Released June 04, 2020 | SUGAR LAND
en
Researched by Industrial Info Resources (Sugar Land, Texas)--In a June 3 webinar, Chris Paschall, Industrial Info's vice president of research for the Oil & Gas and Petroleum Refining industries, discussed the changing landscape of the U.S. and Canadian Crude Oil and Petroleum Refining industries, which have been upended by collapsing prices and widespread lockdowns related to the COVID-19 pandemic.
Industrial Info expects top-line spending for capital and maintenance projects in the U.S. and Canadian Oil & Gas Industry to come in at about $72 billion for 2020, down from about $102 billion in 2019.
Click on the image at right for a graph detailing 2019 vs. 2020 top-line spending in the U.S. and Canada, by industry.
Crude Oil Production
At the beginning of the year, crude oil demand was forecast to increase by 1 million barrels per day (BBL/d) in 2020, but has since been revised down to about 92.6 million BBL/d, an 8.1 million-barrel drop from 2019, according to the U.S. Energy Information Administration (EIA). U.S. crude oil production also has been revised down to about 11.7 million BBL/d in 2020, a drop of 500,000 BBL/d from 2019; the EIA expects production to drop another 800,000 BBL/d in 2021.
Nonetheless, Paschall noted the EIA expects demand to return to normal levels by the end of 2021. In particular, he said demand could begin to exceed supply from third-quarter 2020 onward, reflecting an optimistic forecast as the economies start to re-open and Americans hit the road again. Although the EIA expects inventory builds will be at near-record highs in the first half of 2020, global inventory draws beginning in the third quarter will deplete inventories by 1.9 million BBL/d in 2021.
"We could see a recovery, but it's going to be a wait-and-see as markets re-open around the world," Paschall said. As has been the case for well over a decade, the Permian Basin is expected to account for the bulk of U.S. crude oil production, estimated at 4.37 million BBL/d for 2020. That's more than double what is expected to come from the Bakken and Eagle Ford shale plays put together, which is 2.34 million BBL/d.
"A little more than 1 million BBL/d of the [production] cuts have come from the five top basins alone," Paschall said. He noted that these numbers could be revised upward if prices see substantial improvement.
Crude Oil Pipelines
Industrial Info believes more than $7.2 billion worth of crude-oil pipeline projects have a medium-to-high probability of kicking off in the U.S. and Canada in 2020, and another $8.7 billion worth in 2021. From 2020 to 2023, the U.S. and Canada could see up to $52 billion worth of project kickoffs for crude oil pipelines.
Click on the image at right for a graph detailing pipeline activity project to move to market by the end of 2023.
Routes that are expected to see the highest spending run from the Permian Basin to the Gulf Coast; from the Alberta Oil Sands to the U.S. Midwest; and from the Alberta Oil Sands to the U.S. Mid-continental region. But the single highest-volume project, Canada's Trans Mountain Pipeline, will run from the Alberta Oil Sands to Canada's West Coast.
Crude Oil Storage
Six new deepwater export terminals, with an estimated total investment of $9 billion, are in the works across the U.S. Together, they could load up to 7.8 million BBL/d and store 53 million barrels. But how many actually will move forward?
Enterprise Products Partners LP (NYSE:EPD) (Houston, Texas) and Enbridge Incorporated's (NYSE:ENB) (Calgary, Alberta) Sea Port Oil Terminal (SPOT) and Sentinel Midstream's (Dallas, Texas) Texas GulfLink Terminal, both in Freeport, Texas, seem to have the best chance of kicking off as planned, according to Paschall. He said both projects could receive their final permits and begin construction this fall.
Industrial Info also is tracking about $1.05 billion worth of tank additions at crude oil export facilities along the U.S. Gulf Coast. These projects have a decent likelihood of moving forward, as Paschall says they are "lower risk."
"Gulf Coast storage levels are at a high now, so we think export opportunities will continue to develop in the short term," Paschall said in the webinar.
Refining
Gasoline consumption fell to a low of about 5 million BBL/d in the second week of March, less than a year after it hit a record high of 9.9 million BBL/d in June 2019. Since then, demand for gasoline has grown as states re-open their economies; the EIA expects domestic gasoline consumption will grow from an average 7 million BBL/d in the second quarter to about 8.7 million BBL/d for the second half of 2020.
"Refiners already are starting to see improving margins," Paschall said. He later noted that domestic refinery runs are up to 13.3 million BBL/d, off lows in March and April of about 12.3 million BBL/d.
Click on the image at right for a graph detailing the weekly U.S. product supply of finished motor gasoline in 2019 and 2020.
Meanwhile, U.S. jet fuel consumption is expected to fall from 1.6 million BBL/d in first-quarter 2020 to an average 800,000 BBL/d in the second quarter. For the full year, the EIA forecasts U.S. gasoline consumption will average 8.3 million BBL/d, an 11% decrease compared with 2019, while jet fuel and distillate fuel oil consumption will fall 25% and 10%, respectively, "so we did see a compression across the board."
Grassroot projects are among the least likely to move forward at the moment, Paschall said, given that the heaviest investments are hard to justify with the current low demand. "Petrochemicals [projects], in the near future, will capture the highest total investment value."
U.S. refineries are looking at "changing their diet" by capturing more domestic crude, which offers a cost advantage--a possibility thanks to more pipeline connectivity when compared with previous years.
Turnaround activity in domestic refining is expected to accelerate in second-quarter 2021, as refiners play catch-up with delayed projects.
To listen to this webinar in its entirety, including an analysis of how the natural gas and liquefied natural gas (LNG) markets have fared amid the COVID-19 pandemic, visit Industrial Info's Market Outlook library.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Industrial Info expects top-line spending for capital and maintenance projects in the U.S. and Canadian Oil & Gas Industry to come in at about $72 billion for 2020, down from about $102 billion in 2019.
Click on the image at right for a graph detailing 2019 vs. 2020 top-line spending in the U.S. and Canada, by industry.Crude Oil Production
At the beginning of the year, crude oil demand was forecast to increase by 1 million barrels per day (BBL/d) in 2020, but has since been revised down to about 92.6 million BBL/d, an 8.1 million-barrel drop from 2019, according to the U.S. Energy Information Administration (EIA). U.S. crude oil production also has been revised down to about 11.7 million BBL/d in 2020, a drop of 500,000 BBL/d from 2019; the EIA expects production to drop another 800,000 BBL/d in 2021.
Nonetheless, Paschall noted the EIA expects demand to return to normal levels by the end of 2021. In particular, he said demand could begin to exceed supply from third-quarter 2020 onward, reflecting an optimistic forecast as the economies start to re-open and Americans hit the road again. Although the EIA expects inventory builds will be at near-record highs in the first half of 2020, global inventory draws beginning in the third quarter will deplete inventories by 1.9 million BBL/d in 2021.
"We could see a recovery, but it's going to be a wait-and-see as markets re-open around the world," Paschall said. As has been the case for well over a decade, the Permian Basin is expected to account for the bulk of U.S. crude oil production, estimated at 4.37 million BBL/d for 2020. That's more than double what is expected to come from the Bakken and Eagle Ford shale plays put together, which is 2.34 million BBL/d.
"A little more than 1 million BBL/d of the [production] cuts have come from the five top basins alone," Paschall said. He noted that these numbers could be revised upward if prices see substantial improvement.
Crude Oil Pipelines
Industrial Info believes more than $7.2 billion worth of crude-oil pipeline projects have a medium-to-high probability of kicking off in the U.S. and Canada in 2020, and another $8.7 billion worth in 2021. From 2020 to 2023, the U.S. and Canada could see up to $52 billion worth of project kickoffs for crude oil pipelines.
Click on the image at right for a graph detailing pipeline activity project to move to market by the end of 2023.Routes that are expected to see the highest spending run from the Permian Basin to the Gulf Coast; from the Alberta Oil Sands to the U.S. Midwest; and from the Alberta Oil Sands to the U.S. Mid-continental region. But the single highest-volume project, Canada's Trans Mountain Pipeline, will run from the Alberta Oil Sands to Canada's West Coast.
Crude Oil Storage
Six new deepwater export terminals, with an estimated total investment of $9 billion, are in the works across the U.S. Together, they could load up to 7.8 million BBL/d and store 53 million barrels. But how many actually will move forward?
Enterprise Products Partners LP (NYSE:EPD) (Houston, Texas) and Enbridge Incorporated's (NYSE:ENB) (Calgary, Alberta) Sea Port Oil Terminal (SPOT) and Sentinel Midstream's (Dallas, Texas) Texas GulfLink Terminal, both in Freeport, Texas, seem to have the best chance of kicking off as planned, according to Paschall. He said both projects could receive their final permits and begin construction this fall.
Industrial Info also is tracking about $1.05 billion worth of tank additions at crude oil export facilities along the U.S. Gulf Coast. These projects have a decent likelihood of moving forward, as Paschall says they are "lower risk."
"Gulf Coast storage levels are at a high now, so we think export opportunities will continue to develop in the short term," Paschall said in the webinar.
Refining
Gasoline consumption fell to a low of about 5 million BBL/d in the second week of March, less than a year after it hit a record high of 9.9 million BBL/d in June 2019. Since then, demand for gasoline has grown as states re-open their economies; the EIA expects domestic gasoline consumption will grow from an average 7 million BBL/d in the second quarter to about 8.7 million BBL/d for the second half of 2020.
"Refiners already are starting to see improving margins," Paschall said. He later noted that domestic refinery runs are up to 13.3 million BBL/d, off lows in March and April of about 12.3 million BBL/d.
Click on the image at right for a graph detailing the weekly U.S. product supply of finished motor gasoline in 2019 and 2020.Meanwhile, U.S. jet fuel consumption is expected to fall from 1.6 million BBL/d in first-quarter 2020 to an average 800,000 BBL/d in the second quarter. For the full year, the EIA forecasts U.S. gasoline consumption will average 8.3 million BBL/d, an 11% decrease compared with 2019, while jet fuel and distillate fuel oil consumption will fall 25% and 10%, respectively, "so we did see a compression across the board."
Grassroot projects are among the least likely to move forward at the moment, Paschall said, given that the heaviest investments are hard to justify with the current low demand. "Petrochemicals [projects], in the near future, will capture the highest total investment value."
U.S. refineries are looking at "changing their diet" by capturing more domestic crude, which offers a cost advantage--a possibility thanks to more pipeline connectivity when compared with previous years.
Turnaround activity in domestic refining is expected to accelerate in second-quarter 2021, as refiners play catch-up with delayed projects.
To listen to this webinar in its entirety, including an analysis of how the natural gas and liquefied natural gas (LNG) markets have fared amid the COVID-19 pandemic, visit Industrial Info's Market Outlook library.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
