gulf coast energy outlook 2019: production, trade and ... · in the last ten years, global crude...

59
Gulf Coast Energy Outlook 2019: Production, Trade and Infrastructure Trends. 66 th Mineral Law Institute Meetings, Baton Rouge, LA, March 14, 2019. David E. Dismukes, Ph.D. Center for Energy Studies Louisiana State University

Upload: others

Post on 29-Sep-2020

0 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 2: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 3: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

3© LSU Center for Energy Studies

Crude oil and natural gas

Page 4: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 5: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 6: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 7: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 8: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 9: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 10: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 11: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 12: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 13: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

$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

Page 14: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Forecast Performance

New Natural Gas End Uses & Fuel Diversity Concerns

14© LSU Center for Energy Studies

Upstream Outlook

Page 15: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Forecast Performance

New Natural Gas End Uses & Fuel Diversity Concerns

15© LSU Center for Energy Studies

Upstream Outlook

Page 16: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

$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

Page 17: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 18: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 19: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 20: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Forecast Performance

New Natural Gas End Uses & Fuel Diversity Concerns

20© LSU Center for Energy Studies

Upstream Outlook

Page 21: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Forecast Performance

New Natural Gas End Uses & Fuel Diversity Concerns

21© LSU Center for Energy Studies

Upstream Outlook

Page 22: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

22© LSU Center for Energy Studies

Energy infrastructure

Page 23: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 24: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 25: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 26: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 27: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 28: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 29: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 30: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 31: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 32: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 33: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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.

Page 34: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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.

Page 35: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

35© LSU Center for Energy Studies

Energy trade

Page 36: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 37: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 38: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 39: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 40: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 41: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 42: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 43: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 44: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 45: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 46: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 47: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 48: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 49: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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

Page 50: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

50© LSU Center for Energy Studies

Employment Forecast

Page 51: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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.

Page 52: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

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.

Page 53: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Louisiana Refining and Chemicals

53

Employment Forecast

© LSU Center for Energy Studies

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.

Page 54: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Texas Refining and Chemicals

54

Employment Forecast

© LSU Center for Energy Studies

Texas midstream employment expected to continue to grow: significant revision to projects for 2019 forecast.

Page 55: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

55© LSU Center for Energy Studies

Conclusions

Page 56: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Conclusions – Oil and natural gas.

56© LSU Center for Energy Studies

• 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

Page 57: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Conclusions– Petrochemical/Refining

57© LSU Center for Energy Studies

• 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

Page 58: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Conclusions -- Employment

58© LSU Center for Energy Studies

• 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

Page 59: Gulf Coast Energy Outlook 2019: Production, Trade and ... · In the last ten years, global crude oil production has increased at an average annual rate of 1.3 percent. The U.S. share

Questions, comments and discussion.

59© LSU Center for Energy Studies

David E. DismukesProfessor and Executive DirectorCenter for Energy StudiesEmail: [email protected]

Phone: 225-578-4343

URL: www.enrg.lsu.edu