California Refinery Overview and Fuel Use Transportation Fuel Supply Reliability Due to Reduced Natural Gas Availability San Pedro, CA June 17, 2016 Gordon Schremp Energy Assessments Division California Energy Commission California Energy Commission

Presentation Topics Transportation fuel infrastructure overview West Coast, California & Los Angeles Basin Refinery operations overview Refinery fuel use Natural gas and still gas Natural gas end-uses Operational flexibility 6/17/2016 California Energy Commission 2

Transportation Fuel Infrastructure Overview The California transportation fuel “infrastructure” consists of several interconnected assets operated by a combination of refiner and third-party companies Refineries Pipelines Marine terminals Storage tanks Rail Crude oil and petroleum product infrastructure assets are separate and distinct from one another – not interchangeable Unlike with the electricity distribution system, Northern California is not directly connected to Southern California 6/17/2016 California Energy Commission 3

Western States More Isolated than Rest of U.S. California Energy Commission 6/17/20164

California Refineries 3 primary refinery locations 12 refineries produce transportation fuels that meet California standards 8 smaller refineries produce asphalt and other petroleum products California refineries provide majority of transportation fuel to neighboring states Processed 1.7 million barrels per day of crude oil during /17/2016 California Energy Commission 5

California Refineries Refineries are a primary hub of logistical activity Raw materials imported & finished products shipped Crude oil receipts during 2015 received by Marine vessels (foreign) – TBD Marine vessels (Alaska) – TBD California source via pipelines – TBD Rail/truck – 4.8 TBD Process units operate continuously at or near maximum capacity, except during periods of planned maintenance or unplanned outages 6/17/2016 California Energy Commission 6

Southern California Refineries 6/17/20167 Sources: Oil Change International base map, Energy Information Administration refinery data and California Energy Commission analysis. Burlington Northern Santa Fe Union Pacific

The majority of transportation fuels used in California are produced in Southern California California share CARB Gasoline 55.0 % CARB Diesel 44.2 % Jet Fuel 62.4 % Export Fuel 59.1 % Export fuels sent by pipeline Southern Nevada Phoenix, AZ Crude oil processing TBD 53.0 percent state Los Angeles Basin Refinery Activity 6/17/2016 California Energy Commission 8

Refineries & Process Units 6/17/2016 California Energy Commission 9 First step in refining – distillation - uses heat and pressure to break down crude oil mixtures Produces mostly intermediate components that require further processing by other refinery equipment California refineries are of high complexity and capable of processing wide variety of crude oils to meet some of the most stringent fuel standards Source: supplychainn.blogspot.com

Refineries – Must Maintain Balance 6/17/2016 California Energy Commission 10 Refiners must optimize operations to ensure system remains in balance: Steam load Sulfur plant operations Refinery gases Cogeneration operations & electrical loads Hydrogen use All refinery inputs end up being consumed or converted Storage capacity is finite Source: Oil & Gas Journal

Refinery Fuel Use California Energy Commission 6/17/ Source of original graphic – Position Interactive

Natural Gas vs. Still Gas 6/17/2016 California Energy Commission 12 Natural gas use represented 53.5 percent of total refinery gas use during 2014 and 51.8 percent during Lowest month 48.4 percent – August 2015 Highest month 56.8 percent – May 2014

Refinery vs. System End-use 6/17/2016 California Energy Commission 13 Refinery share of natural gas use within the SoCal Gas system represented an average of 11.2 percent during 2014 and 11.0 percent during 2015.

2015 Atypical Year for Refinery Operations 6/17/2016 California Energy Commission 14 Source: Industrial Information Resources (IIR) Loss Gasoline Production Report. Refinery planned and unplanned maintenance – contributed to lower- than-normal refinery fuel use during 2015 West Coast gasoline production capability significantly degraded during 2015 Based on analysis of IIR data, the quantity of gasoline production capacity off-line during April – December averaged nearly 170 thousand barrels per day (TBD) greater than the same period in 2014 o October – 205 TBD more, November 240 TBD, and December 295 TBD more than previous year

Scheduled maintenance for remainder of 2016 much lower than historical range and 2015 Southern California portion of crude unit maintenance approximately 130,000 barrels per day of West Coast totals during October and early November West Coast Planned Maintenance /17/2016 California Energy Commission 15 Sources: Industrial Information Resources (IIR) Refinery Off-line Report & DOE Review.

Refinery Fuel Use 2015 vs /17/2016 California Energy Commission 16 Refinery fuel use during remainder of 2016 more likely to be similar to level of use during 2014.

2014 end-use shares Cogeneration 45.9 % Hydrogen production 34.6 % Heaters 17.7 % Boilers 1.8 % Natural Gas End-use 6/17/2016 California Energy Commission end-use shares Cogeneration 45.2 % Hydrogen production 34.0 % Heaters 16.8 % Boilers 3.9 % MMcf/day Source: CEC Ad Hoc PIIRA Confidential Survey Relative share similar from one year to next.

Natural Gas Intensity by Refinery End-use 6/17/2016 California Energy Commission 18 Natural gas ratio higher for end-uses that require superior quality properties.

Natural Gas Use Outside Refinery California Energy Commission 6/17/ Source of original graphic – Position Interactive Refinery-related natural gas end-use quantities exclude off-site hydrogen.

None of the Southern California refineries are able to continue operating at planned or even partially reduced rates if all purchased natural gas were to be curtailed Ability of refiners to reduce natural gas use and maintain normal operations is limited o Can collectively reduce NG use by 46 to 52 MMcf/day o Represents 15 to 18 percent of refiner totals o Alternative fueling operations cannot be maintained indefinitely Reduction of natural gas use accomplished through o Consumption of butane and propane o Modification to still gas operations Not all refineries are created equal o Flexibility varies from one facility to the next o Limited by Infrastructure architecture Alternative refinery fuel availability Operational Flexibility 6/17/2016 California Energy Commission 20 Source: CEC Ad Hoc PIIRA Confidential Survey

Additional Q & A California Energy Commission Source: UC Berkeley, Bancroft Library – original lithograph published /17/201621