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The Emergence of Unconventional Liquids

The Emergence of Unconventional Liquids. Greg Goff February 15, 2005. Outline. Importance of Unconventional Liquids Development Strategies Refining Challenges: Adapting to Changing Feedstocks Challenges for Overcoming Refiner Resistance Outlook. Unconventional Liquids. Bitumen Blends

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The Emergence of Unconventional Liquids

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  1. The Emergence of Unconventional Liquids Greg Goff February 15, 2005

  2. Outline • Importance of Unconventional Liquids • Development Strategies • Refining Challenges: Adapting to Changing Feedstocks • Challenges for Overcoming Refiner Resistance • Outlook

  3. Unconventional Liquids • Bitumen Blends • Extra-heavy Crudes • Synthetic Crudes • High TAN • High Sulfur

  4. Non-Conventional Oil ResourcesInitially In Place Type Location Other 13% Extra heavy oil 23% Oil Shales 38% Canada 36% United States 32% Oil sands and bitumen 39% Venezuela 19% 7 trillion barrels Source: International Energy Agency based on Cupcic, Dyni & IHS Energy

  5. The Reserve Base in the Western Hemisphere is Enormous Billion Barrels Extra-Heavy Unconventional Potential Conventional Proved Depicted only for Comparison Purposes Sources – Venezuela Potential from PDVSA Statements Reported OGJ Dec 2003 Canada Potential from NEB Energy Market Assessment May 2004

  6. Non-Conventional OilPlanned Additions to Production Capacity Source: International Energy Agency World Energy Outlook 2004

  7. Unconventional Resources & Technology Delay the Peak in Oil Production Oil Production in Million Barrels per Day Adds improved recovery Adds Unconventional Conventional only Sources: USGS Estimates of Total Recoverable Resources: 1981 – 2000 Peter R. Odell, Erasmus University Rotterdam; COP estimate

  8. Development Strategies for Unconventional Liquids • Dilution • Upfront costs minimized • Upgrading • Significant upfront investment in facility • Integration • Optimizing value chain Commercial Aspects include: Long Term Contracts and the Spot Market

  9. Integration Petrozuata • 8.5 deg API ; 140MBPD • Upgraded to 3 grades of syncrude • Long term offtake agreements to COP’s Lake Charles refinery & PDVSA’s Paraguana refinery Surmont Syncrude Hamaca • 8 – 9 deg API ; 190MBPD • Upgraded to 26 deg API syncrude • Primarily sold into the US Gulf Coast market • COP’s Sweeny , Tx processing 2MMBBLS in 1st QTR 2005 Hamaca Petrozuata Canada – Surmont • 8 deg API • Steam Assisted Gravity Drainage (SAGD) • First commercial production planned for 2006 • Processed at Mid-Continent Refineries Existing refining position Planned heavy crude position Existing heavy crude position

  10. Loading Monobuoyand Solids Marine Terminal Jose Industrial Condominium VENEZUELA CARIBBEAN SEA Upgrading Complex Jose Industrial Condominium Jose BARCELONA AnzoáteguiState 200 KmPipelines Zuata - Jose 20” Diluent 36” Diluted Crude Orinoco river San Diego De Cabrutica Production Field Development Petrozuata ConocoPhillipsLake Charles Refinery PDVSA Paraguana Refining Complex

  11. Refining ChallengesAdapting to Changing Feedstocks • Quality of inputs deteriorating • Properties of Crudes: • Specific Gravity • Resid Content • Sulfur Content • Metals • TAN • D/S undergoing transformation to cleaner fuels • Incremental investment required • Addition of conversion units • Additional capacity (hydrogen, sulfur recovery) • Metallurgy • Chemical treating

  12. Challenges for Required Refining Investments • Sustaining profitability in low margin business • Variable investment approaches, each with different economic and commercial considerations • How much to upgrade?Bitumen -> Syncrude ---> Finished Product • How much flexibility should be built in? • Tighter linkages with producers .

  13. Outlook • Non-conventional crudes represent a significant resource potential • Opportunity to more fully leverage downstream capabilities to accommodate the unique feedstocks • Non-integrateds will either discount the price or seek long-term contracts or other strategic arrangements • Technology will continue to be an enabler • Shift in economic rents between upstream and downstream?

  14. The Emergence of Unconventional Liquids Greg Goff February 15, 2005

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