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Demand –
When Push Comes to Shove
CONFIDENTIAL 2
Overlap of Boiling Point Ranges Contributes to
Terminology Confusion
Condensate
80-600+°F
Pentanes
80-100°F
Natural Gasoline
80-150°F
Light Naphtha
80-180°F
Full-range
Naphtha
80-380°F
Heavy Naphtha
180-380°F
CONFIDENTIAL 3
Definitions for this Presentation
• Naphtha - generic term for a light volatile petroleum liquid or low octane gasoline
– Light Naphtha (aka Light Straight Run or LSR)
Composed primarily of C5 (pentanes) and C6 (hexanes)
Best suited for isomerization or gasoline blending
RVP between 12 and 20 psi
– Heavy Naphtha - Best suited for reformers, C6 -C7-C8.
– “Full-range” Naphtha: Light Naphtha + Heavy Naphtha
• Natural Gasoline
– Heaviest liquid stream from a gas fractionation plant, maybe referred to as condensate
– Composed of C5 and heavier
• Condensate - Generic term for light raw petroleum that “condensed” from gas;
ranges in quality from natural gasoline to light crude oil
– Condensate may meet minimum export regulations (distilled) or not (field grade)
– Usually meets pipeline vapor pressure specs of 11-12 psi
CONFIDENTIAL 4
Light Naphtha Balance: U.S.
Sources
• Produced Natural Gasoline
• Produced Condensate
• Produced Crude Oil
• Imported Crude Oils
Disposition
• U.S. Domestic Gasoline Production
• Ethylene Cracking
• Exports - Western Canada Diluent
• Exports - other
• Ethanol Denaturant
CONFIDENTIAL 5
Light Naphtha Consumers
Gasoline
Olefins
Balance Envelope
Natural Gasoline
U.S.
Condensate Domestic
Gasoline
Crude Oil Production
Gasoline
U.S. Refining
Waterborne Pool
System
Imported Direct/Isom.
Crude Oil Gasoline
Exports
Western
Canadian
Dilbit Diluent Olefins
Exports
CONFIDENTIAL 7
Light Naphtha Content of Crude Oils Vary Significantly
Source: PRISM assay database; light naphtha distillation range of 85-185 ⁰F.
CONFIDENTIAL 8
Crude /
Condensate
Refining
Introduction
Crude Qualities
Sample Yields from Crude Oils
100%
90%
80%
Light Ends
70%
LSR
Liquid Volume Percent
60% Naphtha
Kerosene
50% Diesel
ATB
40%
30%
20%
10%
0%
Eagle Ford Eagle Ford 44.6 Bakken WTI LLS Brent
Condensate 54.7
Source: PRISMTM
CONFIDENTIAL 9
U.S. Light Tight Oil Distillation Capacity Growth
800
Planned Firm
700
Cumulative Expansions, MB/D
600
500
400
300
200
100
0
2015 2016 2017 2018
Source: Company Announcements, Baker & O’Brien Analysis.
CONFIDENTIAL 10
Quality Issues The Opportunity of Light Ends
CONFIDENTIAL 11
Light Tight Oil Production
Source: EIA.
CONFIDENTIAL 12
Light Tight Oil Production
Eagle Ford Condensate Production
CONFIDENTIAL 13
Light Tight Oil and Light Naphtha Production
12,000
10,000
8,000
Thousands of Barrels
6,000
4,000
Total LTO Production
2,000
Source: EIA.
CONFIDENTIAL 14
Influences on Light Naphtha Consumption
3,000
2,900
2,800
Trailing 12-Month Total
2,600
2,500
2,400
200,000
(200,000)
(400,000)
(600,000)
(800,000)
Source: EIA.
CONFIDENTIAL 16
Influences on Light Naphtha Consumption
Monthly Exports
250,000
Annual Average Exports
200,000
Barrels Per Day
150,000
100,000
50,000
Source: EIA.
CONFIDENTIAL 17
Influences on Light Naphtha Consumption
9,500,000
Barrels Per Day
9,000,000
8,500,000
8,000,000
17,500
17,000
16,500
16,000
15,500
15,000
14,500
14,000 Gross Inputs into Refiners
13,500 Average Refinery Operable Capacity
13,000
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Source: EIA and Baker &O’Brien Analysis.
CONFIDENTIAL 19
Heavy Naphtha Demand
3,500 95.0%
3,400
3,300 90.0%
3,200
3,100 85.0%
3,000
2,900 80.0%
Reformer Throughput
2,800
Reformer Capacity Utilization
2,700 75.0%
2,600
2,500 70.0%
Source: PRISM™.
CONFIDENTIAL 20
Value of Light Naphtha in Gasoline
100%
Natural Gasoline
90%
80%
Percentage of Gasoline Price
70%
60%
50%
Normal Butane
40%
30%
20%
Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015
Source: Baker & O’Brien Analysis and Platts.
CONFIDENTIAL 21
Value of Light Naphtha in Gasoline
NATURAL GASOLINE AS A PERCENTAGE OF GASOLINE
(Mont Belvieu Natural Gasoline / Gulf Coast Gasoline )
100% 8.00
95% 7.00
90% 6.00
80% 4.00
75% 3.00
70% 2.00
65% 1.00
60% 0.00
~1.6 MM B/D
40.00
35.00
Propane
Cents Per Pound
30.00
High Cost Feed
25.00 Normal Butane
20.00
15.00
Ethane
10.00
5.00
0.00
2010 2011 2012 2013 2014 Current
(Sep 2015)
Source: Dan Lippe, Petral Consulting Company.
CONFIDENTIAL 24
Incentives to Store?
100%
90%
87% Natural Gasoline
80%
Percentage of Gasoline Price
72%
70%
60%
Normal Butane
50%
40%
30%
Record
Lows
20%
CONFIDENTIAL 26
Naphtha and
Condensate
Markets Global Naphtha Markets
100.00
80.00
USGC Heavy Naphtha
$/B
Oct-2011
Oct-2012
Oct-2013
Oct-2014
Jul-2011
Jan-2010
Apr-2010
Jul-2010
Jan-2011
Apr-2011
Jan-2012
Apr-2012
Jul-2012
Jan-2013
Apr-2013
Jul-2013
Jan-2014
Apr-2014
Jul-2014
Jan-2015
Apr-2015
Source: Baker & O’Brien Analysis and Platts.
CONFIDENTIAL 27
Export Markets
CONFIDENTIAL 28
Conclusions
CONFIDENTIAL 29
Baker & O’Brien – Independent Energy Consultants
12001 N. Central Expressway 1333 West Loop South 146 Fleet Street
Suite 1200 Suite 1350 Suite 2
Dallas, TX 75243 Houston, TX 77027 London EC4A 2BU
Phone: 1-214-368-7626 Phone: 1-832-358-1453 Phone: 44-20-7373-0925
Fax: 1-214-368-0190 Fax: 1-832-358-1498
www.bakerobrien.com
CONFIDENTIAL 30