1. ASPHALT SUPPLY IN A VOLATILE OIL WORLD
Bill Haverland
ConocoPhillips Company

2. Issues to be Discussed Crude Oil Supply Crude Oil Pricing
Refining Capacity
Products Supply
Products Pricing
Future of the Industry

3. CRUDE OIL SUPPLY
A WORLD LOOK

4. Crude Oil Supply (2006) World Proven Crude Oil Reserves
Billions of Barrels
World Crude Oil Production
Millions of Barrels Per Day
W. Europe 15
FSU/E. Europe
FSU/E. Europe
W. Europe
Latin America
Latin America 79
6.3
116
12.6
10.6
US/Canada
201
Proven reserves grew in Canada
Comprised of primarily tar sands
Crude is extracted from sands and topped in the field for diluant in pipeline (syncrude)
11.3
US/Canada 36
Asia
/Pacific
26.0
743
102
8.4
Africa
9.8
Asia/Pacific
Middle East
Asia/Pacific
Africa
Africa
Middle East
Middle East
Total: 85MMB/D
Total: 1,292 BB

5. Crude Oil Demand Demand has risen by 7 MMBD (9%) since 2002.
Demand at 85 MMBD or 98% of world daily delivery capacity.
Vulnerable to supply disruptions caused by storms, accidents, breakdowns, political unrest.
65% of proven reserves within national oil companies and 16% held by Russia.
Traditional companies have full access to 7% of reserves and 12% through partners (if allowed).

6. CRUDE OIL PRICING

7. WTI Price by Year
Based upon WTI Spot Price at Cushing

8. WTI Price by Quarter
Based upon WTI Spot Price at Cushing

9. Current Crude Pricing

10. REFINING CAPACITY

11. Topping Refinery “Tea Pot” Not A Refinery Really Just A Crude
GASES
650-
NAPHTHA AND
GASOIL FEEDSTOCKS
“Tea Pot”
Not A Refinery
Really Just A Crude
Distiller
CRUDE OIL DU
6OIL or ASPHALT
(if heavy crude)
650+

12. “Hydroskimming” Refinery, many exist all over the world
Simple Refinery
GASES
TO MOGAS
650-
NHT
CRU
KHT
JET/KERO
DHT
TO NO.2
CRUDE OIL DU
“Hydroskimming” Refinery,
many exist all over the world
6OIL or ASPHALT
(if heavy crude)
650+

13. CCU - “Complex” Refinery
GASES
TO MOGAS
650-
NHT
CRU
TO MOGAS
KHT
JET/KERO
DHT
TO 2OIL
CRUDE OIL DU
GASES
ALKY
TO MOGAS
GASOLINE
TO MOGAS
CCU
GASOIL
TO 2OIL
650+
VAC
1050+
6OIL
ASPHALT

14. CCU/HCU/Coker - “Very Complex” Refinery
TO MOGAS
JET/KERO
TO 2OIL
ISOM
GASES
NHT
CRU
KHT
DHT
H2 PLANT
GASES
HCU
MTBE
CRUDE OIL DU
GASES
ALKY
CCU
VAC
GASES
COKER
TCU/VIS
DEASPHALTER
COKE

15. Refinery Yield (% of Crude Intake)

16. U. S. Refining Capacity
319
175
158
131
Last New U. S. Refinery Built in 1976
Source: Oil & Gas Journal

17. U. S. Asphalt Refining Capacity
Per Poten 510MB/D domestic supply.
Production Range: 600 B/D to 60,000 B/D
Source: Oil & Gas Journal

18. U. S. Refining Coking Capacity

19. U.S. Coker Construction Projects 2005 - 2011
Planning, Engineering, or Construction Phase
Total Refineries: MB per day
Asphalt Refineries: MB per day
* Source: Argus Asphalt Report

20. PRODUCTS SUPPLY/DEMAND

21. Supply Source for U. S. Demand

22. U. S. Product Demand, MB/D

23. Historical Asphalt Supply/Demand Millions Tons - Liquid
Per Poten, 2004 demand 36MMT, production 33.2MMT, import 3MMT
Source: Oil & Gas Journal

24. PRODUCTS PRICING

25. Prices by Quarter
WTI Spot price at cushing. Unleaded Chicago Pipe price.

26. Gasoline Price Components

27. Prices by Quarter
$36.00 asphalt versus $80.00 gasoline = $44.00 price spread.
$36.00 per barrel asphalt = $ asphalt.
“Kansas” racks up to average $245 by late Feb 2006

28. Asphalt vs Coker Feed Value
Gulf coast coker values from P&P reports

29. Current Coking Economics
Gasoline/Diesel Pricing
Aug., 07 Price: $95.00/BBL
Less Distribution: /BBL
Net to Refinery: $89.00/BBL
Kansas City Asphalt Pricing
Aug 07: $54.50/BBL*
($40/Ton): $7.15/BBL
$47.35/BBL
Lost Value: $41.65/BBL
* Source – Poten & Partners

30. Current Coking Economics
30,000 BBLS/Day Asphalt Production
X 70% Gasoil Production
21,000 BBLS Gasoil for Gasoline/Diesel
X $41.65/BBL Gasoline/Diesel diff. To Asphalt
$874,650 per day added margin
$1 Billion / $874,650 = 1,143 days (3.1 years payoff)

31. FUTURE OF THE INDUSTRY

32. Current Realities
Crude production at maximum rates based on existing infrastructure
U.S. refining running at maximum capacity (less turnaround activity)
No new refineries in the near term
Existing refinery expansions must fill gap
Increase crude capacity and conversion capabilities to meet light product demand
Asphalt must keep pace with conversion feed values to encourage production

33. Factors Influencing Asphalt Price
Absolute price of crude (WTI benchmark)
Light/Heavy crude price differential
Light product “crack spread”
Coking economics
Impact of clean fuels (sweet crudes)
Heavy crude availability (Venezuela/Canadian)
Transportation costs
Supply/Demand

34. Future For Asphalt More heavy crude being run (availability and price)
Clean fuels capital behind refiners, up-graders next?
Asphalt is more expensive in a $70.00 crude world
Asphalt has to trend faster with crude oil prices
Asphalt has to be more competitive with light products
Transportation costs rising – Rail, Barge, Terminalling
State asphalt price indexes reduce supplier/contractor risk

35. QUESTIONS