keynote: opportunities, trends & forecasts for o&g - midstream/downstream projects and...

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 provides market intelligence that can be leveraged across all departments

Website Resources

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

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42% 37%

41%

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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

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Q2 2012

Q3 2012

Q4 2012

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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

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Crude Imports into the US Gulf Coast (PADD 3)

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Historically Competitive Gas Pricing Gas Fundamentals are Reshaping Gas Investment Strategies

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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


$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

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2014 2015 2016 2017

$ D

olla

rs in

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ion

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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


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Natural Gas Production vs. Processing Capacity

Monthly Production Processing Capacity

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Northeast Natural Gas Production vs. Processing Capacity

Monthly Production Processing Capacity


Oil & Gas Industry – Upstream/Midstream Natural Gas Processing Overcapacity?

Oil & Gas Industry – Upstream/Midstream Regional Need for Natural Gas Processing Capacity


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


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

Thank You!

Upcoming IIR Industry Outlooks Chicago, IL – May 6th 2015

Jersey City, NJ – Sept 9th 2015

keynote: opportunities, trends & forecasts for o&g - midstream/downstream projects and...

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