ASSESSMENT OF THE NATURAL GAS LIQUIDS MARKET IN WESTERN CANADA - February 5, 2019... ·...
Transcript of ASSESSMENT OF THE NATURAL GAS LIQUIDS MARKET IN WESTERN CANADA - February 5, 2019... ·...
Allan Fogwill, CEOCanadian Energy Research Institute
February 2019
ASSESSMENT OF THE NATURAL GAS LIQUIDS MARKET IN WESTERN CANADA
Flagship Breakfast Overview Sponsor:
Canadian Energy Research Institute
Overview
Founded in 1975, the Canadian Energy Research Institute (CERI) is an
independent, registered charitable organization specializing in the analysis
of energy economics and related environmental policy issues in the
energy production, transportation, and consumption sectors.
Our mission is to provide relevant, independent, and objective economic
research of energy and environmental issues to benefit business,
government, academia and the public.
CERI publications include:
•Market specific studies
•Geopolitical analyses
•Energy Market reports (crude oil, electricity and natural gas)
In addition, CERI hosts an annual Petrochemical Conference and
supports Argus Energy Week.
Core Funders:
Donors:
In-kind:
Ivey Foundation
Introduction
Source: Bloomberg
• Global NGLs markets
• Historic production trends of NGLs in Western Canada
• natural gas processing plants
• crude oil refineries
• bitumen upgraders’ off-gas processing plants
• Stakeholder perceptions
• NGLs Production Forecast and Supply Demand Balances
• Conclusions
NGL Products
NGL Uses End-use Products End-use Sectors
Ethane/C2 Petrochemical feedstock for ethylene production
Plastics; anti-freeze; detergents
Industrial
Propane/C3
Space or water heating; cooking; transportation; petrochemical feedstock; oil sands solvent technologies
Fuel for cooking, heating and drying; plastics
Residential, commercial, industrial, and transportation
Butanes (normal and isobutane)
Petrochemical and petroleum refinery feedstock; motor gasoline blending; oil sands solvent technologies
Motor gasoline; solvents; plastics; synthetic rubber; lighter fuel
Industrial and transportation
Pentanes plus
Blending fuel for non-upgraded bitumen; additive to motor gasoline
Diluent; motor gasoline
Industrial and transportation
Global NGLs Production
Source: Eni
Global Demand Is Increasing
Source: IHS Markit
Source: IEA
Petrochemical Capacity
Ethane Supply and Demand
Propane Supply and Demand
Butane Supply and Demand
Pentanes plus Supply and Demand
US Production and Exports
Implied Pricing
Midstream Infrastructure: NGL plants
Province Facility #
Raw Gas
Capacity
(MMcfpd)
Sales Gas
Capacity
(MMcfpd)
Western
Canadian
Share
(%)
AB
Fractionators 11 - -
88 Straddle Plants 8 14,094 12,154
Gas Plants 623 36,851 34,614
BC
Fractionators 10 - -
11.5 Straddle Plants 1 597 548
Gas Plants 63 4,801 4,500
SK Gas Plants 32 219 173 0.5
Western
Canada
Fractionators 21 - -
100 Straddle Plants 9 14,690 12,702
Gas Plants 718 41,871 39,287
Natural Gas Production Forecast
Stakeholder Perceptions
• Limited Infrastructure development especially when compared to the
US
• Market Access Concerns by Rail
• Limited Local Demand for NGLs however the market is expected to
grow due to exports
• High fees for gas processing and transportation charges
• Governments to continue their support for the sector (e.g. incentives)
• Market and price transparency is limited
• Environmental concerns related to GHG emissions and plastic waste
• The Western Canadian NGLs market is supported by an abundant
resource base and accessible subsurface formations
• Infrastructure and export options remain both areas of weakness and
opportunity in the market
• Asian market demand is increasing and Western Canada has a
locational advantage
• The Gulf Coast NGLs market presents varying degrees of threats to
Western Canadian NGLs, fostered by higher levels of infrastructure
development, fiscal policies and a decreasing US reliance on Western
Canadian NGLs
Market Assessment
NGLs Market Opportunities
• Develop a market clearing price mechanism to increase transparency
for new entrants and foreign investors
• Export market development in particular for ethane/ethylene
• Greater collaboration between upstream and downstream NGL
infrastructure projects
• Greater collaboration between industry, government and First Nations
for regional development
• Foster long term sale and purchase agreements to provide long term
security of supply
• Liquified natural gas export projects – needed to maintain the demand
for methane
• Increased NGL recovery
Ethane Supply and Demand Outlook
Propane Production Projections
Butane Production Projections
Pentanes Plus Production Projections
Conclusions
• Natural gas production will continue to be the main driver of
NGLs supply growth in Western Canada
• Canada’s export market for NG and NGLs to the US is
shrinking. Alternative markets need to be found included value
added demand domestically
• Few companies involved with the market resulting in a
concentration of market power (processing and logistics)
• Lack of price transparency is limiting infrastructure and
petrochemical investment
• Gas processing
• Value added
• Rail
Thank You for Your Time
www.ceri.caCANADIAN ENERGY RESEARCH INSTITUTE
@CERI_CANADA
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