Changing Flow Dynamics: Natural Gas, Oil, NGL

Transcription

1 Changing Flow Dynamics: Natural Gas, Oil, NGL Pipeline Development & Expansion Conference September 22, 2011 The Westin Oaks Houston, TX E. Russell Braziel BENTEK Energy Bentek Energy 2011

2 Shale Infrastructure Adoption Curve Natural Gas Crude Oil NGLs Bentek Energy

3 Changing Flow Dynamics Impact of shale technologies has shifted from natural gas to crude oil and NGLs We ve seen this movie before constrained flows > basis blow-outs > infrastructure investments But parallels go only so far. Supply dynamics, physical properties and markets are completely different It will take years and billions in midstream investment to return crude oil and NGL markets to equilibrium 3

4 U.S. Natural Gas $$ $ $$$ Production Up Go East 4

5 Natural Gas Market Impact $16.00 $16.00 Henry Hub Prices ($/MMBtu) $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 $8.87 $6.74 $6.93 $8.85 $3.92 $4.37 $4.21 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Henry Hub $/MMBtu Yearly Average Source: ICE, EIA 5

6 Continued Strong Production Growth 65 Current Dry Production Levels At All Time Highs 60 Hurricanes Gustav and Ike Bcf/d Dry Production Barnett Hurricane Katrina Woodford Fayetteville Haynesville Marcellus Eagle Ford Source: BENTEK Pipeline Flow Data --- Daily Supply and Demand Report: 6

7 NGLs and Crude Economics Eclipse Natural Gas Horn 11% Montney WCSB 39% 9% 104% Duvernay PRB 78% Bakken Pinedale 36% 11% Niobrara Marcellus Piceance 32% 59% 78% San Juan 8% Anadarko Woodford 107% 12% Barnett 15% Fayetteville Permian 98% 14% 21% Haynesville 98% Eagle Ford 37% Primary Production Dry Gas Rich Gas/ Liquids Crude Oil Source: BENTEK 7

8 Active Rig Additions Since Recent Low May Bakken 156 Oil and Liquid Rich Gas Plays Attract Capital DJ- PRB Niobrara Anadarko Marcellus Permian 369 Haynesville , Eagle Ford 26 Source: RigData, BENTEK: September 3,

9 U.S. Crude Oil Market Flow $ Production Up $$$ 9

10 U.S. Crude Oil Supply Growth Denver-Julesberg & Niobrara Denver-Julesberg Niobrara Ft. Worth ,000 1,500 1, Permian Basin Eagle Ford Area Permian-TX Permian-NM Bentek Energy 2011 Mb/d 10

11 U.S. Crude Oil Supply Growth 2016 vs Bakken +273 DJ/Niobrara 2,024 MB/d in 2016 Above 2010 Mb/d (149) CA/AK Bentek Energy 2011 Permian Anadarko Eagle Ford Ft. Worth /Haynesville +112 Offshore Note: 2010 Average to 2016 Average 11

12 A New Peak in Crude Oil Production 000s b/d 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Source: BENTEK, EIA, Excludes NGLs and Other Liquids 12

13 Adding In Canada 4,500 4,000 3,500 3,000 2,500 2,000 1,500 Canada Bentek Energy

14 U.S. + Canada Crude Oil Supply Growth ,024 2,995 MB/d in 2016 Above 2010 (149) Mb/d Bentek Energy 2011 Note: 2010 Average to 2016 Average 14

15 U.S. and CN Production Exceeding 1970s Level 12,000 10, s b/d 8,000 6,000 4, , U.S U.S Canada Canada Source: BENTEK, EIA, BP Stat Review Excludes NGLs and Other Liquids 15

16 2011 YTD WTI Basis $ (20) $ (12) $ (10) $ (16) $ (11) $ 5/11 $ 96 $ (2) $ 13 $ 16 Bentek Energy

17 N. American Crude Oil Production Growth ,995 Mb/d by End of (149) Mb/d Bentek Energy 2011 Note: 2010 Average to 2016 Average 17

18 Forward Curve WTI - Brent $/Bbl WTI Brent Futures Forward Curve $0 -$5 -$10 -$15 -$20 -$25 -$30 Spread Mb/d Bentek Energy

19 Natural Gas Liquids Similar to Crude Production up in middle of continent Demand along Gulf Capacity constraints & price differentials Unique to NGLs 5 End-use markets Processing, Transport, Fractionation, Demand Compete with refinery LPGs Production Up $ $$$ 19

20 MBPD U.S. Gas Plant NGL Production Rising Actual Forecast Processing Transportation Fractionation Demand Source: BENTEK/Turner Mason NGL Report October 2011 Other Other USGC Anadarko Permian Fort Worth TX Gulf Coast Marcellus 20 Bentek Energy 2011

21 MBPD MAPL Delivering >250,000 B/D NGLs into the Permian Colorado Receipts Utah Receipts Capacity New Mexico Receipts WY Receipts MAPL Permian Takeaway Capacity Permian Takeaway MBPD Seminole Skelly-Belvieu Total Takeaway Capacity Bentek Energy 2011 West Texas LPG Chaparral 21

22 U.S. NGL U.S. Pipelines NGL Pipelines & Expansions & Expansions - $5.7 Billion 60 Mb/d Bentek Energy

23 Mt. Belvieu NGL Fractionation Capacity Should be Adequate MBPD Mt. Belvieu NGL Supply Frac Capacity 23

24 Conclusions Impact of shale technologies has shifted from natural gas, to crude oil and NGLs Production in Canada + U.S. is increasing beyond historical peaks Current infrastructure is inadequate to move the growth in production to market Price differentials across capacity constraints will continue for some time, until the bottlenecks are relieved by new infrastructure For the next few years, regional basis differentials for crude oil and NGLs will be wide and volatile 24

25 BENTEK Energy, LLC BENTEK is an energy market analytics company, focused on the natural gas market and related energy sectors. E. Russell Braziel Castle Court, Ste. 200 Evergreen, CO Office: