Eagle Ford Crude, Condensate & NGL: Production Forecasts & Infrastructure PlansAugust 28-29 2013 Houston | Texas

Glenn Karnei Domestic Crude Oil ManagerAnadarko Energy Services

I think it’s obvious crude oil is king today

and should have plenty of running room as long as

places like China and India continue to grow

and the world economy doesn’t falter.

www.american-business-conferences.cominfo@american-business-conferences.com+ (1) 800 721 3915

48 years of production at the most current rates. Therefore, as long as oil prices hold and global economic activity accelerates, U.S. producers will continue searching liquids-rich opportunities, in particular oil-rich opportunities.

This on-going development will undoubtedly continue to increase the U.S. self-sufficiency, even more so when considering North America as whole. Since the import peak in 2006, when the U.S. imported two-thirds of its crude needs, we have drastically reduced our importing requirements to 50% of domestic consumption. When excluding Canada and Mexico, the U.S. has reduced its non-North American imports from 48% in 2006 to less than 30% today.

I think it’s obvious crude oil is king today and should have plenty of running room as long as places like China and India continue to grow and the world economy doesn’t falter.

As good as crude oil pricing is and the returns they are delivering, let’s not forget natural gas and natural gas liquids (NGL), because so many of these wells are great natural gas and NGL producers too, the economics on Eagle Ford wells will only get better with modest increases in natural gas and NGL prices.

In your opinion, is there going to be enough market to absorb overwhelming volumes of Eagle Ford crude – both heavy and light crude?

Yes, I believe so. The heavy crudes that will be produced from the Gulf of Mexico and Canada will be priced into the US refining market and some foreign heavies will be backed out until balanced.

As far as the light crudes go, this will be more interesting. The combination of new build splitters in the US and existing refining reconfigurations will absorb a lot of the light sweet. Additionally, the blending of the heavy crudes with the light oil to create a medium blend will also take place.

There is so much condensate being produced and it’s getting to a point where there is not enough crude to blend it down. How are producers bracing for this shortfall?

The condensate end of the barrels is an interesting market because not all condensate is created equal. Plant condensate and natural gasoline, depending on the quality, can be directly consumed in petrochemical plants. Also, given that plant condensate has already experienced an initial stage of processing, this enables the plant products to be exported.

The lease condensate is bit trickier because it requires some level of processing to enable export. In addition to refiners making capital investments to process more light crude and condensate, condensate splitters are also being built.

How can midstream operators quickly and efficiently narrow the gap between current production volumes and available takeaway options to prevent production shut-ins?

Looking back at it now, I believe midstream operators did a very good job narrowing the takeaway gap.

Looking forward, we still need more takeaway options for future production but that is being worked on currently through announced open season(s) and

potential ones that may be coming.

My recommendations to midstream operators would be: 1) don’t build “fit for purpose” capacity which limits upside takeaway and 2) provide as much connectivity as possible to other pipelines, markets and refineries for maximum flexibility and flow assurance.

In your opinion, how feasible is marine takeaway as an alternative takeaway route to take Eagle Ford production to market?

Marine takeaway is extremely feasible in the Eagle Ford. Marine takeaway provides the greatest market flexibility for deliveries at competitive pricing. It provides better flexibility than pipeline and rail due to the number of delivery options available.

From a producer’s perspective, you want a diverse mix of takeaway options for flow assurance. In the Eagle Ford, we have pipeline to market, rail to market and barge to market optionality – as good as the first two are . . . I wouldn’t want to be without the latter.

Do you think collaborative partnerships and exploitation of emerging markets is the way forward for Eagle Ford operators?

Collaborative partnerships and emerging markets could possibly be an additional opportunity that requires further discussion and analysis.

With Eagle Ford production escalating at unmatched rates and outstripping takeaway capacity, what do producers need to do to exploit the full potential of the play?

Producers should constantly be updating production forecasts from their upstream E&P department and comparing it to their committed and interruptible takeaway capacity. Any gaps in potential short falls for takeaway capacity versus the forecast should be addressed immediately by canvasing the midstream operators, trucking companies and refineries for solutions.

Lowest price transportation and closest proximity to a producer’s infrastructure should not be the sole basis for a commitment. Diversification for flow assurance and market pricing should be appropriately weighted in the decision process.

What is your perspective on the longevity of the crude market upsurge in order to drive plans for future exploration and drilling programs?

From an oil perspective, the most recent proved reserve estimate from the EIA (25.2 billion barrels as of YE 2010) shows that the U.S. can extract these resources for the next 10 years at the most current production rates. However, history has shown how flawed the process is for estimating reserves; in the 1940’s, the U.S. had estimated that proved reserves were at 20 billion barrels, but realized production was roughly 9 times that number. Assuming that the EIA has improved its process for reserve estimation and they’re only off by a factor of five (instead of 9x factor from the 1940’s), the U.S. would have

www.eagle-ford-markets-2013.com

Follow Us On: