2013-03-19-InternationalLPGSeminar.pdf
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Transcript of 2013-03-19-InternationalLPGSeminar.pdf
Slide 1
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Canadian Gas and NGL Market Developments
International LPG Seminar, Houston | March 19, 2013
President, Aux Sable Canada
Tim Stauft
Slide 2
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Outline
Who is Aux Sable
Canadian Natural Gas Markets
NGL Supply Fundamentals
Canadian NGL Infrastructure Developments
NGL value drivers
Utilizing the Aux Sable Value Chain
Conclusion
Slide 3
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Slide 3
Aux Sable OperationsA world-class rich gas gathering and processing system bringing value to producers
Slide 4
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Alliance Pipeline and Aux Sable Provide a value added option to field processing to minimize investment/
maximize value
Slide 5
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Slide 5
Canadian Natural Gas Prices Still Depressed
AECO prices lowest in 10 yrs
Storage levels near capacity
in Canada
Gas well completion in
WCSB down
Shale gas development has
altered the supply/demand
balance in North America
Expect gas prices to remain
low for the foreseeable
future, which will continue
to impact marginal gas
production in the WCSB
Source: GLJ
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Alberta Storage Levels
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Gas Wells Completed
Source: Daily Oil Bulletin
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Alberta Field Receipts Down
Source: TransCanada Pipelines
Slide 9
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Slide 9
British Columbia Production Slowing
Source: BC Ministry of Energy, Mines and Natural Gas
Slide 10
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Slide 10
Canadian Gas Exports Continue to Decline
Source: EIA
Slide 11
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Slide 11
Natural Gas Infrastructure Developments
Market shift
Gas from the WCSB faces increasing competitive in traditional Eastern markets
― Trans Canada Mainline Restructuring decision expected soon from NEB
Demand within the WCSB continues to grow – fuelled mostly by growth in oilsands
Natural gas production propped up by NGL prices
A New Hope?
Numerous LNG projects and pipelines have been announced off the West Coast
― Proposed Pipeline projects
TransCanada – 3.4 bcf/d to 7.4 bcf/d (Coastal Link and Prince Rupert Transmission Project)
Spectra – 4.2 bcf/d
KM LNG – 1.0 bcf/d
Three export licenses granted by NEB
Potential NGL exports via west coast LNG but hurdles exist
Role for Canadian Gas in the US
Canadian gas and NGLs continue to be competitive with US markets in the Midwest
& Gulf Coast
Slide 12
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Slide 12
NGLs Critical to Drilling Decisions
March 2012
Raw Gas (C$3.53/mcf)
NGLs = C$2.10/mcf (60%)
Methane $1.42Pentanes+ $0.94
Ethane $0.27Propane $0.31
March 2002
Raw Gas (C$3.84/mcf)
NGLs = C$1.18/mcf (31%)
Methane $2.65
Pentanes+ $0.31
Ethane $0.47
Propane $0.24
Butanes $0.16
Note: Based on March 2012 gas and Edmonton NGL reference prices, netted back to the plantgate,
assuming recoveries of 80% C2, 97% C3, and 100% C4+, from 1100 btu/cf raw gas. Netbacks prices
only, no deduction for field plant extraction and capital costs.
Butanes $XXXX
in Western Canada
Slide 13
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Slide 13
NGL Markets in Western Canada
McMahon/Younger
Judy Creek
Fort SK
Edmonton
West Pembina
Caroline
HarmattanCochrane
Empress
Waterton
AEGS
Alliance
Cochin
Pembina
Enbridge
Ethane (C2) Market
Supply from straddle plants (via AEGS) and
Fort Saskatchewan de-ethanizers (supplied
by field deepcut plants connected to the
Pembina gathering system)
Only two ethane buyers (NOVA & Dow)
who can crack up to 265 kb/d of ethane
Specification ethane (i.e. spec barrels in
Fort Saskatchewan) typically trades at a
gas value plus premium (i.e. AECO NIT
price plus $5 to $7/bbl)
No export capacity (i.e. if disruption at
crackers, C2 must be flared or reinjected
into gas stream/storage)
Ethane can access premium US markets
only via Alliance and Aux Sable
Alberta NGL Facilities
Slide 14
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Slide 14
NGL Markets in Canada
Propane (C3)
Western Canada is a significant net exporter of C3 into mainly space heating and crop drying markets
Pricing typically driven off Conway, KS postings less a discount of 5 to 25 cents per gallon
Expect market to become oversupplied with Kinder Morgan of reversal of Cochin pipeline and conversion to C5+ service in 2014
Potential export via west coast LNG
Butane (fC4)
Field butane is used as a feedstock in the production of iso-octane and as a heavy oil diluent
Pricing is typically based on a volatile discount or premium to Mont Belvieu, ranging from a discount of 2 cents per gallon to a premium of as a high as 20 cents per gallon
Condensate (C5+)
Used almost exclusively as a heavy oil diluent
Pricing based on a differential to WTI that trades daily on NGX
Cochin reversal will add C5+
Southern Lights reaching capacity
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Slide 15
Announced Expansions of NGL Facilities
NGL Pipelines
Pembina announced expansion of 54,000 mb/d to Northern NGL system (old Federated
pipeline) by mid-2015 and 55,000 mb/d on Peace Pipeline to Edmonton by mid-2014
Fractionation
Keyera is constructing a 30,000 bpd deethanizer at its Ft Saskatchewan facility,
additional storage capacity and development of a new brine pond
Pembina expanded its Redwater Fractionator in 2012 by 8,000 bpd, with planned
increase to 73,000 bpd by 4Q2015. Saturn II Expansion of 13,000 bpd by 2015.
Pembina is also in the processes of developing 7 fee-for-service storage caverns, the
first which came into service September 2012.
Fracs will almost certainly require long-term take or pay before facilities proceed
Terminals
Small truck terminal projects underway, mostly crude oil driven
Pembina considering 35,000-40,000-barrel-per-day export terminal BC Export Terminal for Propane
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For Western Canada, Access to U.S./InternationalNGL Markets is Critical
0
200
400
600
800
1000
1200
1400
1600
AB Supply
AB Demand
US Supply
US Demand
Mb/d
(T
housa
nd B
arr
els
/ D
ay)
Rail Exports
Conway
Mt. Belvieu
Chicago
Alliance Pipeline
—— Cochin
—— Enbridge
Edm/Ft. Sask.
Empress
Sarnia
Ethane
NGL Pipelines
Source: Petral, En*Vantage, Aux Sable.
Propane
NGL Markets: Edmonton,
Sarnia, Conway & Mt Belvieu.
Conway & Mt Belvieu are liquid,
have transparent pricing, and
are significant in size.
0
200
400
600
800
1000
1200
1400
1600
AB Supply
AB Demand
US Supply
US Demand
Mb/d
(T
housa
nd b
arr
els
/ d
ay)
+2016 Prodn.
+2016 Imports
+2016
Prodn. +2016
Demand
20122012
20122012
Exports to Canada
on Vantage and
Mariner East
Excess Supply
+2016
Demand
2012 2012
+2016
Exports
Exports on ENB
2012/16
Cochin
Exports to
US 85% of
Supply
2012 Exports
Net Waterborne
Exports 18% of
Supply
+2016 Prodn.
+2016
2012
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Slide 17
Ethylene Value Share: US vs Western Canada
Western Canada US Gulf Coast
Alberta ethane producers enjoy a much lower percentage of the ethylene
value chain than their US counterparts.
Source: Petral and Aux Sable
Feedstock Gas Value
35%AB Petchem Share
50%
C2 Producer Share
15%
Feedstock Gas Value
39%
US Petchem Share
29%
C2 Producer Share
32%
Slide 18
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Slide 18
Efficient, Lower Cost Access to Liquid Markets
Lean Gas
to TCPL
Produce
Raw
Gas
Dew-Point
Plant
(C5+ Extracted)
Rich Gas to
Alliance
Pipeline
Extraction
Premium from
Aux Sable
Alliance Aux Sable
Produce
Raw
Gas
Refrig or
Deepcut
Plant
C3+ or C2+ to
Edmonton
Frac/Market
TCPL / Pembina
Alberta Gas Market
Edmonton NGL Market
Alberta/Chicago Gas
U.S. NGL Markets
C5+ Edmonton
Produce
Raw
Gas
Dew-Point
Plant
(C5+ Extracted)
Rich Gas to
Spectra/TCPL
West Coast LNG
Rich Gas to Asia as LNG
C5+ Edmonton
Slide 19
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Slide 19
Alliance Aux Sable Value Proposition
Provides value directly to producers,
reflective of the market value of their NGLs
Rich Gas Aux SableAlliance
Trading
Pool
Chicago
Gas
Alliance
Receipt Toll
(paid by
producer)
Alliance
Long-haul Toll
(paid by
Long Haul
Shipper)
Aux Sable provides
competitive gas netback
with Alberta market
Aux Sable provides
Extraction Premium
for NGLs
Slide 20
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Slide 20
Summary
WCSB natural gas continues to face challenges amidst shale gas boom
Significant new volumes of NGLs will be produced in North America driven by high
NGL frac spread, low gas prices and rich gas directed drilling activities
Frac spread seems to have structurally shifted to a new higher level, with
temporary weakness as the local and global market absorbs new volumes
Infrastructure investments are required in the filed in Western Canada,
and in Edmonton
Existing infrastructure to premium US NGL markets exists (via Alliance)
Slide 21
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Slide 21
Contact Information
Tim Stauft
President, Aux Sable Canada
1.403.508.5868