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A Wall Street Transcript Interview with Paul Sankey, the Deutsche Bank Securities Integrated Oil Analyst: Growth in U.S. Crude Oil Supply Requires Massive Pipeline Investments

67 WALL STREET, New York - January 10, 2013 - The Wall Street Transcript has just published its Oil & Gas: Refining, Independent and Major Integrated Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Capital Expenditures and Consolidation Activity - Refining Crude Price Differentials - Frontier Exploration and Development - Shale Drilling Capital Expenditures - Oil and Gas Price Divergence - Oil Price Expectations - LNG Global Pricing Differentials

Companies include: Occidental Petroleum Corporati (OXY), Chevron Corp. (CVX), Anadarko Petroleum Corp. (APC), Marathon Oil Corporation (MRO) and many others.

In the following excerpt from the Oil & Gas: Refining, Independent and Major Integrated Report, a top ranked oil & gas industry research analyst discusses the outlook for the sector for investors:

TWST: You expect 2013 to be the year of the pipeline. What developments do you think we will see and who will be the key players?

Mr. Sankey: Yes, so you've had a revolution in U.S. oil and gas, a total revolution. And what happened is, previously looking at a 30-year trend of falling supply in the U.S. and rising demand, we now have falling demand and rising supply. And essentially over 30 years, you developed infrastructure to increasingly import oil and gas in order to make up for the shortfall between rising demand and falling supply.

What's happened in the last five years is, we've turned into a market where certainly from the unconventional oil and gas revolution, supply is rising right when we've seen the peaking of oil demand and demand has started to fall, and there's also a total reversal of the dynamic of imports coming into the center of U.S. now turning into production coming from the center to the outside. So the net result has been that you had some massive breakdown in prices in various places where there simply isn't the right infrastructure which is designed to be the opposite of what it's required to do. As a result of that, an enormous boom similar to what we saw in natural gas a few years ago is now happening in oil because of the very wide differentials and because of the economics of building pipelines to take advantage of these. We have 20 major pipeline projects being developed and starting in 2013 alone for about 4 million barrels a day of oil transport into Houston by 2015, which we think is the biggest single oil pipeline infrastructure addition ever seen in the world. And by the way, we have same thing happening in 2014, another 20 pipelines for a similar amount for additional oil transport. So it's a huge story that I think a lot of people don't fully appreciate.

TWST: What do you expect to be the implications of the U.S. crude export ban?

Mr. Sankey: The current market is less impacted because you are still importing fairly significant quantities of light sweet oil. The mistake people make is that they look at the total quantity of imports of crude oil, which is about 8.5 million barrels a day, and don't appreciate that the growth in U.S. oil supply is light sweet oil. There are significant differences between qualities in crude oils, especially in regards to what's attractive and what makes money for refiners, and what we are essentially doing is very rapidly substituting away all our light sweet imports, which is now down to only about 0.5 million barrels a day remaining on the Gulf Coast, which is the main refining center. And as I said, with the 4 million barrels a day of pipeline capacity that we see by 2015, we expect total substitution of light sweet crude imports into the U.S. by middle of this year, mid 2013. The net effect will be the beginning of significant oversupply...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.