with other material or in discussions. The document is subject to revisions. Rystad Energy is not responsible for actions taken based on information in this document.

© Copyright 2019. All rights reserved.

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Rystad Energy disclaims any responsibility for content errors.

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