Making’The’Business’Case’For’Crude3By3Rail’As’ASustainable ...€¦ · UintaBasin 4...
Transcript of Making’The’Business’Case’For’Crude3By3Rail’As’ASustainable ...€¦ · UintaBasin 4...
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Making The Business Case For Crude-‐By-‐Rail As A Sustainable Alterna;ve To Regional Markets for Uinta Waxy Crude
August 22, 2013
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Forward Looking Statements and Related MaDers
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This presenta;on contains forward-‐looking statements within the meaning of Sec;on 27A of the Securi;es Act of 1933, as amended, and Sec;on 21E of
the Securi;es Exchange Act of 1934, as amended. The words “will”, “believe”, “intend”, “plan”, “expect” or other similar expressions are intended to
iden;fy forward-‐looking statements. Other than historical facts included in this presenta;on, all informa;on and statements, such as informa;on
regarding planned capital expenditures, es;mated reserves, es;mated produc;on targets, drilling and development plans, the ;ming of produc;on,
planned capital expenditures, and other plans and objec;ves for future opera;ons, are forward-‐looking statements. Although as of the date of this
presenta;on Newfield believes that these expecta;ons are reasonable, this informa;on is based upon assump;ons and an;cipated results that are
subject to numerous uncertain;es and risks. Actual results may vary significantly from those an;cipated due to many factors, including drilling results,
commodity prices, industry condi;ons, the prices of goods and services, the availability of drilling rigs and other support services, the availability of
refining capacity for the crude oil Newfield produces in the Uinta Basin in Utah, the availability of capital resources, labor condi;ons, severe weather
condi;ons, governmental regula;ons and other opera;ng risks. Please see Newfield’s 2012 Annual Report on Form 10-‐K and subsequent Quarterly
Reports on Form 10-‐Q filed with the U.S. Securi;es and Exchange Commission (SEC) for a discussion of other factors that may cause actual results to
vary. Unpredictable or unknown factors not discussed herein or in Newfield’s SEC filings could also have material adverse effects on forward-‐looking
statements. Readers are cau;oned not to place undo reliance on forward-‐looking statements, which speak only as of the date of this presenta;on.
Unless legally required, Newfield undertakes no obliga;on to publicly update or revise any forward-‐looking statements.
Cau;onary Note to Investors – Effec;ve January 1, 2010, the SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved,
probable and possible reserves that meet the SEC’s defini;ons for such terms. Newfield may use terms in this presenta;on, such as “resources”, “net
resources”, “net discovered resources”, “net risked resources”, “net lower-‐risked captured resources”, “net risked captured resources”, “gross
resources”, “gross resource poten;al”, “gross unrisked resource poten;al”, “gross unrisked resources”, and similar terms that the SEC’s guidelines
strictly prohibit in SEC filings. Investors are urged to consider closely the oil and gas disclosures in Newfield’s 2012 Annual Report on Form 10-‐K,
available at www.newfield.com, www.sec.gov or by wri;ng Newfield at 4 Waterway Square Place, Suite 100, The Woodlands, Texas 77380 ADn:
Investor Rela;ons.
Uinta Basin
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• Located ~150 southeast of Salt Lake City
• Cumulative gross production − Oil – 570 MMBO − Gas – 6.1 TCF
• Current daily gross production − Oil – 60,000 BOPD − Gas – 1.4 BCFD
• Crude oil produced is Uinta Black and Yellow Wax
• Majority of crude is trucked to the five SLC refineries
• Oil production has been constrained historically due to limited refining capacity for waxy crudes in SLC and well permitting
Types of Wax Crude Produced from the Uinta Basin
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Black Wax Yellow Wax
API Gravity 30-34° 38-43° Pour Point ~105° F ~120° F
Sulfur, % 0.08 0.02
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Poten;al Waxy Crude Market: Trucking and Rail Orbits There are many attractively configured refineries able to extract maximum
value out of the waxy crudes which can be transported by rail
Rail
Rail
Rail Trucking
Waxy Crude Rail Logis;cs Chain
• Transloaded into coiled & insulated tank cars
• Tank cars steamed on the refinery
• Loaded into insulated trailers at 140-160° F • Lose ~20°F in transit to SLC ( 5 hrs. load/drive time)
• Heat traced lines • Heated tanks: fixed roof for Black Wax • Heated tanks: floating roof for Yellow Wax
• Produced into heated tanks
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Trucking Logis;cs to Rail Transloading
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• Transloading sites in SLC, Ogden and the Price area
• Trucking cost $8-12/mile depending on location
• Seasonal winter weather delays - less than 20 days per year
• Insulated trailers keep oil above pour point for close to 24 hours
Oil Transloading Rail Sites
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Transloading: Factors to Consider When Choosing a Site
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• Site Location – Lowest trucking cost from field (not always the shortest distance) – Proximity to a major highway – Dual served by both UP and BNSF rail roads – Direct Class 1 rail road or shortline access – Surrounding acreage and potential for future capacity expansion/unit
trains
• Capacity of Transloading Facility – Number of loading / storage spots
• Split loads / partial loads count as 1 loading spot and slow down throughput – Number of rail cars transloaded per day
• 1 truck = 1 hour to transload – Operating hours of site
• Need 24/7 operating for maximum loading efficiency – Number of daily switches
• Acts as a multiplier to site capacity
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Transloading: Lessons Learned
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• Transloader operating both trucking and site – Incentivized to optimize logistics and site capacity – Trucking demurrage not related to lease loading is mitigated
• Track space must be actively managed − Loading and receipt / release of cars must be efficient to avoid
both trucking delays and railroad demurrage
• Safety and quality control − HSE − Car cleaning costs
• Longer term commitments lend to quality of labor – Term deals in lieu of spot markets allow alignment and
retention of well trained labor
• Measurement and metering accuracy is critical • Minimizes back office reconciliation and PPAs • Streamlines invoicing process
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Rail Transporta;on: Shortline RR vs. Class 1 RR
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• Option 1: Shortline RR: provides switching at transloading site and interfaces with Class 1 RR – Both manifest and unit train capable – Can provide more frequent switching than a Class 1 RR – Storage and overflow capacity key in managing fluctuations in rail car
arrivals • Option 2: Class 1 RR: Manifest only
– Switches less frequent than with a shortline; more track and storage capacity needed to accommodate & mitigate a reduction in site efficiency
– Less flexible on switches/requires minimum number of cars to switch • Option 3: Class 1 RR: Unit or Manifest site operated by
transloader – Empty rail cars are dropped off by Class 1 RR and transloader sections
out and sort cars – Once train is loaded & reassembled by transloader, Class 1 RR picks up
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Results to date
• Successfully worked through front-end logistics of trucking and transloading
• Transloaded 11,000 bpd moved by manifest train
• Resolved handling issues on the receiving end – Steaming – Heated lines – Heated tanks
• Completed a test run of 250,000 bbls at a major refinery both as crude and FCC feed with very positive results
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Dis;lla;on Profile of Waxy Crudes
65
25
10
34
29
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BAKKEN WCS Western Canadian Select
650F and less (distillate and lighter) 650F-1000F (gasoil) 1000F+ (resid)
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35+28=63
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35+33=68
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35
28
Yellow Wax
Waxy crudes are very high in 650F+ material which is in short supply on the market
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35
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Black Wax
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Refinery Types and Waxy Crude Valua;on as Crude Unit Feed
wax
Type 1 Type 2
wax
Type 3
wax
Type 4
wax
wax
Coking refinery with normal size cracking unit
Coking refinery with oversized cracking unit
Cracking refinery with oversized cracking unit
Cracking refinery with normal size cracking unit
Wax Refining Value ~ heavy crude + $X/b
Wax Refining Value ~ heavy crude + $XX/b
wax
Wax Refining Value ~ light crude + $XX/b
Wax Refining Value ~ light crude + $X/b
CDU/VDU
FCCU
Coker
>35% of CDU
>35% of CDU
CDU: Crude Distillation Unit; VDU: Vacuum Distillation Unit; FCC: Fluid Catalytic Cracking Unit
The ideal configuration is a cracking refinery with oversized FCC
CDU/VDU
CDU/VDU
FCCU
Coker
FCCU FCCU
CDU/VDU
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Waxy Crude Displacement in Refineries Type 1
Coking refinery with normal size FCC
-‐15,000
-‐10,000
-‐5,000
0
5,000
10,000
15,000
1 2 3 4
bpd
Waxy crude Condensate Heavy crude
Type 2Coking refinery with oversized FCC
-‐15000
-‐10000
-‐5000
0
5000
10000
15000
1 2 3 4
bpd
Condensate Heavy crude Purchased VGO Waxy crude
Type 3Cracking refinery with normal size FCC
-‐15,000
-‐10,000
-‐5,000
0
5,000
10,000
15,000
1 2 3 4
bpd
Waxy crude Condensate Light crude
Type 4 Cracking refinery with oversized FCC
-‐15000
-‐10000
-‐5000
0
5000
10000
15000
1 2 3 4
bpd
Light crude Purchased VGO Waxy crude
• Waxy crude displaces a combination of high cost light crude and an even higher cost VGO
• Best value for waxy crude
• Waxy crude displaces heavy crude and VGO
• Waxy crude displaces heavy crude
• The resid value of waxy crude is reduced by processing in the Coker vs. FCC
• Waxy crude dispropor-tionately displaces light crude and adds more condensate
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Waxy Crude Value Proposi;on: Crude or FCC feed
Cru
de/V
acuu
m D
istil
latio
n FCCU
Resid
Light products for finishing
Light products for finishing
Gasoil
Waxy crude bottoms lose value in bottoms
processing
Ideally wax needs to displace a light or medium
crude, not heavy
wax catfeed
wax crude
Waxy crudes can be processed in low conversion refineries with high relative capacity FCC units or can be used as FCC feed
Bot
tom
s P
roce
ssin
g
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Why Black and Yellow Wax as FCC Feed?
• Very low in sulfur - no hydrotreating required which is a significant cost savings
• More hydrogen compared to typical VGO, translates into a higher liquid volume gain
• May lose some gasoline octane, but gasoline yield will be much higher than typical VGO
• Even though the residue (micro carbon) in Black Wax is 3.5%, it is very mild and only a small part of it will deposit on the catalyst
• Very low vanadium (severe catalyst poison) compared to VGO - other metals can be passivated (Ni) or removed via desalting (Na)
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Waxy Crude as FCC Feed Study • Goals
– Provide FCC yield data for Black and Yellow Wax through test plant runs and valuate FCC processing issues
– Make the data available to interested refineries for evaluation • Execution
– Hired a well known engineering firm of FCC experts who are providing technical advice on the value of waxy crude as FCC feed
– Conducting FST (Fluid Simulation Test) plant tests of Black and Yellow Wax vs. typical FCC feedstocks
– The tests compare the value generated by typical FCC feedstocks (including conventional residue feedstocks) vs. waxy crudes and will help define their impact on FCC unit operating conditions
• Next Steps – Publish the results in oil & gas/refining publications and present at
refining and crude oil supply conferences – Share the results with interested refiners for evaluation as potential
FCC feedstock
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FST (Fluid Simula;on Test) Technology by Albemarle Catalysts
• Lab scale FCC unit for feed and catalyst tes:ng • Tes:ng samples at different condi:ons and catalyst types to compare the performance of Black and Yellow Wax rela:ve to VGO and residue feedstocks