1 Chris John, LMOGA PresidentThe World of Energy Chris John, LMOGA President

2 Who is LMOGA?

3 Where is the Oil?

4 Where is Oil Produced?

5 How is Oil Transported? World oil chokepoints as narrow channels along widely-used global sea routes, some so narrow that restrictions are placed on the size of the vessel that can navigate through them. Chokepoints are a critical part of global energy security because of the high volume of petroleum and other liquids transported through their narrow straits. Blocking a chokepoint, even temporarily, can lead to substantial increases in total energy costs and world energy prices. Chokepoints also leave oil tankers vulnerable to theft from pirates, terrorist attacks, shipping accidents that can lead to disastrous oil spills, and political unrest in the form of wars or hostilities.

6 Where is Oil Refined?

7 World’s Largest RefineriesCompany Location Crude Capacity Paraguana Refining Center Cadon, Venezuela 940,000 SK Innovation Ulsan, South Korea 840,000 GS Caltex Corps Yeosu, South Korea 785,000 S-Oil Corp Onsan, South Korea 669,000 Reliance Petroleum Jamnagar, India 660,000 Motiva Port Arthur, Tx 600,000 ExxonMobil Pulau Ayer Chawan, Singapore 592,500 Reliance Industries 580,000 Baytown, Tx 560,500 Aramco Ras Tanura, Saudi Arabia 550,000 Formosa Petrochemical Mailiao, Tawain 540,000 Marathon Petroleum Garyville, La 522,000 Baton Rouge, La 502,500 Kuwait National Petroleum Mina Al-Ahmadi, Kuwait 466,000 Shell 462,000 Galveston Bay, Tx 451,000 Citgo Lake Charles, La 440,000 Pernis, Netherlands 404,000 Sinopec Zhenhai, China 403,000 Rabigh, Saudi Arabia 400,000 Aramco-Mobil Yanbu, Saudi Arabia Aramco-Total Jubail, Saudi Arabia

8 Where is Oil Consumed? Barrels Per Day Source: BP statistical review

9

10 The Price of Oil Iran-Iraq war Strong-demand, Stagnant supplyArab Spring Iranian revolution Gulf War OPEC embargo Asian financial crisis GFC Commodity conflict September 11

11 Impacts on the Price of OilGeopolitical Conflicts Taxes Environmental Policies OPEC Global Demand Logistics & Infrastructure Currency Fluctuations Changing Supply Landscape

12 U.S. Energy Rankings

13 Technological advancements have transformed America into a World Energy Superpower

14 Shale in America

15 Gulf of Mexico “The GULF OF MEXICO has been left for dead more than once over the past half-century. It’s now roaring back to life… Billions of dollars are being poured into new wells in the ultra-deep waters off Texas and Louisiana, fueling a resurrection that could set a production record this decade and complete a recovery from the worst offshore oil spill in U.S. history.” BusinessWeek

16 Gulf of Mexico $70 Billion in investment and new projects over the next 15 years New technologies are extending the life of projects Expected to be producing over 2 million barrels of oil a day from the GOM by 2019 Over 11 major discoveries since the moratorium was lifted The fastest growing deepwater market in the world

17 Natural Gas “What has become known as the ‘unconventional-natural- gas revolution’ has turned a shortage into a large surplus and transformed not only the energy industry, but the world.” Daniel Yergin

18 #2 Producer of Natural GasLouisiana’s Role #2 Producer of Crude Oil #2 Producer of Natural Gas #2 Refining Capacity You can’t talk about America’s strength as an energy superpower without talking about Louisiana’s role in U.S. energy.

19 Impact on the State $73.8 Billion Economic Impact$5.9 Billion in Annual Wages $4.2 Billion to State and Local Governments Direct Employment 64,669 Indirect Employment 287,008

20 Industrial Expansion in Louisiana$140 Billion in Announced Projects New Orleans -- $24.6 Billion in industrial investments and new construction in the petro chemical and refining industries along the river Baton Rouge -- $16.0 Billion in industrial investments and new construction in the petro chemical and refining industries along the river Lake Charles -- $93 Billion in industrial investments driven by LNG 11,977 new direct jobs.

21 Market Reality Due to the price of commodities and a strong dollar several projects have been delayed Of the 140 Billion only $65.3 Billion have broken ground Only $3 Billion of the 24.6 Billion in the New Orleans Area Only $45 Billion of the $93 Billion in the Lake Charles Area

22 Trifecta of Challenges for the Industry in Louisiana1. Low Oil Prices 2. Legal Challenges 3. State Taxes & Budget

23 Price of Oil

24 Legal Challenges SLFPA-E Lawsuit Coastal Parish LawsuitsFiled in July, 2013 Dismissed in February, 2015 (on appeal) Coastal Parish Lawsuits Jefferson and Plaquemines Parish filed November, 2013 State Intervention March, 2016 Cameron and Vermillion filed Summer of 2016 St Bernard filed Fall of 2016 AG refusal to sign outside counsel contract Summer of 2016 Judge Enright initially ruled against Jefferson parish-- Summer 2016-but then reversed his decision last week— most likely to appeal

25 Taxes & Budget In the First Special Session of 2016, the legislature raised almost $2 billion in taxes on oil and gas to be collected in fiscal years 2016 through 2018. FY16 - $265,600,000 FY17 - $823,940,000 FY18 - $894,200,000 In the Second Special Session of 2016, the legislature raised another $280 million on oil and gas to be collected in fiscal years 2017 through 2019.  FY17 - $91 million FY18 - $94 million FY19 - $94 million

26 2016 National Election Donald Trump won the Electoral College 290-232.Hillary Clinton won the popular vote Al Gore won popular over George W Bush For the second consecutive cycle polling was almost universally wrong.

27 The Map

28 President-elect Donald TrumpTrump on Energy “America is sitting on a treasure trove of untapped energy – some $50 trillion in shale energy, oil reserves, and natural gas offshore and on federal lands, in addition to hundreds of years of coal energy reserves. It’s all upside for this country – more jobs, more revenues, more wealth, higher wages, and lower energy prices. I’m going to lift the restrictions on American energy, and allow this wealth to pour into our communities.” President-elect Donald Trump

29 Trump on Energy Key Appointments: Sec. of Interior Sec. of EnergyBSEE and BOEM Directors Sec. of Energy Sec. of State Supreme Court Other Federal Bench Appointments EPA Administrator FERC Commissioners

30 Trump on Energy The Trump Administration will role back regulations on on and offshore oil and gas drilling. Open up more offshore drilling Open up drilling on federal lands Less red tape in permitting Easier pipeline construction approval Less regulations for refineries Pullout of the Paris Climate Deal Still has to deal with market reality

31 The Make Up of Congress Democrats gain two seats in the Senate, Republicans maintain a majority. Democrats gain a net 6 seats, Republicans maintain majority in the House.

32 The Senate Republicans will have at least 51 seats, Democrats 48 seats --La still undecided Louisiana Runoff between John Kennedy (R) and Foster Campbell (D), Kennedy is the frontrunner Senate Majority Leadership team is expected to remain the same. Senator Chuck Schumer is expected to be the Minority Leader.

33 Louisiana Senate Race Open Seat 24 candidates, the most ever on ballot9, (R), 7 (D), 4 (NP), 2 (L), 2 (0) Runoff between States Treasure John Kennedy (R) and PSC Commissioner Foster Campbell (D)

34 The House Republicans will maintain control of the House, with a reduced majority. Republicans lost only 6 seats Paul Ryan is expected to be reelected as Speaker, with some minor changes to his leadership team. Louisiana has two House Districts that will be decided in the December runoff.

35 Chris John, LMOGA PresidentThe World of Energy Chris John, LMOGA President