gulf coast energy outlook 2019: production, trade and ... · in the last ten years, global crude...
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Gulf Coast Energy Outlook 2019: Production, Trade and Infrastructure Trends.66th Mineral Law Institute Meetings, Baton Rouge, LA, March 14, 2019.
David E. Dismukes, Ph.D.Center for Energy StudiesLouisiana State University
2019 Gulf Coast Energy Outlook
Gulf Coast Energy Outlook
2019
David E. Dismukes, Ph.D. • Gregory B. Upton, Jr., Ph.D.Dek Terrell, Ph.D.
Gold
Silver
Bronze
Presentation is based upon materials from recent 2019 GCEO.
GCEO
3© LSU Center for Energy Studies
Crude oil and natural gas
Source: U.S. Energy Information Administration.
Domestic shale gas basins and plays.
4© LSU Center for Energy Studies
U.S. unconventional production from shale plays has
unleashed a considerable
level of domestic
energy production.
This production, however, is
arising in new areas, leading to
a number of market,
infrastructure, and institutional
changes.
Upstream Outlook
Changes in crude oil reserves and production.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-
5
10
15
20
25
30
35
40
45
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Crude Oil Reserves Crude Oil Production
U.S
. Cru
de O
il Pr
oved
Res
erve
s (B
illion
Bbl
)U
.S. Crude O
il Production (Billion Bbl)
Source: U.S. Energy Information Administration. 5© LSU Center for Energy Studies
Crude oil production and reserves are climbing back to levels not seen since the early 1980s (reserves). Creates new domestic resource opportunities for U.S.
refineries.
CONFIDENTIAL
Upstream Outlook
World Crude Oil Production (2017)
6© LSU Center for Energy Studies
The U.S. is now the largest producer of crude oil (2017).
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000
Qatar
Norway
Nigeria
Venezuela
Mexico
Kuwait
Brazil
United Arab Emirates
Iraq
Iran
China
Canada
Russia
Saudi Arabia
United States
(In Thousands of Barrels; Includes Condensate)Source: Energy Information Administration
Upstream Outlook
Monthly global and U.S. crude oil production.
0%
2%
4%
6%
8%
10%
12%
14%
0
10
20
30
40
50
60
70
80
90
100
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
World U.S. U.S. as a Percent of Total World
Prod
uctio
n (M
Bbl/d
)
7© LSU Center for Energy Studies
In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share has increased from seven percent
to around 12 percent.
Percent of Total (%)
OPEC attempts to undermine this loss of market share by flooding the market through the better part of 2015-2016
Source: U.S. Energy Information Administration.
Upstream Outlook
8© LSU Center for Energy Studies
U.S. Crude Oil Prices
U.S. crude oil prices fell over 70 percent from over $100/bbl to around $35/bbl(June 2014 to February 2016). Recovery cut back about half of that difference.
Source: U.S. Energy Information Administration.
0
20
40
60
80
100
120
Jan-2010 Jan-2012 Jan-2014 Jan-2016 Jan-2018
Cru
de O
il Pr
ice
($ p
er b
bl) October correction.
Upstream Outlook
9© LSU Center for Energy Studies
U.S. crude oil prices and rig count
Source: U.S. Energy Information Administration; and Baker Hughes.
Num
ber o
f Rig
s
$0
$20
$40
$60
$80
$100
$120
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
Crude Oil Rigs WTI Price
Crude O
il Price ($/Bbl)
Price/rig price responsiveness is weakening considerably since mid-year 2017 (shaded area).
OPEC-induced recovery.
Upstream Outlook
Monthly U.S. horizontal drilling rig activity (per major basin).
0
200
400
600
800
1,000
1,200
1,400
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Baken Eagle Ford Appalachian Permian
Rig
Cou
nt
10© LSU Center for Energy Studies
Horizontal rig activity increased by 400 percent to 2015 but fell by over half during the ensuing price collapse. Current rebound is highly concentrated in
the Permian basin.
Source: U.S. Energy Information Administration.
Upstream Outlook
Monthly U.S. crude oil production.
$0
$20
$40
$60
$80
$100
$120
$140
$160
0
2
4
6
8
10
12
14
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Crude Oil Production Crude Oil Price
U.S
. Cru
de O
il Pr
oduc
tion
(Milli
on B
blpe
r day
)
Source: U.S. Energy Information Administration. 11© LSU Center for Energy Studies
U.S. crude oil production volumes are up by over 100 percent relative to historic trends. While production was down, it is still resilient and strong.
Bakken
Eagle Ford
Appalachia
Permian
Other
Share of Production, 2018
Crude O
il Price ($/BBl)
Strong production resiliency despite exceptional price decrease.
Upstream Outlook
Monthly drilled but uncompleted wells.
0
1
2
3
4
5
6
7
8
9
10
Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18
Thou
sand
Wel
ls
Source: U.S. Energy Information Administration. 12© LSU Center for Energy Studies
Drilled but uncompleted wells have increased by almost 50 percent in the last few years.
AnadarkoAppalachiaBakkenEagle FordHaynesvilleNiobraraPermian
2018 Share of Wells
Upstream Outlook
$0$10$20$30$40$50$60$70$80$90
$100
2012 2013 2014 2015 2016 2017
Permian Midland Permian Delaware Eagle Ford Bakken Niobrara
Wellhead breakeven prices for key shale plays.
13© LSU Center for Energy Studies
$ pe
r Bbl
Since 2012, the average wellhead break-even price for key shale plays has decreased from $79 per barrel to $40 per barrel, representing an average
decrease of nearly 50 percent.
Note: Author’s estimate from source.Source: Rystad Energy and OPEC.
Upstream Outlook
Forecast Performance
New Natural Gas End Uses & Fuel Diversity Concerns
14© LSU Center for Energy Studies
Upstream Outlook
Forecast Performance
New Natural Gas End Uses & Fuel Diversity Concerns
15© LSU Center for Energy Studies
Upstream Outlook
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-18
Natural gas price trends
Natural gas price reductions (and reductions in volatility) are the direct result of unconventional oil and gas development.
$/M
cf
Source: Energy Information Administration, U.S. Department of Energy.
Average 2001-2008: $6.24(standard deviation: $2.39)
Average1997-2000: $2.79
(standard deviation: $1.28)
16© LSU Center for Energy Studies
Average post 2008: $3.44(standard deviation: $0.88)
Upstream Outlook
0
5
10
15
20
25
30
35
0
50
100
150
200
250
300
350
400
450
500
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Natural Gas Reserves Natural Gas Production
Changes in Reserves and Production
Natural gas production and reserves are at levels not seen since the 1970s and both U.S. natural gas production and reserves are now at an all time recorded peak.
U.S
. Dry
Nat
ural
Gas
Pr
oved
Res
erve
s (T
cf)
U.S. N
atural Gas
Marketed Production (Tcf)
Source: Energy Information Administration, U.S. Department of Energy. 17© LSU Center for Energy Studies
Upstream Outlook
Res
erve
s (T
cf)
Source: Energy Information Administration, U.S. Department of Energy
Annual Energy Outlook, Natural Gas Reserves
Unconventional resources are not a “flash in the pan” and are anticipated to continue to increase over the next two decades or more.
18© LSU Center for Energy Studies
200
220
240
260
280
300
320
340
360
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040
Upstream Outlook
Monthly U.S. natural gas production.
$0
$2
$4
$6
$8
$10
$12
$14
0
10
20
30
40
50
60
70
80
90
100
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Natural Gas Production Natural Gas Price
19© LSU Center for Energy Studies
Bakken
Eagle Ford
Appalachia
Permian
Other
Share of 2018 Production
U.S. natural gas production has increased 62 percent in the last 10 years.
U.S
. Nat
ural
Gas
Pro
duct
ion
(Bcf
per d
ay)
Source: U.S. Energy Information Administration.
Natural G
as Price ($/Mcf)
Strong production resiliency despite exceptional price decrease.
Upstream Outlook
Forecast Performance
New Natural Gas End Uses & Fuel Diversity Concerns
20© LSU Center for Energy Studies
Upstream Outlook
Forecast Performance
New Natural Gas End Uses & Fuel Diversity Concerns
21© LSU Center for Energy Studies
Upstream Outlook
22© LSU Center for Energy Studies
Energy infrastructure
Gulf of Mexico region – energy manufacturing capital expenditures (by State)
23© LSU Center for Energy Studies
Billio
n $
$0
$10
$20
$30
$40
$50
$60
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Louisiana Texas Alabama/Mississippi
Source: David E. Dismukes (2013). Unconventional Resources and Louisiana’s Manufacturing Development Renaissance. Baton Rouge, LA: Louisiana State University, Center for Energy Studies and author’s updates.
Capital expenditures have been relatively balanced across the two states.
Industrial/Export Outlook
Louisiana total capital expenditures by sector
24© LSU Center for Energy Studies
Billio
n $
$0
$5
$10
$15
$20
$25
$30
$35
$40
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
LNG Export Cracker/Polymer Methanol/Ammonia Other
Source: David E. Dismukes (2013). Unconventional Resources and Louisiana’s Manufacturing Development Renaissance. Baton Rouge, LA: Louisiana State University, Center for Energy Studies and author’s updates.
The Louisiana capital expenditures are more heavily weighted to LNG export facilities than in Texas.
Industrial/Export Outlook
Louisiana exports (chemicals and refined product).
25© LSU Center for Energy StudiesSource: International Trade Administration
Louisiana exports of petroleum and coal products increased 190 percent between 2009 and 2014 but have fallen in recent years. Chemical exports have increased 301 percent
since 2009. All facilitated by new capacity investments.
$0
$2
$4
$6
$8
$10
$12
$0
$5
$10
$15
$20
$25
$30
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Petroleum and Coal Products Chemicals
Petro
leum
and
Coa
l Pro
duct
s (B
illion
$)
Chem
icals (Billion $)
Post-2009 capital investments in capacity assisting in facilitating export growth.
Industrial/Export Outlook
Industrial electric sales comparisons
Louisiana’s industrial electric sales (proxy for onsite production activity) fell 21 percent between 1996 and 2009. Since then, they have jumped 45 percent.
Note: Southeast states include Alabama, Arkansas, Florida, Mississippi and Georgia.Source: U.S. Energy Information Administration.
80
90
100
110
120
130
140
150
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Louisiana Southeast Average Texas U.S.
Indu
stria
l Ele
ctric
Sal
es, 1
990=
100
26© LSU Center for Energy Studies
Industrial/Export Outlook
Industrial natural gas sales comparisons
Louisiana’s industrial natural gas sales (proxy for onsite production activity) fell 27 percent between 1996 and 2009. Since then, they have increased 44 percent.
Note: Southeast states include Alabama, Arkansas, Florida, Mississippi and Georgia.Source: U.S. Energy Information Administration.
60
70
80
90
100
110
120
130
140
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Louisiana Southeast Average Texas U.S.
Indu
stria
l Nat
ural
Gas
Sal
es, 1
990=
100
27© LSU Center for Energy Studies
Industrial/Export Outlook
28© LSU Center for Energy Studies
35%
40%
45%
50%
55%
60%
65%
70%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Petroleum and Coal Products Chemical Manufacturing
Cap
acity
Util
izat
ion
(%)
Source: U.S. Energy Information Administration.
Estimated Louisiana CHP utilization
Cogeneration utilization (proxy for onsite production activity) at existing facilities has been stable, increasing slightly in 2015 and 2016.
Industrial/Export Outlook
U.S. Industrial Production Index
29© LSU Center for Energy Studies
100
101
102
103
104
105
106
107
108
109
Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 May-18
Indu
stria
l Pro
duct
ion
Inde
x
Industrial production consistently increasing since the lows of 2016.
Source: Federal Reserve Bank of St. Louis.
Industrial/Export Outlook
60
70
80
90
100
110
120
130
140
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Note: The Broad Index is a weighted average of the foreign exchange values of the U.S. dollar against the currencies of a large group of major U.S. trading partners. Base year is 2002.Source: Federal Reserve Bank of St. Louis.
Cur
renc
y U
nits
per
U.S
. $
Dollar Valuations (Federal Reserve Broad Index)
30
The dollar is up relative to the currencies: 25 percent appreciation over last five years, and six percent in the last 12 months.
© LSU Center for Energy Studies
Industrial/Export Outlook
0
2
4
6
8
10
12
14
16
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Changes in Chinese GDP
31© LSU Center for Energy Studies
Chinese economic growth officially reported at 6.8 percent, reflecting expectations of expansionary policy mix and a goal of doubling real GDP
between 2010 and 2020
Annu
al P
erce
nt C
hang
e, G
DP
Projections
Source: International Monetary Fund.
Industrial/Export Outlook
Ammonia demand and capacity outlook
Excess global ammonia supply continues to 2022. This excess is comparable to last year’s GCEO forecast. Likely one of the reasons for a slow down in new project
announcements.
0
20
40
60
80
100
120
140
160
180
200
2015 2016 2017 2018 2019 2020 2021 2022
Demand World Capacity U.S. Capacity GOM Capacity
Milli
on m
etric
tons
Source: Author’s construct from previous slides and company annual reports and other press releases.
1. Ammonia/Nitrogen Manufacturing
32
Industrial/Export Outlook
Methanol demand and capacity outlook
Methanol market is way over supplied – this is important change from last year’s GCEO.
0
50
100
150
200
250
2015 2016 2017 2018 2019 2020 2021 2022
Demand World Capacity U.S. Capacity GOM Capacity
Milli
on m
etric
tons
1. Ammonia/Nitrogen Manufacturing
33
Industrial/Export Outlook
Source: Author’s construct from previous slides and company annual reports and other press releases.
Ethylene demand and capacity outlook
Ethylene moves to becoming tighter than other chemical commodity markets and represents a big and important shift from last year’s GCEO.
0
50
100
150
200
250
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Demand World Capacity U.S. Capacity GOM Capacity
Milli
on m
etric
tons
1. Ammonia/Nitrogen Manufacturing
34
Industrial/Export Outlook
Source: Author’s construct from previous slides and company annual reports and other press releases.
35© LSU Center for Energy Studies
Energy trade
U.S. crude oil production and imports.
36© LSU Center for Energy StudiesCONFIDENTIAL
U.S. crude oil production surged in 2012 through 2015. Production did fall during the first nine months of 2016, but increased at the end of the year and has continued to increase since. Meanwhile, U.S. imports of crude oil have fallen as U.S. demand for crude oil has remained
constant.
0
2
4
6
8
10
12
14
16
18
20
3
4
5
6
7
8
9
10
11
12
13
Jan-2000 Jan-2003 Jan-2006 Jan-2009 Jan-2012 Jan-2015 Jan-2018U.S. Crude Oil Production U.S. Net Imports U.S. Crude Demand
Prod
uctio
n an
d Im
ports
(Milli
on b
arre
ls p
er d
ay)
Dem
and (Million barrels per day)
Source: U.S. Energy Information Administration.
Energy Trade
U.S. crude oil exports.
37© LSU Center for Energy StudiesCONFIDENTIAL
In December 2015, restrictions on exporting U.S. produced crude oil were lifted. In 2016, the U.S. exported an average of 520,000 barrels per day reaching 1.1 million barrels per day in 2017. Opportunities for the U.S. to participate further in global crude oil exports are
considerable, and the Gulf Coast will be the beneficiaries of these opportunities.
0
500
1,000
1,500
2,000
2,500
Jan-2000 Jan-2003 Jan-2006 Jan-2009 Jan-2012 Jan-2015 Jan-2018
Thou
sand
bar
rels
per
day
Thousand barrels per day0 200 400 600 800
Rest of WorldColumbia
ItalyUK
JapanKoreaChina
Canada2018 Export Destinations
Source: U.S. Energy Information Administration.
Energy Trade
LOOP crude oil imports.
38© LSU Center for Energy Studies
-
50
100
150
200
250
300
350
400
450
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Milli
on B
arre
ls
Imports of crude oil through LOOP have fallen 50 percent in the last ten years, and 38 percent since 2012, or an average annual rate of 6.7 percent - due to
increased production of competitive U.S. crude oil from unconventional plays.
Source: Louisiana Department of Natural Resources.
Energy Trade
St. James, Louisiana.
39© LSU Center for Energy Studies
• The St. James, Louisiana crude oil trading hub is located on the Mississippi River, about 45 miles west of New Orleans and 160 miles upstream from the GOM.
• Serves as a distribution hub for crude oil from North Dakota, Texas, the GOM and imports through Louisiana.
• Location allows for barge or tanker receipts as well as capacity for 300 railcars.
• Total crude storage capacity of ~32 million barrels. Capacity has increased significantly in recent years to accommodate shale production from North Dakota and Texas.
• Crude oil can be dispatched to local Louisiana refineries providing feedstock to 2.6 million barrels per day of capacity.
Source: LOOP LLC, available at: https://www.loopllc.com/Information-Central/Distribution-Information/LoCap-Connectivity; RBN Energy, available at:https://rbnenergy.com/i-got-storage-i-feel-good-storage-operators-at-the-st-james-crude-hub.
• Crude oil can also be dispatched from St. James to other pipeline systems connected to more than 50 percent of U.S. refining capacity throughout the Midwest and as far north as Canada.
Energy Trade
A two-way LOOP: facilitating an Louisiana energy export economy.
40© LSU Center for Energy Studies
In July 2017 LOOP announced it was pursuing contracts to start exporting crude oil. The “two-way LOOP” would provide connecting logistics from the Clovely Hub to the deepwater port.The facility would require minor modifications to pump oil in both directions and service could be available in early 2018.Most U.S. crude exports are shipped from Houston or Corpus Christi. However, these Texas facilities cannot accommodate the largest tankers carrying full loads. Smaller vessels are being used to transfer cargoes to large tankers elsewhere. Exporting from LOOP would lower freight costs. And, LOOP’s multi-tank storage hub would allow for customer-specific blending of different crude grades.
Note: 12017 is 6-month average, January through June.
Energy Trade
Petroleum and liquid fuels demand.
41© LSU Center for Energy Studies
75
80
85
90
95
100
105
0
5
10
15
20
25
30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
U.S. Rest of World
U.S
. Pet
role
um D
eman
d (M
MBb
lper
day
)
U.S. demand for liquid fuels has been relatively flat, while demand in the rest of the world has been increasing underscoring the opportunities for new Louisiana-based energy
exports.
Rest of W
orld Petroleum D
emand
(MM
Bblper day)
Projection
Source: U.S. Energy Information Administration.
Energy Trade
Gulf Coast petroleum net exports.
42© LSU Center for Energy Studies
Gul
f Coa
st P
etro
leum
Impo
rts a
nd E
xpor
ts(M
MBb
lper
day
)
The Gulf Coast region became a net exporter of petroleum products at the end of 2008. Since then net exports have increased at an average annual rate of 38 percent.
-3
-2
-1
0
1
2
3
4
5
6
Jan-2004 Jan-2006 Jan-2008 Jan-2010 Jan-2012 Jan-2014 Jan-2016 Jan-2018
Imports Exports Net Exports
Source: U.S. Energy Information Administration.
Energy Trade
U.S. petroleum product imports and exports.
43© LSU Center for Energy Studies
Petro
leum
Pro
duct
Impo
rts a
nd E
xpor
ts(M
MBb
lper
day
)
In 2011, the U.S. became a net exporter of petroleum products. Net exports have increased over 600 percent since then.
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
Imports
Exports
Net exports
Distillate Motor gasoline Other petroleum products
Source: U.S. Energy Information Administration.
Energy Trade
GOM LNG capacity
A
Existing
IE
ExistingA. Everett, MA: 1.035 BcfdB. Cove Point, MD: 1.8 BcfdC. Elba Island, GA: 1.6 Bcfd (+0.5 Expansion)D. Lake Charles, LA: 2.1 BcfdE. Northeast Gateway, Offshore MA: 0.8 BcfdF. Freeport, TX: 1.5 Bcfd (+2.5 Expansion)G. Sabine, LA: 4.0 BcfdH. Hackberry, LA: 2.1 BcfdI. Neptune, Offshore MA: 0.4 BcfdJ. Sabine Pass, TX: 2.0 BcfdK. Pascagoula, MS: 1.5 BcfdUnder ConstructionL. Corpus Christi, TX: 2.14 BcfdApprovedM. Lake Charles (Magnolia): 1.08 Bcfd
G
Regasification
Under Construction
Approved
Existing
Liquefaction
Under Construction
Approved
F
© LSU Center for Energy Studies 44
H
B
L DJ
C
KM
Energy Trade
Natural gas and crude oil prices
45© LSU Center for Energy Studies
-$20
$0
$20
$40
$60
$80
$100
$0
$20
$40
$60
$80
$100
$120
$140
$160
Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
Natural Gas Price Crude Oil Price Differential
$ pe
r BO
E
Source: U.S. Energy Information Administration.
Natural gas/crude oil price spreads well in excess of $60 per Bbl and as high as $90 per Bbl. These differentials have collapsed by about half.
Differential ($ per BO
E)Energy Trade
Example: Changes in competitiveness of US-sourced LNG
46Source: Various sourcesNote: *uses a BOE conversion of 5.8 Mcf/BOE.
Economics of LNG development are important, but there are additional factors that can influence development such as geopolitical and supply stability
concerns that could sustain continued projects.
Europe:LowHigh
Asia:LowHigh
Caribbean:LowHigh
Feedgas40-60%
($/MMBtu)
$3.00$5.00
$3.00$5.00
$3.00$5.00
Liquefaction12%-20%($/MMBtu)
$1.25$1.25
$1.25$1.25
$1.25$1.25
Shipping & Fuel20%-40%($/MMBtu)
$1.40$1.65
$2.50$3.00
$0.75$1.00
Regas5%-8%
($/MMBtu)
$0.50$0.50
$0.50$0.50
$0.50$0.50
DeliveredCost
($/MMBtu)
$6.15$8.40
$7.25$9.75
$5.50$7.75
EquivalentOil Price*($/BOE)
$35.65$48.72
$42.05$56.55
$31.90$44.95
Henry Hub (Feb-2019):
$2.90
WTI(Feb-2019):
$53.63 © LSU Center for Energy Studies
Brent (Feb-2019):
$61.38
Energy Trade
World LNG trade volumes.
47© LSU Center for Energy Studies
-
5
10
15
20
25
30
35
40
2000 2002 2004 2006 2008 2010 2012 2014 2016
Bcfp
er d
ay
World LNG trade volumes have increased at an average annual rate of seven percent over the last 18 years and have increased 73 percent over the last 10
years.
Source: BP Statistical Review of World Energy.
Post global recession (2010) shift increase of almost 4 Bcf/d.
Energy Trade
LNG liquefaction capacity additions.
48© LSU Center for Energy Studies
0%
5%
10%
15%
20%
25%
30%
35%
-
1.0
2.0
3.0
4.0
5.0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Liquefaction Capacity Addition Spare capacity (nameplate)Spare capacity (available)
Cap
acity
Add
ition
s (B
cf/d
)
Excess capacity facilitating considerable competition – “nirvana” (for developers) is anticipated to arrive around 2021-2022 as capacity tightens and it becomes sellers’
market.
Percent of Total Capacity (%
)
Source: International Energy Agency, Gas 2018.
Energy Trade
Source: U.S. Department of Energy.
U.S. LNG capacity development outlook.
49© LSU Center for Energy Studies
0
10
20
30
40
50
60
70
2017 2018 2019 2020 2021 2022 2023 2024 2025
Existing Capacity Additional Capacity
Cap
acity
(Bcf
/d)
If all of the LNG applications currently filed with the Department of Energy were to come online, U.S. liquefaction capacity would exceed 60 Bcf per day
by 2025.
Current capacity around 2.6 Bcf/d.
50 Bcf/d on GOM alone.
Energy Trade
50© LSU Center for Energy Studies
Employment Forecast
Louisiana Upstream
51
Employment Forecast
© LSU Center for Energy Studies
2018 GCEO did not predict the continued lackluster gains in Louisiana upstream employment. Still forecasting increases, but much smaller than last
year’s forecast.
Texas Upstream
52
Employment Forecast
© LSU Center for Energy Studies
Texas forecasts were much more in line with outcomes. Continued, moderate employment growth anticipated: employment rebound continues.
Louisiana Refining and Chemicals
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Employment Forecast
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2018 GCEO did a good job in looking at Louisiana mid-stream employment, continued moderate growth anticipated for 2019 to 2022: could surpass 2001
highs.
Texas Refining and Chemicals
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Employment Forecast
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Texas midstream employment expected to continue to grow: significant revision to projects for 2019 forecast.
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Conclusions
Conclusions – Oil and natural gas.
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• Domestic crude oil and natural gas production should continue to be strong.
• The nation and region will build upon existing productivity gains. • Drilling activity may start to geographically diversify, but not enough to knock the
Permian basin off its perch as being the premier U.S. unconventional basin.• The overall “cool-down” in crude oil demand should allow infrastructure development
to catch up with production requirements.• “Quality over quantity” mentality by larger companies. Drilling responsiveness has
changed in the last recovery period, being more tepid given investor expectations about balance sheet improvement versus drilling (capital budgets are flat).
• The price outlook (crude oil, natural gas) is a little more complicated than last year.
• 2017 saw crude prices rise (natural gas flat). Market has now shifted to correction mode (crude oil) given changing expectations.
• Crude prices likely range-bound at current levels.• Over the next year, the issue will be economic growth and the corresponding issues of
Fed tightening, exchange rates, inflation, and fiscal stimulus and geopolitical impacts.
Conclusions
Conclusions– Petrochemical/Refining
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• The 2019 GCEO petrochemical industry outlook is flat.
• The capacity utilization outlook for existing and recent investments will likely not increase in any measurable fashion given a number of global headwinds that include: (a) a slow-down in Asian demand; (b) increased dollar valuations; and (c) continued trade policy uncertainties.
• The GCEO does not anticipate any chemical industry or LNG project cancellations, but it is not implausible to see that many currently-announced projects move out their anticipated project commercial operation dates in order to account for the current global market and geo-political uncertainties.
• The 2019 GCEO sees a continued positive, yet limited growth outlook for U.S. refining. Refineries will benefit from continued growth of U.S. crude oil supplies and the geographic diversity of those supplies. The sector will also benefit from continued pipeline infrastructure moving into and within the region. Product demand growth and storage will be the top issues to watch.
Conclusions
Conclusions -- Employment
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• Thus, on an overall basis, the GCEO anticipates, on average, that the region will build upon its economic gains of the last year, although those gains will likely be slower due to concerns about economic growth and several geopolitical tensions that create uncertainties that are not conducive for capital formation and growth in this industry.
• The region will continue to become a more integrated part of the overall world energy market and will likely place itself in a favorable position for future growth once some of these uncertainties start to evaporate.
• The GCEO sees regional employment continuing to grow over the next year in both the upstream and downstream sectors for both Louisiana and Texas.
• Louisiana upstream growth has been tempered considerably from last year’s projections.
• For Louisiana, there is more employment in refining and chemicals than upstream and we anticipate this to continue but on slower basis.
• In contrast, Texas still employs approximately two workers in the upstream sector for every downstream employee whereas in Louisiana this is more like a one-to-one relationship.
Conclusions
Questions, comments and discussion.
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David E. DismukesProfessor and Executive DirectorCenter for Energy StudiesEmail: [email protected]
Phone: 225-578-4343
URL: www.enrg.lsu.edu