Navigating COVID-19: Good Times Bad Times in …...LNG Feedgas by Terminal Source: ICE, Genscape 0.0...

INTERCONTINENTAL EXCHANGE

Navigating COVID-19: Good Times Bad Times in Natural Gas and NGL Markets

Special Guest Host

Rusty Braziel | CEO and Chief Principal Energy Consultant

RBN Energy

J.C. Kneale | VP of NA Natural Gas, NGLs and Power

Intercontinental Exchange

2© Copyright 2020 RBN Energy

Crude/Gas/NGL Production, Exports, and % Exports

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

10

20

30

40

50

60

70

80

90

Bcf

/d

Lower-48 Natural Gas

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0.0

1.0

2.0

3.0

4.0

5.0

MM

b/d

NGLs from Gas Processing

0%

5%

10%

15%

20%

25%

30%

35%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

MM

b/d

Crude Oil

Source: EIA; RBN

Production to U.S. Markets Production to International Markets Percentage Exports


Permian Gas Takeaway Capacity & Price

WAHA

NGPL NNG

ETC & Oneok

** Roadrunner, Comanche Trail, Trans-Pecos

Trans-Western

El Paso

LegacyIntra-

states*

* ET Fuel, Atmos, Oasis,

Enterprise, Kinder

GCX

Gulf Coast Express to Agua Dulce$6.00

$5.00

$4.00

$3.00

$2.00

$1.00

$0.00

$1.00

$2.00

$3.00

$/M

MB

tu

Waha Hub Daily Average Price

----------------------2019 ---------------------- 2020


Permian Crude and Gas Pipeline Projects

Kinder/DCP/Targa/Altus

Gulf Coast ExpressIn Service, 1.98

Bcf/d

Kinder/EagleClaw/OthersPermian Highway Pipeline

1Q-2021 2.1 Bcf/d

WhiteWater/MPLX/ Stonepeak- West Texas Gas

Whistler Pipeline3Q-2021, 2.0 Bcf/d

NAmericoPecos Trail Pipeline1H-2021, 2.0 Bcf/d

WilliamsBlue Bonnet Express

2020 2.0 Bcf/dBoardwalk

Permian-Katy (P2K)TBD, 1.5–2.0 Bcf/d

TellurianPermian Global Access

Pipeline (PGAP) 2H-2022 2.0 Bcf/d

HoustonCentral Plant

Katy/Ship

Sta. 30

Agua Dulce

Waha

Natural Gas Pipeline Projects

P66/Enbridge/Marathon/Rattler- Gray Oak

900 Mb/d Q4-2019

EPIC/Noble/Altus/Rattler- EPIC Crude (NGL conversion

temp. service 400 Mb/d Q3 2019) 600 Mb/d Q1 2020 (expandable to 900)

Plains- Cactus II585 Mb/d Q3-2019(expandable to 670)

Enterprise - Midland to Echo III450 MMb/d – 1H21

Midland, TX

Corpus Christi, TX

Nederland, TX

Houston, TX

Plains/Exxon/Lotus/MPLX/Delek/Rattler-

Wink-to -Webster1 MMb/d 1H 2021

(expandable to 1.5 MMb/d)

Energy Transfer –Permian Express IV

120 Mb/d – 3Q 2019

Enterprise - Midland to Echo IV450 MMb/d – 1H21

(expandable to 540 MMb/d)

Crude Oil Pipeline Projects


LNG Export Projects by Status

Terminal Status

Operational

Under Construction/FID

Pending FID

Bear Head

Goldboro

QilakAlaska

Kitimat

Jordan Cove

Commonwealth

Magnolia

Annova

Pascagoula

Eagle

Texas LNG

Lake Charles

Plaquemines

Delta

Rio GrandePort Arthur

Energia Costa Azul

Driftwood

Calcasieu Pass

Woodfibre LNG Canada

Freeport

Golden PassElba Island

Cameron

Corpus Christi

Cove Point

Sabine Pass

Tier 1

Tier 2

Tier 3

Cedar

Energie Saguenay

Mexico Pacific Limited

Delfin


U.S. Gulf Coast Crude Oil Exports

0.0

0.5

1.0

1.5

2.0

2.5

3.0

MM

b/d

Houston

Beaumont

Corpus Christi

Louisiana

Other


Global Oil Supply/Demand Outlook

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

96

97

98

99

100

101

102

103

104

MM

b/d

Sto

ck C

han

ge

MM

b/d

Su

pp

ly/D

em

and

Stock Change Demand Supply

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

96

97

98

99

100

101

102

103

104

MM

b/d

Sto

ck C

han

ge

MM

b/d

Su

pp

ly/D

em

and

IEA Oil Market Report: Q4 2019

Stock Change Demand Supply


0.0

0.5

1.0

1.5

2.0

2.5

MM

b/d

Ethane Exports + Petchem Demand

Exports

Petchem

NGL Export and Petchem Demand

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6 U.S. Overseas LPG Exports

Other

Marcus Hook

Freeport/P66

ETP/Sunoco

Targa

Enterprise

MM

b/d


U.S. Lower 48 Rich and Associated Gas vs. Dry Gas

-

10

20

30

40

50

60

70

80

90

100

Bcf

/d

Other Associated & Wet

Eagle Ford

Permian

Appalachia - Wet

Appalachia - Dry

Haynesville

Other Dry Gas

Legacy


Good Times Bad Times

Before AfterMarch 6, 2020


-$50

-$40

-$30

-$20

-$10

$0

$10

$20

$30

$40

$50

$60

$70

$/b

bl

Crude Oil Cushing

$0.00

$0.50

$1.00

$1.50

$2.00

$/M

MB

tu

Natural Gas HH

$0

$5

$10

$15

$20

$/b

bl

NGLs Mont Belvieu

2020 COVID Era Energy Market Meltdown

11© Copyright 2020 RBN Energy Source: ICE

:


U.S. Rig Count

75

95

115

135

155

175

195

Natural Gas

250

350

450

550

650

750

850

# o

f R

igs

Crude Oil


Crude Oil and Natural Gas Production

11.0

11.5

12.0

12.5

13.0

MM

b/d

U.S. Crude Oil Production

Tropical Storm Barry

80

82

84

86

88

90

92

94

96

Lower-48 Gas Production


Bakken Hit Hard

» 7,500 shut-in wells

» 510 Mb/d shut-in production

» Only 12 drilling rigs operating

» 1 frac crew operating – Most frac supply contracts

cancelled through the rest of the year

» 790 abandoned wells

» Gas plants near maximum turn down capacity (35%)

ND Department of Mineral ResourcesBakken Restart Task Force

May 15 2020

1.0

1.2

1.4

1.6

1.8

2.0

Total Bakken Gas Pipeline Receipts


Bakken NGL Shortfall Impacts Conway

SemGroup(Energy Transfer)/DCP-

White Cliffs Conversion (Southern Hills)

90 Mb/d 4Q-2019

Conway, KS

ONEOK- Elk Creek240 Mb/d 4Q-2019

Expandable up to 400 Mb/d

(4.0)

(2.0)

-

2.0

4.0

6.0

c/G

al

Mont Belvieu less Conway Propane and Ethane (EP)

Ethane vs EP Propane

Source: ICE

:


LNG Feedgas by Terminal

Source: ICE, Genscape

0.0

2.0

4.0

6.0

8.0

10.0

Bcf

/d

Pipeline Deliveries by LNG Terminal

Sabine Pass Cove PointCorpus Christi CameronFreeport Elba

$0

$2

$4

$6

$8

$10

$12

$/M

Mb

tu

Japan LNG, Europe, US Gas

Henry (US)

TTF (Dutch)

JKM (Japan Korea LNG)

Apr-May

$1.50

$1.70

$1.90

$2.10

$2.30

$2.50

$2.70

$2.90

$3.10Apr-May


World Liquid Fuels Production and Consumption Balance

80

85

90

95

100

105

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4

2015 2016 2017 2018 2019 2020 2021

MM

b/d

World production

World consumption

//

0

Source: EIA

-5

0

5

10

Stock Build

Stock Draw


U.S. Crude Oil “Mid” Forecast Before & After

0

2

4

6

8

10

12

14

MM

b/d

History Before After15.4 @ $55/bbl & $2.55/MMbtu

11.3 @ $40/bbl & $2.35/MMbtu

Source: RBN U.S. Crude Oil Mid Forecast - Unconstrained


U.S. Natural Gas Demand

20

25

30

35

40

45

Bcf

/d

Power Burn

2018 2019

2020 Projection

-

10

20

30

40

50

60 Residential Commercial

2018 2019

2020 Projection

19

20

21

22

23

24

25

26

27 Industrial

2018 2019

2020 Projection

-

2

4

6

8

10

12

14

16 Exports

2018 2019 2020


U.S. Natural Gas Production

75

80

85

90

95

Bcf

/d

Lower-48 Dry Gas Production

2018 2019 2020 Projection

?


NGL Markets

2, 36%

1.2, 21%0.6,

11%

1.8, 32%

Petchem

Consumer

Exports

Refinery/Fuels

NGL Markets MMb/d, %


NGLs - Domestic Demand and Exports

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Mb

/d

Ethane

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Propane

0

100

200

300

400

500

600

700

800

900

1,000Butanes

0

100

200

300

400

500

600

700

800Natural Gasoline

Domestic Demand Exports


0

10

20

30

40

50

60

70

Propane

Mont Belvieu NGL Prices (ENT/non-TET)

0

5

10

15

20

25

30

35

c/ga

l

Ethane

0

10

20

30

40

50

60

70

80

90

100Butanes

IsoButane

N Butane

-100

-50

0

50

100

150Natural Gasoline

Crude/Gal

NGasoline

Source: ICE

:


Ethane to Henry Hub Gas Ratio

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

Rat

io

0.0

1.0

2.0

3.0

4.0

Rat

io

Ethane to HH Gas Ratio

» Production cuts

» New ethane-only crackers online

» Attractive LDPE margins

Source: ICE

:


Propane Price and Relationship to WTI Crude Oil

20

25

30

35

40

45

50

c/ga

l

Propane

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%Propane Ratio to

Cushing WTI

-$40

-$20

$0

$20

$40

$60

$80

$/B

bl

WTI Crude Oil Cushing

0%

10%

20%

30%

40%

50%

60%

70% Historical Ratio

Source: ICE

:


2,000

3,000

4,000

5,000

6,000

7,000

8,000

Mb

/dRejection Mid Scenario

Production Mid Scenario

U.S. NGL Gas Plant Potential Production Forecast (Mid Scenario)

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Mb

/d

Rejection Mid Scenario

Production Mid Scenario

$55/bbl Crude, $2.55/MMbtu Gas $40/bbl Crude, $2.35/MMbtu Gas


The 2020 NGL Domino Effect

Rich natural gas production containing NGLs flattens or declines

Less NGLs are available for processing

Potential ethane volume falls along with all NGLs

Ethane that was previously being rejected must be recovered to meet petchem demand

To incentivize recovery of more ethane, the price of ethane must increase

Higher ethane prices result in flexible crackers switching to alternative feedstocks

Flexible crackers run more propane

Propane production falls along with all NGLs

With less propane supply and higher petchem demand for propane, there is less propane available for export

Will crackers cut runs due to lower demand?Will global demand for U.S. LPG exports hold up?


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Mb

/d

Butane

Propane

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Mb

/d

Butane

Propane

Gulf Coast LPG Exports (Mid Scenario)

$55/bbl Crude, $2.55/MMbtu Gas $40/bbl Crude, $2.35/MMbtu Gas


Crude to Gas Ratio

0

5

10

15

20

25

30

35Historical Annual Average

0

5

10

15

20

25

30

35

Daily 2020 Forward Curve

-20

Source: ICE

:

Navigating COVID-19: Good Times Bad Times in …...LNG Feedgas by Terminal Source: ICE, Genscape 0.0...

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