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OPPORTUNITIES, TRENDS & FORECASTS FOR O&G – MIDSTREAM/DOWNSTREAM PROJECTS AND WORKFORCE
Michael Bergen Executive VP, Industrial Info Resources
KEYNOTE
STRATEGIES & OPPORTUNITIES: MANAGING IN A TURBULENT OIL & GAS WORLD
Workforce Next Spring Summit – 2015
P r e s e n t e d b y
Industrial Info Resources, Inc.
Industrial Market Outlook
IIR’s Industrial Market Coverage
O & G PRODUCTION ONSHORE AND OFFSHORE OIL & GAS PROCESSING LNG EXPORT TERMINALS, GAS-TO-LIQUIDS
O &G PIPELINES ONSHORE AND OFFSHORE CRUDE OIL, CONDENSATE, GAS & REFINED PRODUCTS
O & G TERMINALS STORAGE FACILITIES, LNG RECEIVING & REGASIFICATION
PETROLEUM REFINING (HPI) REFINERIES, LUBE OIL PLANTS AND ASPHALT PLANTS
CHEMICAL PROCESSING (CPI) PETROCHEMICAL, AGRICULTURAL, INDUSTRIAL GASES, ORGANIC & INORGANIC CHEMICALS
PHARMACEUTICAL & BIOTECH MANUFACTURING FACILITIES AND RESEARCH LABORATORIES
ELECTRIC POWER GENERATION, TRANSMISSION & DISTRIBUTION
METALS & MINERALS MINES, MILLS AND PROCESSING PLANTS
INDUSTRIAL MANUFACTURING DURABLE AND NON-DURABLE GOODS MANUFACTURING
FOOD & BEVERAGE PROCESSING & DISTRIBUTION/STORAGE FACILITIES
PULP, PAPER & WOOD MILLS, FOREST PRODUCTS & CONVERTING PLANTS
ALTERNATIVE FUELS ETHANOL, BIODIESEL, COAL GASIFICATION, FUEL PELLETS
Latin America 8,906 Projects $1.23 Trillion 18% Growth
Africa 2,854 Projects $694 Billion 67% Growth
Oceania 2,414 Projects $710 Billion 33% Growth
Asia 37,744 Projects $6.66 Trillion 37% Growth
Europe 14,855 Projects $2.14 Trillion 34% Growth
North America 18,620 Projects $2.41 Trillion 15% Growth
Worldwide Coverage Represents a 30% increase (Feb 2014 to Feb 2015). Flags Represent IIR’s World Regional Research Offices
Our Global Reach 87,388 Projects in Progress worth $13.93 trillion
Based on active projects with future completion dates and QC’d in the last 12 months
Latin America 10,888 Projects $1.3 Trillion 17% Growth
4
42% 37%
41%
28% 19%
30%
18%
17%
20%
29%
30%
29%
5%
6%
6% 10%
14%
8%
7% 10%
7% 5% 7%
7%
6% 4%
4% 5% 7%
4%
13% 16% 12% 13% 15% 15%
8% 8% 7% 8% 8% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015
Pharmaceutical
Industrial Mfg
Food & Beverage
Pulp & Paper
Metals & Minerals
Chemical
Oil & Gas
Power
65% 60% 67% 67% 63%
United States
How Has Industry Spending Shifted?
Energy & Chemical Maintain 60+% of Industrial Construction Activity
Pre-fallout observation
$300 billion Proposed
Oil & Gas Production – Industrial Market Spending Driver 7 of the 12 Industries are benefitting from unconventional production
Bakken, Eagle Ford, Permian, Utica
Marcellus, Niobrara
INPUT BENEFICIARIES OUTPUT BENEFICIARIES
6
Drill Pipe Fabrication
Steel Pipe/ Tube Mills
Fracturing Equipment Producers
Proppant Producers
High-Velocity Fluids
Frac Sand Mines
Midstream Processing
Ethylene Capacity
Storage Terminals Fertilizer
Plants
LNG Export Market
Gas to Liquids
Petroleum Refineries
Manufacturing
Electronics
Ceramics
Textile
Micro-LNG Domestic Market
Pipelines
Automotive
Downstream Petrochem
Methanol
Power Generation
Production Field
Still Viable with Low Crude Prices
2,558 Projects @ $182 billion 2007 - 2014
Paints Coatings
Chemical Industry
Rubber & Plastic Good
?
?
?
-1.5
-1
-0.5
0
0.5
1
1.5
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Global Supply / Demand Trends Versus WTI/Brent Spot Price
IEA February 2015
WTI Spot $/bbl Brent Spot $/bbl
Short Term Supply / Demand Outlook Marginal Price Increases
7
Dem
and
> S
up
ply
Short Term Supply Trends
• Crude prices stabilized following early Feb gains – Brent higher than WTI.
• Price rebound off falling US rig counts and “opportunistic buyers” – Contango traders
• US rig count declines not yet filtered into lower US production growth.
• Global supply rose by 1.3 m/bpd Yr-on-Yr to an estimated 94 m/bbl/d in Feb.
• Led by a 1.4 m/bpd gain in non-OPEC production.
• US supply revised upwards by 300 k/bpd for Q4 2014 and Q1 2015 also revised up.
• OPEC crude edged down by 90 k/bpd - loses in Libya and Iraq offset higher Saudi, Iranian and Angolan production.
Sup
ply
> D
eman
d
Axis shows difference (mn/bpd) between global crude production and global demand.
-ve indicates demand greater than daily +ve indicates supply volumes exceed demand.
Mn bpd
Sources: IEA, EIA
Short Term Demand Trends
• Global Demand bottomed out in Q2 2014 and since steadily risen. Yr-on-Yr gains of 0.9 m/bpd for Q4 2014 and 1m/bbl/d for Q1 2015.
• Global demand forecast raised 75 k/bpd to 1 m/bpd. 2015 average to be approx. 93.5 m/bpd.
• Global Refining throughputs raised for H1 2015 but annual gains are forecast to be down from 2.2 m/bpd in Q4 2014.
• Storage build up in US, China, India, Europe, S. Korea, Africa, Japan (70% capacity).
North America Petroleum Refining Industry U.S. Crude Imports
© 2015, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
2,129
829
35 0
500
1,000
1,500
2,000
2,500
3,000
Jan
-09
Ap
r-0
9
Jul-
09
Oct
-09
Jan
-10
Ap
r-1
0
Jul-
10
Oct
-10
Jan
-11
Ap
r-1
1
Jul-
11
Oct
-11
Jan
-12
Ap
r-1
2
Jul-
12
Oct
-12
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Tho
usa
nd
s o
f B
arre
ls p
er D
ay
Crude Imports into the US Gulf Coast (PADD 3)
Heavy
Medium
Light
Historically Competitive Gas Pricing Gas Fundamentals are Reshaping Gas Investment Strategies
9
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
20
05
M0
1
20
05
M0
7
20
06
M0
1
20
06
M0
7
20
07
M0
1
20
07
M0
7
20
08
M0
1
20
08
M0
7
20
09
M0
1
20
09
M0
7
20
10
M0
1
20
10
M0
7
20
11
M0
1
20
11
M0
7
20
12
M0
1
20
12
M0
7
20
13
M0
1
20
13
M0
7
20
14
M0
1
20
14
M0
7
20
15
M0
1
Natural Gas Prices 2005 – March 2015
World Bank
Series1 Series2 Series3
Source: World Bank Pink Sheets
Japan LNG European Nat Gas
US Nat Gas
Variable Trending
Divergent
US shale supply providing cost advantage for US Chemicals Producers:
Massive ethylene build out planned
Export driven capacity
US Lake Charles
$3.5
UK $9.3
Belgium $8.9
India $14.3
Mexico $14
Brazil $14.2
Argentina $14.5
Japan $15
Korea $14.8
China $14.1
Spain $12.1
$7.16
Worldwide LNG Landed Prices Oct 2014 Versus FERC March 2015 estimates
U$/MMBtu
US Cove Point
$2.8
Source: US FERC
$2.7
$2.36
$6.63
$6.51
$6.92
$7.2
$6.9
$6.6
$7
$7
$6.79
But natural gas economics are changing.
US cost advantage eroded / swing in naphtha based foreign crackers
US domestic demand insufficient to absorb new planned ethylene
© 2015, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
$76.6 Billion LNG Export Industry Build Out
Oil & Gas Industry Oil & Gas Production Industry Breakout
5.04
12.14 16.02
23.80 0.00
$0.63
$2.14
$13.56
$15.19 $7.74
$4.64
$0
$5
$10
$15
$20
$25
$30
$35
2014 2015 2016 2017
$ D
olla
rs in
Bill
ion
s
Oil & Gas Production
GTL
LNG
Company LNG Liquefaction Plant Location Cost
1 Cheniere Energy Incorporated Sabine Pass, Louisiana $9.0 bn 2 Sempra LNG Cameron, Louisiana $12.0 bn
3 Lake Charles LNG (Trunkline) Lake Charles, Louisiana $9.0 bn
4 Cheniere Energy Incorporated Corpus Christi, Texas $9.0 bn 5 Freeport LNG Development LP Freeport, Texas $8.0 bn
6 Golden Pass Products LLC Sabine Pass, Texas $3.3 bn 7 Annova LNG Brownsville, Texas $3.7 bn
8 NextDecade (Train 1 only) Brownsville, Texas $8.0 bn 9 Gulf LNG Energy LLC Pascagoula, Mississippi $8.0 bn
10 Dominion Transmission Inc Cove Point, Maryland $4.1 bn
11 Southern LNG Inc (Train 1 only) Elba Island, Georgia $2.5 bn
What’s included in our forecast for LNG?
GTL ? Sasol & G2X NGL Fractionation Bubble
© 2015, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
155.0
160.0
165.0
170.0
175.0
180.0
185.0
190.0
195.0
200.0
205.0
64.0
65.0
66.0
67.0
68.0
69.0
70.0
71.0
72.0
73.0
74.0
Jan
-13
A
pr-
13
Ju
l-1
3
Oct
-13
Ja
n-1
4
Ap
r-1
4
Jul-
14
O
ct-1
4
Jan
-15
A
pr-
15
Ju
l-1
5
Oct
-15
Ja
n-1
6
Ap
r-1
6
Jul-
16
O
ct-1
6
Pro
cess
ing
Cap
acit
y (i
n B
cf)
Mo
nth
ly P
rod
uct
ion
(in
Bcf
/d)
Natural Gas Production vs. Processing Capacity
Monthly Production Processing Capacity
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Jul-
16
Oct
-16
Pro
cess
ing
Cap
acit
y (i
n B
cf)
Mo
nth
ly P
rod
uct
ion
(in
Bcf
/d)
Northeast Natural Gas Production vs. Processing Capacity
Monthly Production Processing Capacity
© 2015, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Oil & Gas Industry – Upstream/Midstream Natural Gas Processing Overcapacity?
Oil & Gas Industry – Upstream/Midstream Regional Need for Natural Gas Processing Capacity
© 2015, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Total US Gas Production
Pipelines – Oct. 2014
TIV
2012 $11.53 B
2013 $10.13 B
2014 $11.15 B
2015 $21.52 B
2016 $16.99 B
2017 $35.62 B
Total $106.96 B
Pipelines – Jan. 2015
TIV
2012 $11.53 B
2013 $10.13 B
2014 $9.27 B
2015 $7.29 B
2016 $27.39 B
2017 $27.81 B
Total $103.28 B
Production – Oct. 2014
TIV
2012 $15.26 B
2013 $8.45 B
2014 $13.82 B
2015 $13.86 B
2016 $8.38 B
2017 $6.03 B
Total $65.82 B
Production – Jan. 2015
TIV
2012 $15.23 B
2013 $8.45 B
2014 $14.23 B
2015 $7.69 B
2016 $4.79 B
2017 $11.29 B
Total $67.4 B
1993 2003 2013 2023
BCF/d 45.7 49.0 66.3 84.7
Oil & Gas Industry Oil & Gas Industry – Upstream/Midstream Crude Oil Transportation
Total Proposed Pipeline Capacity 18.9 Million Barrels
© 2015, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
October 2014
Miles TIV
2012 1,175 $4,554
2013 1,515 $5,234
2014 4,802 $8,961
2015 3,952 $8,893
2016 4,094 $17,831
2017 790 $395
Total 16,328 $45,868
January 2015
Miles TIV
2012 1,175 $4,554
2013 1,515 $5,234
2014 3,645 $9,600
2015 5,119 $10,249
2016 1,680 $24,460
2017 1,826 $11,077
Total 14,960 $69,436
15 MM BBLs of crude storage capacity was added in 2014
Transportation Costs (per barrel):
Gathering
Canada to Houston
by Rail by Pipeline
by Pipeline by Truck
$0.50 $2.00
$5 - 6.00 $12.00