1. The Gulf Coast Boom: Petroleum, Pipelines and Prices
Lipow Oil Associates, LLC
October 30, 2018

2. Agenda Crude Oil Production Crude Oil Pipelines, Terminals, Docks
Refinery Capacity and New Pipelines
IMO Marpol
Market Comments
Lipow Oil Associates

3. USA Crude Oil Production Million Barrels per Day
Lipow Oil Associates

4. Pipeline Connectivity
Enbridge from ND/Canada
Lockport
Pipeline Connectivity
DAPL
Enbridge
Lines 6 and Line 9
Keystone
Mustang
SAX
Marathon, IL,OH
Spearhead
Flanagan South
Capwood
Patoka
Woodpat
Mid Valley
To Ohio
Ozark
Cushing
Basin
Centurion
Permian
Express
ETCOP
Capline
W. Texas Gulf
Longhorn
BridgeTex
Enterprise
Cactus
Seaway and
TransCanada
Zydeco
Lipow Oil Associates

5. State Crude Oil Production Million Barrels per Day
Nigeria
Angola
Venezuela
Algeria
Libya
Qatar
Ecuador
Lipow Oil Associates

6. Texas Permian + New Mexico Oil Production Thousand Barrels Per Day
Lipow Oil Associates

7. Permian Basin Takeaway Volumes in MBD
Pipeline Takeaway
Current
Sunrise
PE III
Bridge Tex
Cactus II
Future (2019)
WA Line
Line 80
Basin
Centurion
West Texas Gulf
Prm Express II/III
Refining Takeaway
Western El Paso 130
Western NM
Holly
Alon
WRB included in PL
Total
Amdel
Longhorn
BridgeTex
Enterprise
Cactus
Lipow Oil Associates

8. Pipeline Capacity to Cushing Thousand Barrels Per Day
Sunrise Nov 2018
Sunrise/Nustar/Ardmore 100 Nov 2018
Sunrise Phase III Unknown
Lipow Oil Associates

9. Pipeline Capacity to Corpus Christi Thousand Barrels Per Day
Cactus II (Plains) Nov ‘19
Gray Oak (P66, MPC) 800 End ‘19
EPIC Jan ‘20
EPIC plans to provide interim service on the 400 MBD NGL Line 3Q 2019
Cactus III (Plains) ???
Lipow Oil Associates

10. Pipeline Capacity to Houston/Beaumont Thousand Barrels Per Day
Perm Exp III (ETP) 50 Oct ‘18
BridgeTex (MMP/PAA) 40 1Q ‘19
Enterprise Conversion ?
ETP/Magellan/Delek 600 Mid ‘20
Plains/Exxon
Lipow Oil Associates

11. Cumulative Change in Permian Supply versus Takeaway Thousand Barrels per Day
Gray Oak
EPIC
Enterprise
ETP/MMP/DLK
Sunrise
PE III
BridgeTex
Cactus II
Enterprise
Expansions
Enterprise
PE III
Lipow Oil Associates

12. Terminal Expansions Corpus/Ingleside Thousand Barrels of Capacity
Plains/Enterprise Q ’18
Magellan
Pin Oak
Flint Hills Oct ‘19
Moda (Oxy) End ‘19
South TX Gateway End ’19
Junction Energy ???
TX Gulf Terminals ???
Harvest/Vitol
Lipow Oil Associates

13. Terminal Expansions Houston/Beaumont Thousand Barrels of Capacity
Enterprise
Magellan East Houston Mid ’18
MPC TX City End ‘18
Phillips66 Beaumont End ‘18
Seabrook Logistics 700 End ‘19
Lipow Oil Associates

14. VLCC Crude Oil Export Projects
Jupiter Midstream Brownsville Offshore Loading
Pt of Corpus Christi Harbor Island VLCC Dock
Texas Gulf Terminals Trafigura Corpus Christi Offshore Loading
Oxy Ingleside VLCC Dock
South Texas Gateway Ingleside VLCC Dock
Enbridge/Kinder/Oil Tanking Freeport Offshore Loading
Enterprise Texas City: VLCC Loading
Flint Hills Ingleside Evaluating Project
Lipow Oil Associates

15. Midland WTI Differentials $/bbl
Source: CME Group Daily Bulletin
Lipow Oil Associates

16. EIA Refinery Operable Capacity Million Barrels per Calendar Day
Lipow Oil Associates

17. Refining Capacity Since Jan 2015, USA has added 785 MBD
Valero McKee 27, Corpus 70, Houston 90
Splitters: Kinder 100, Buckeye 50, Magellan 50, Petromax 27, Targa 35
Expansions: Exxon Beaumont, Raven Laredo, MMEX Ft Stockton, Jupiter Brownsville
Lipow Oil Associates

18. PADD 3 Crude Oil and Product Exports Thousand Barrels per Day (EIA)
Lipow Oil Associates

19. Product Pipelines to Mexico Capacity in MBD
Existing
Magellan
El Paso to Juarez 30
Pemex Frontera
El Paso to Juarez 45
New Projects
Howard Midstream
Dos Aguilas Corpus
to Monterrey 90
Nustar Burgos
to Laredo 64
Nustar New Burgos
Corpus to Nuevo
Laredo 108
Pemex Frontera
Brownsville
to Matamoros 30
Lipow Oil Associates

20. IMO Marpol Annex VI
Program is based on reducing deaths due to sulfur emissions from vessels
Bunker fuel sulfur reductions began in 2010
Emission Control Areas such as USA and NWE sulfur spec reduced from 1.0 to 0.1 wt% in Jan 2015
Effective Jan 1, 2020, sulfur specs are being reduced from 3.5% to 0.5%
Current HSFO Consumption is Million B/D
Lipow Oil Associates

21. Vessel Considerations
Do nothing and burn LS fuels (diesel, LS VGO)
Install scrubber and continue to burn HSFO
Scrubber Cost is $2 to $5 million depending on vessel
Limited capital investment, perhaps 20% of the fleet will have scrubbers
As time goes on, more vessels will install scrubbers
Lipow Oil Associates

22. Refinery Considerations
Do Nothing
New Coker $500MM-$1 B, 3 to 5 years to get on line
Resid Desulfurization: $300-$500 MM 3 years to get on line
Solvent Deasphalting: $200-$300 MM 2 to 3 years to get on line
Lipow Oil Associates

23. Marine Vessel Fuel Supply
Industry must deal with 3.5 to 4.0 MMBD
Vessels: 1500 scrubbers will be either on order or installed by Jan 2020 = 500 MBD
Refineries: Investments upgrade 700 MBD
Non –Compliance = 350 MBD
HSFO Blending = 350 MBD
Leaves the industry to come up with 2 MMBD of low sulfur compliant fuel
Lipow Oil Associates

24. Compliant Fuel Must be 0.5% sulfur or less
Distillate, LSVGO, LS Slurry, LS Resid
Industry expects that the new bunker pool will be distillate based
Distillate contains 8% less BTU’s per gallon that HS bunkers
Gasoline and diesel are low sulfur fuels, bunkers now join the list
Lipow Oil Associates

25. TFFA Implications Increased demand for distillate = higher price
Refinery 2020 diesel margin is $6 per barrel more than today
Refiners divert VGO from the FCCU = less gasoline supply = higher price
Ethanol and Biodiesel, are low sulfur fuel volume extenders
Lipow Oil Associates

26. Summary
Producers/Refiners aligning with logistics providers to construct infrastructure reaching overseas markets
Adequate crude oil logistics and export capacity underway to meet increasing production
Additional refined product export capacity coming on line and under construction as USA demand plateaus or declines
Lipow Oil Associates
Lipow Oil Associates 26

27. Q&A