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ASPHALT SUPPLY IN A VOLATILE OIL WORLD
Bill HaverlandBill Haverland
ConocoPhillips CompanyConocoPhillips Company
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Issues to be Discussed
Crude Oil SupplyCrude Oil Supply Crude Oil PricingCrude Oil Pricing Refining CapacityRefining Capacity Products SupplyProducts Supply Products PricingProducts Pricing Future of the IndustryFuture of the Industry
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CRUDE OIL SUPPLY
A WORLD LOOKA WORLD LOOK
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Crude Oil Supply (2006)World Crude Oil World Crude Oil
ProductionProductionMillions of Barrels Per DayMillions of Barrels Per Day
World Proven Crude Oil World Proven Crude Oil ReservesReserves
Billions of BarrelsBillions of Barrels
W. Europe
US/Canada
Asia/PacificAfrica
Middle East
FSU/E. Europe
Latin America
11.3
6.3
10.6
8.49.8
FSU/E. Europe
W. Europe15 Latin
America
US/Canada
Asia/Pacific
Africa
Middle East
743
201
11679
102
36
Asia/Pacific
Africa
26.0
12.6
Middle East
Total: 85MMB/D Total: 1,292 BB
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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 Demand at 85 MMBD or 98% of world daily
delivery capacity.delivery capacity. Vulnerable to supply disruptions caused by storms, Vulnerable to supply disruptions caused by storms,
accidents, breakdowns, political unrest.accidents, breakdowns, political unrest. 65% of proven reserves within national oil 65% of proven reserves within national oil
companies and 16% held by Russia.companies and 16% held by Russia. Traditional companies have full access to 7% of Traditional companies have full access to 7% of
reserves and 12% through partners (if allowed).reserves and 12% through partners (if allowed).
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CRUDE OIL PRICING
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WTI Price by Year
0
10
20
30
40
50
60
70
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007YTD
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WTI Price by Quarter
0
10
20
3040
50
60
70
80
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Current Crude Pricing
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REFINING CAPACITY
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Topping RefineryTopping Refinery
DUCRUDE OIL
GASES NAPHTHA AND
6OIL or ASPHALT(if heavy crude)
GASOIL FEEDSTOCKS
650-
650+
“Tea Pot”Not A RefineryReally Just A
CrudeDistiller
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Simple RefinerySimple Refinery
650-CRUNHT
KHT
DHT
GASES TO MOGAS
JET/KERO
6OIL or ASPHALT(if heavy crude)
TO NO.2
DUCRUDE OIL
650+
“Hydroskimming” Refinery,many exist all over the
world
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CCU - “Complex” RefineryCCU - “Complex” Refinery
CRUNHT
KHT
DHT
ALKY
CCU
DUCRUDE
OIL
GASES
VAC
GASES650-1050
TO MOGAS
TO MOGAS
JET/KERO
TO 2OIL
TO MOGAS
TO MOGAS
TO 2OIL
650-
650+
6OIL
ASPHALT
GASOLINE
GASOIL
1050+
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CCU/HCU/Coker - CCU/HCU/Coker - “Very Complex” Refinery“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 MOGASTO MOGAS
JET/KERO
TO MOGASTO MOGASTO MOGAS
TO 2OIL
MTBE
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Refinery Yield (% of Crude Intake)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
TOPPINGRFY
SIMPLERFY
CCU RFY COKERRFY
OTHER
MOGAS
JET
LT NAPH
HVY NAPH
GAS OIL
NO.2
NO6 or Asphalt
COKE
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U. S. Refining Capacity
14
14.5
15
15.5
16
16.5
17
17.5
18
18.5
1980 1995 2000 2006
more than 30less than 30Crude Dist Cap
Last New U. S. Refinery Built in 1976
Source: Oil & Gas Journal
319
175158 131
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U. S. Asphalt Refining Capacity
72
98
60
42
1980 1995 2000 2006
400
450
500
550
600
650
700
750
800
# Refineries
Asphalt Capacity
Production Range: 600 B/D to 60,000 B/D
Source: Oil & Gas Journal
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U. S. Refining Coking Capacity
50
585681
120138
46
48
50
52
54
56
58
60
1995 2000 20060
20
40
60
80
100
120
140# Refineries w/Cokers
Coke Production, MT/D
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U.S. Coker Construction Projects 2005 - 2011 Planning, Engineering, or Construction Planning, Engineering, or Construction
PhasePhase Total Refineries: 360 MB per dayTotal Refineries: 360 MB per day Asphalt Refineries: 197 MB per dayAsphalt Refineries: 197 MB per day
* * Source: Argus Asphalt ReportSource: Argus Asphalt Report
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PRODUCTS SUPPLY/DEMAND
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Supply Source for U. S. Demand
02468
101214161820
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06
MM
B/D
Domestic Crude Production Imported Crude Imported Products
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U. S. Product Demand, MB/D
0100020003000400050006000700080009000
10000
Gasoline Diesel Jet Resid Asphalt
1995200020042005
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Historical Asphalt Supply/DemandMillions Tons - Liquid
0
10
20
30
40
50
60
1980 1995 2000 2003 2005 2006
Supply
Demand
Source: Oil & Gas Journal
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PRODUCTS PRICING
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Prices by Quarter
2030405060708090
100110
WTIGasoline
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Gasoline Price Components
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Prices by Quarter
0102030405060708090
100WTIGasolineAsphalt
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Asphalt vs Coker Feed Value
0102030405060708090
Jan-
02
May
-02
Sep-
02
Jan-
03
May
-03
Sep-
03
Jan-
04
May
-04
Sep-
04
Jan-
05
May
-05
Sep-
05
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
WTI
P&P MC Avg
gulf coast coker value
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Current Coking Economics
Gasoline/Diesel PricingGasoline/Diesel Pricing
Aug., 07 Price: $95.00/BBLAug., 07 Price: $95.00/BBL Less Distribution: 6.00/BBLLess Distribution: 6.00/BBL
Net to Refinery: $89.00/BBLNet to Refinery: $89.00/BBL
Kansas City Asphalt PricingKansas City Asphalt Pricing
Aug 07:Aug 07: $54.50/BBL* $54.50/BBL* ($40/Ton): $7.15/BBL($40/Ton): $7.15/BBL
$47.35/BBL$47.35/BBL
Lost Value: Lost Value: $41.65/BBL$41.65/BBL
** Source – Poten & PartnersSource – Poten & Partners
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Current Coking Economics
30,000 BBLS/Day Asphalt Production30,000 BBLS/Day Asphalt Production X 70%X 70% Gasoil Production Gasoil Production
21,000 BBLS Gasoil for Gasoline/Diesel21,000 BBLS Gasoil for Gasoline/Diesel X $41.65X $41.65/BBL Gasoline/Diesel diff. To Asphalt/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)
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FUTURE OF THE INDUSTRY
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Current Realities
Crude production at maximum rates based on existing Crude production at maximum rates based on existing infrastructureinfrastructure
U.S. refining running at maximum capacity (less U.S. refining running at maximum capacity (less turnaround activity)turnaround activity)
No new refineries in the near termNo new refineries in the near term Existing refinery expansions must fill gapExisting refinery expansions must fill gap Increase crude capacity and conversion capabilities to Increase crude capacity and conversion capabilities to
meet light product demandmeet light product demand Asphalt must keep pace with conversion feed values to Asphalt must keep pace with conversion feed values to
encourage productionencourage production
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Factors Influencing Asphalt Price Absolute price of crude (WTI benchmark)Absolute price of crude (WTI benchmark) Light/Heavy crude price differentialLight/Heavy crude price differential Light product “crack spread”Light product “crack spread” Coking economicsCoking economics Impact of clean fuels (sweet crudes)Impact of clean fuels (sweet crudes) Heavy crude availability (Venezuela/Canadian)Heavy crude availability (Venezuela/Canadian) Transportation costsTransportation costs Supply/DemandSupply/Demand
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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 worldAsphalt is more expensive in a $70.00 crude world Asphalt has to trend faster with crude oil pricesAsphalt has to trend faster with crude oil prices Asphalt has to be more competitive with light productsAsphalt has to be more competitive with light products Transportation costs rising – Rail, Barge, TerminallingTransportation costs rising – Rail, Barge, Terminalling State asphalt price indexes reduce supplier/contractor risk State asphalt price indexes reduce supplier/contractor risk
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QUESTIONS