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Dismukes Center for Energy Studies Louisiana State University Impacts of Recent Hurricanes and the Outlook for Energy Markets Presentation to Baton Rouge Rotary Club November 8, 2005Slide2: Summary on Impacts of Hurricanes Hurricanes were incredibly destructive to energy business and ramifications are going to be long lived (locally and nationally). Hurricanes created more destruction than offshore production – storms clearly showed the interrelationship of all types of energy infrastructure in the Gulf – the “4 Ps” – production, processing, pipes, and power. Hurricanes created more destruction than just that along the Gulf – price ramification were felt nationally – and impacts felt globally in energy markets. In the near term, this will be the most expensive heating season on record for American consumers. Price and supply wildcards: weather and industrial activity. The claims of demand destruction potentially overstated in very near term – not in intermediate to longer term. Energy markets are likely to not be back on their feet prior to the next hurricane season. Potentially setting ourselves up for a major “supply-demand” realignment. Slide3: Katrina versus Other Major Hurricanes - Shut-in Oil Production as a Percent of Daily GOM Production Source: Minerals Management ServiceSlide4: Refineries Impacted by Katrina Gulf Coast, Port Arthur and Lake Charles Source: Energy Information Administration, Department of EnergySlide5: Total Immediate Refinery Impact LA/MS/AL Gulf Coast Refiners (reduced runs and shutdowns) 2,528 thousand bbls/day 15% of US operating capacity Port Arthur/Lake Charles (reduced runs and supply loss) 775 thousand bbls/day 5% of US operating capacity Total Refinery Impact 4,931 thousand bbls/day 30% of US operating capacity Remaining US Operating Capacity 12,075 thousand bbls/day 70% of US operating capacity Source: Energy Information Administration, Department of Energy Midwest (reduced runs – supplied by Capline Pipeline) 1,628 thousand bbls/day 10% of US operating capacitySlide6: Source: American Petroleum Institute Gasoline Price Increases August 30, 2005 to September 6, 2005 20 25 20 18 45 35 38 33 32 42 38 40 45 20 52 45 49 35 49 50 35 36 36 42 40 42 46 56 66 58 58 61 61 61 60 56 58 55 42 52 54 Colonial / Plantation Pipeline Systems Mid-Atlantic Northeast South Atlantic Midwest South Mountain West US Regional Changes in Gasoline Prices (cents per gallon) 35 42 44 44 24 24Slide7: Critical Terminals Impacted by Katrina ExxonMobil Baton Rouge RefinerySlide8: Critical Electricity Transmission Lines Impacted by Katrina ExxonMobil Baton Rouge RefinerySlide9: Critical Terminals and the Power-Pipeline Infrastructure ExxonMobil Baton Rouge RefinerySlide10: Katrina versus Other Major Hurricanes - Shut-in Gas Production as a Percent of Daily GOM Production Source: Minerals Management ServiceSlide11: Number of Natural Gas Processing Facilities Out Source: Energy Information Administration, Department of EnergySlide12: Shell Mars Tension Leg Platform Source: Shell.comSlide13: Shell Mars Tension Leg Platform Source: Shell.comSlide14: Ocean Warwick Dauphin Island, ALSlide15: Semi-Sub Stuck Under Bridge North Mobile BaySlide16: Venice Port, Supply & Crew BasesSlide17: Chevron Refinery Pascagoula, MSSlide18: Then, Along Comes RitaSlide19: Platforms/Structures Impacted by RitaSlide20: Shut-in Statistics Crude Oil Note: 1 cumulative production is as of August 26, 2005 Source: Minerals Management Service Slide21: Rita versus Other Major Hurricanes - Shut-in Oil Production as a Percent of Daily GOM Production Source: Minerals Management ServiceSlide22: Total Immediate Refinery Impact Port Arthur/Lake Charles (shutdowns and damaged facilities) 1,715 thousand bbls/day 10% of US operating capacity Houston/Texas City (shutdowns and damaged facilities) 2,292 thousand bbls/day 13.5% of US operating capacity Total Refinery Impact 5,052 thousand bbls/day 30% of US operating capacity Remaining US Operating Capacity 11,954 thousand bbls/day 70% of US operating capacity Source: Energy Information Administration, Department of Energy Corpus Christi (shutdown and reduced runs) 706 thousand bbls/day 4% of US operating capacity Midwest (reduced runs from supply loss) 338 thousand bbls/day 2% of US operating capacitySlide23: Shut-in Statistics Natural Gas Note: 1 cumulative production is as of August 26, 2005 Source: Minerals Management ServiceSlide24: Rita versus Other Major Hurricanes - Shut-in Gas Production as a Percent of Daily GOM Production Source: Minerals Management ServiceSlide25: Number of Natural Gas Processing Facilities OutSlide26: Henry Hub, September 25, 2005 Source: LIOGASlide27: Entergy Transmission Source: Entergy.comSlide28: Single Well Caisson – Western GOM Source: MMSSlide29: Natural Gas Pipeline Leak Source: MMSSlide30: Chevron Typhoon TLPSlide31: Longer Run Impacts of Hurricanes Katrina and RitaSlide32: Estimated Decrease in Refining Production from both Katrina and Rita Refining capacity should return to normal soon, but there will be a stubborn five percent of total capacity that has unknown return date – not good for tight markets Source: Assumes 95 percent capacity factor; assumes 4 week recovery for facilities damaged by Rita.Slide33: Cumulative Refining Production Source: Assumes 95 percent capacity factor Impacts of Katrina result in a loss of 136.5 million barrels, or 4 percent of total production, by the end of the year. Impacts of Katrina and Rita result in a loss of 188.7 million barrels, or over 5 percent of total, by the end of the year.Slide34: Note: Assuming recovery of 2,685 barrels per day for remaining days. Estimated Return of Existing Crude Production If crude production returns follow path similar to Ivan, we could still be experiencing production shut-ins for some time.Slide35: Note: Assuming recovery of 12.53 bcf per day for remaining days. Estimated Return of Existing Natural Gas Production If natural gas production returns follow path similar to Ivan, we could still be experiencing production shut-ins for some time.Slide36: Where Have We Been? Where Are We Now?Slide37: Forecast for Energy Commodity Prices Natural Gas Futures Source: Federal Reserve Bank of St. Louis; and Nymex.com Note: Prices recorded on November 7, 2005Slide38: Short term (September-October) weather futures prices are bullish for natural gas in the South and West, but neutral in the East and Midwest Forecast of $58 to $70 crude through the end of 2006. Refining capacity challenges will keep pressure on refined product prices. Diminishing natural gas surpluses especially in the aftermath of Katrina and Rita. Storage forecasts combined with production shut-ins call into question the supply adequacy heading into the winter season given our preliminary winter assessments. Is 3.2 tcf adequate in the face of 50 percent plus shut-ins? Katrina and Rita impacts felt until next hurricane season. Usage wild cards: weather & industrial activity Energy Market OutlookSlide39: Outlook for Winter Gas Demand Source: Energy Ventures Analysis, Inc.Slide40: Industrial Production IndexSlide41: Historic and Forecasted Winter Season Industrial Gas Usage Forecast Source: Energy Ventures Analysis, Inc.Slide42: Questions, Comments, & Discussion firstname.lastname@example.org www.enrg.lsu.edu You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.