1. The Global oil outlook (and why it matters to Appalachian gas)
Bob Tippee, Editor, Oil & Gas Journal
Appalachian pipeliners association
January 15, 2019

2. On these subjects in OGJ…
Forecast & Review (January 7)
Conglin Xu, Senior Editor-Economics
Laura Bell, Statistics Editor
Worldwide Pipeline Construction (February 4)
Christopher Smith, Managing Editor-Technology
Midyear Forecast (July 6)
Forecast & Review Webcast, January 25, 2019

3. The plan Global oil markets in 2019
US oil, gas markets in 2019 (with pipeline notes)
Pipeline construction outlook
Long-term oil and gas market changes (why policy matters)
Why gas producers should pay attention to oil (and vice versa)

4. global oil demand (MMb/d)
2019
2018
OECD
48.1
47.8
Non-OECD
52.5
51.4
Total
100.6
99.2
Quarterly growth
Growth in oil demand is slowing.
Growth dominated by China, other non-OECD (developing countries).
Source: OGJ Forecast & Review, Jan. 7, 2019

5. global oil supply (MMb/d)
2019F
2018E
OPEC crude
31.5*
32.5
OPEC NGL
7.0
Non-OPEC
61.9
60.4
Total
100.4
99.9
*OGJ estimate. Other from IEA.
Quarterly
growth
OPEC is yielding to non-OPEC supply: North American unconventionals, Brazil
Source: OGJ Forecast & Review, Jan. 7, 2019

6. Will opec+ keep market balanced? (MMbd)
2019
Vs. 2018
Demand
100.6
+1.4
Non-OPEC supply
61.9
+1.5
OPEC NGL
7.0 NC
Need for OPEC crude
31.7
-0.1
OPEC crude
31.5
-1.0
Stock change
-0.2
-0.9
Key uncertainties:
Demand growth (and, therefore, global economy)
OPEC restraint after agreement expires in June
Source: IEA Oil Market Report, December 2018 with OGJ projection for OPEC crude

7. Oil supply management *
The oil market seems to crave coordinated supply management
December 2018 agreement: Cut 1.2 MMb/d from October levels, 800 Mb/d OPEC, 400 Mb/d non-OPEC
OPEC production; world supply
Inventories *
THE LEADERS (MMB/D)
Saudi Arabia
Russia
Orig. quota
10.54
11.597
Oct. 2017
10.05
11.303
Oct. 2018
10.65
11.79
Agreed in December:
Needed cut +
Cut 0.230
Source: OGJ F&R
*OPEC+ cuts started Jan. 2017
Vienna, Dec. 2016: Cuts of 1.2 MMb/d by 12 OPEC members, 600 Mb/d by 10 nonmembers, effective Jan
Production surged late 2018 to compensate for losses from Venezuela, others, expected from Iranian sanctions scheduled for November but waived for 6 months.

8. The oil market’s uncertain variables
Middle Eastern unrest
US disengagement
Saudi turbulence (Yemen quagmire, Jamal Khashoggi murder, economic and cultural reform, Aramco IPO)
Blockade of Qatar and weakening of GCC
Iranian expansionism (Yemen, Syria, Iraq, Lebanon) and sanctions
Maneuvers for influence by Russia, China, Turkey
Eastern Mediterranean gas discoveries
Global economic growth
IMO 2020

9. The IMO 2020 rule
International Maritime Organization regulation effective Jan. 1, 2020
Lowers sulfur limit in marine bunker fuel to 0.5 wt % from 3.5 wt %
Lower limits already apply in four emission control areas (ECAs)
What happens to ~3.4 million b/d of high-sulfur fuel oil?
What happens to sweet-sour price spreads?
Source: Ken Cowell et al., Muse, Stancil & Co., in OGJ, July 2, 2018

10. Us oil demand Gasoline is no longer the growth market 2019 2018 Amount
MMb/d
Change %
Motor gasoline
9.370
+0.6
9.311
-0.2
Jet fuel
1.780
+3.5
1.720
+2.3
Distillate
4.200
+1.7
4.130
+5.0
Residual
0.320
0.318
-7.0
LPG + ethane
3.150
+5.4
2.990
+13.1
Other products
2.060
+0.5
2.050
+0.9
TOTAL
20.880
+1.8
20.519
+2.8
Source: OGJ Forecast & Review, Jan. 7, 2019

11. US oil supply
Unless oil prices crash, growth constraint is physical until Permian pipelines open in 2H 2019
2019
2018
Amount
MMb/d
Change %
Crude & cond.
12.070
+10.7
10.900
+16.6
NGPL
5.000
+14.2
4.380
+15.8
TOTAL FIELD
17.070
+11.7
15.280
+16.3
Renewables, oxygenates
1.220
-0.8
1.230
+3.4
Proc. gain, etc.
1.120
-0.9
1.130
+1.7
TOTAL SUPPLY
19.41
+10.0
17.64
+14.0
Source: OGJ Forecast & Review, Jan. 7, 2019

12. Permian basin Crude pipeline projects
Phillips 66, Enbridge; Gray Oak, 385,000 b/d to Corpus, Freeport, Houston, 2019
EPIC Crude; 700-mile, 550,000 b/d, 2019, to Corpus
Magellan; 600-mile, 24-in. OD, 350,000 b/d, to Nederland/East Houston, 2020
PAA; Cactus II, 515-mile, 24-in. OD, Wink-to-McCamey-Ingleside/Corpus, 585,000 b/d, 2019
JupiterMLP; 650-mile, to Brownsville, 2020
ExxonMobil, PAA, Lotus, Midland-to-Houston/Beaumont

13. Us OIL IMPORTS AND EXPORTS
Net-exporter status is in view
2019
2018
Amount
MMb/d
Change %
Crude imports
7.700
-1.9
7.850
-1.5
Product imports
2.250
-0.9
2.270
+4.4
TOT. IMPORTS
9.950
-1.7
10.120
-0.2
Crude exports
2.800
+33.3
2.100
+81.3
Product exports
5.890
+6.1
5.550
+6.4
TOT. EXP’TS
8.690
+13.6
7.650
+20.0
NET IMPORTS
1.26
2.47
Source: OGJ Forecast & Review, Jan. 7, 2019

14. US refining
High refinery utilization reflects margins widened by US crude price discount to Brent
2019
2018
Amount
MMb/d
Change %
Crude runs
17.03
+0.7
16.92
+2.0
Total inputs
17.20
-0.3
17.26
+2.1
Refining cap.
18.62
+0.1
18.60
+0.2
Cap. utilization
92%
93%

15. US gas production and trade
Exports will grow with LNG project starts
2019
2018
Amount
tcf
Change %
Production
35.697
+9.1
32.715
+12.0
Pipeline imports
2.612
-8.4
2.851
-3.8
LNG imports
0.073
+5.3
0.069
-11.1
Pipeline exports
3.066
+15.1
2.665
+8.3
LNG exports
2.044
+89.8
1.077
+52.1
Net exports
2.425
0.822
Source: OGJ Forecast & Review, Jan. 7, 2019

16. US LNG export projects, 2016-21

17. US gas: More gas, more liquids
Source: US Energy Information Administration, 2018 Annual Energy Outlook

18. Debottlenecking Permian Gas
NAmerico Partners; Pecos Trail, 468-mile 1.85 bcfd to Corpus, 2020
Kinder Morgan, DCP, Targa; Gulf Coast Express, 430-mile, Waha to Agua Dulce, 1.92 bcfd, October 2019
Sempra, Boardwalk; Permian-Katy, 470-mile, 2 bcfd, phased in starting December 2019
Tellurian; Permian Global Access, Waha to Gillis, La., 625-mile, 2 bcfd, 2022
Targa, NextEra, MPLX; Whistler, Waha to Agua Dulce, 450-mile, 2 bcfd, 2020
Kinder Morgan, ExxonMobil; Permian Highway, Waha-to-Katy, 430-mile, 2 bcfd, 2020

19. Debottlenecking Permian ngl
EPIC Y Grade; 650-mile, DLK Black River to Corpus Christi 220,000 b/d, 2019
Enterprise; Shin Oak, 571-mile, Hobbs to Mont Belvieu 250,000 b/d, 2019
Permico Energia; Companero, 510-mile, to Corpus Christi, 300,000 b/d, 2020
Energy Transfer; Lone Star Express extension, 352-mile, Wink to Fort Worth interconnect, Q4 2020
Targa; Grand Prix, Permian and Oklahoma to Mont Belvieu

20. Appalachian gas pipeline delays
Northern Access (97 miles, Pennsylvania-NY) approved early 2017, blocked by NY court
PennEast (115 miles, Pennsylvania-NJ) approved Jan. 2018, NJ judge OKs eminent domain
Mountain Valley (303 miles, WV-Virginia) approved Oct. 2017, 70% complete, Virginia AG filed suit, year-end 2019 in-service
Atlantic Coast (600 miles, WV-NC) approved Oct. 2017, work halted after Virginia court stays F&WS permit

21. OGJ pipeline construction: 2019 only*
Global - 14,387 miles (Flat from 2018 but maintaining a return to 2013 levels)
US – 6,334 miles, +79% (of which, 1,315 miles NGL)
Land pipeline construction costs:
2018, $9.95 million/mile
2017, $5.94 million/mile
*Projects planned to be completed in 2019.
Source: OGJ World Pipeline Construction, Feb. 4, 2019

22. OGJ pipeline construction: 2019 and beyond*
Global – 31,917 miles, -5% (Continuing general decline since 2009)
US, Canada – 10,396 miles, -4.7%
Natural gas, 4,865 miles
Crude, 4,115 miles
Products, 1,416 miles
*Projects under way at start of or set to begin in 2019 and be completed after 2019.
Also includes some large projects not yet under construction but expected to advance.
Source: Worldwide Pipeline Construction, OGJ, Feb. 4, 2019

23. Global crude
Liberty (Phillips 66, Bridger) – Bakken-to- Corpus, 1,300 miles, 2020
Basra-Aqaba – Export Iraqi crude – 1,043 miles, 2020
Uganda-Indian Ocean – roughly 930 miles, 2020
Keystone XL?

24. Global natural gas projects
SCP/TANAP/TAP (Shah Deniz II) – Caspian to Europe
TAP = 800 km, incl. 115 offshore, 2020
Xinjiang to Guangdong-Zhejiang (Sinopec) – Gasified coal to market – 5563 miles, 2020
Power of Siberia (CNPC, Gazprom) – Russian gas to China – 2,465 miles, 2019
Trans Alaska Gas Pipeline?

25. The long term: IEA’s World Energy Outlook 2018
New Policies Scenario
Current and planned policies, including Paris 2015 country commitments
Sustainable Development Scenario
“a pathway to meeting various climate, air quality and universal access goals in an integrated way. “
Energy-related, global emissions of CO2 peak in 2020 then decline in trajectory needed to meet goals of Paris Climate Agreement.

26. Long-Term Energy in IEA/WEO 2018:
Oil -29%
Gas +11% :
Oil +10%
Gas +43%
Sustainable Development
Scenario
New Policies Scenario
Source: International Energy Agency World Energy Outlook 2018

27. Long-term oil demand in iea/weo 2018
New Policies Scenario
Sustainable Development Scenario
Source: International Energy Agency World Energy Outlook 2018

28. Long-Term oil production in IEA/WEo 2018
Policy is important!
2017:
92.8 MMb/d
103.4 MMb/d
Change vs. 2017:
New Policies +11.4%
Sustainable Development -26.7%
68 MMb/d
Source: International Energy Agency World Energy Outlook 2018

29. Oil-demand growth leader: petrochemicals
Net petrochem change: 4.81 MMbd
Source: International Energy Agency World Energy Outlook 2018

30. Long-term gas outlook: ‘new policies’*
Source: International Energy Agency World Energy Outlook 2018

31. Long-term gas sensitive to policy (but demand grows in both cases)
Source: International Energy Agency World Energy Outlook 2018

32. Lng requirements under ‘new policies’
LNG will overtake pipeline share of gas trade in this period
US LNG growing rapidly under uniquely flexible contracts
Economically, gas will act increasingly like oil (but never totally)
Source: International Energy Agency World Energy Outlook 2018

33. IEA models: chemical feedstock demand
Chemical feedstock share of oil demand grows in both scenarios
Feedstock demand: RTS vs. CTS*
Oil demand for feedstock: RTS vs. CTS*
*RTS=Reference Technology Scenario, aligned with New Policy Scenario in WEO 2017
*CTS=Clean Technology Scenario, aligned with Sustainable Development Scenario in WEO2017
Source: IEA ,”The Future of Petrochemicals,” October 2018.

34. IEA: Chemicals can use more Ethane
*RTS = reference technology scenario.
Source: IEA, “The Future of Petrochemicals, October 2018

35. What it means Oil market remains dependent on supply management
Middle Eastern instability hampers but hasn’t impaired supply management
Shale makes US a net gas exporter, nearly a net oil exporter, a growing exporter of NGL
NGL dominates US pipeline construction outlook
Long-term oil demand very sensitive to climate-related regulation
Long-term growth in oil demand dominated by petrochemicals
Gas-production growth means more NGLs, which will compete with oil in petrochemical market

36. Contact Information
Bob Tippee, Editor, Oil & Gas Journal
1455 W. Loop S., Suite 400
Houston, TX 77027
Ogj online:
Oil & Gas Community: