West Region Gas Pipelines

Transcription

1 West Region Gas Pipelines

2 Cautionary Language Regarding Forward-Looking Statements Privileged and Confidential This presentation contains forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results or the ability to generate revenues, income or cash flow or to make distributions or pay dividends are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations of Kinder Morgan Energy Partners, L.P., Kinder Morgan Management, LLC, El Paso Pipeline Partners, L.P., and Kinder Morgan, Inc. may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond Kinder Morgan's ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future, including, among others, the ability to achieve synergies and revenue growth; national, international, regional and local economic, competitive and regulatory conditions and developments; technological developments; capital and credit markets conditions; inflation rates; interest rates; the political and economic stability of oil producing nations; energy markets; weather conditions; environmental conditions; business and regulatory or legal decisions; the pace of deregulation of retail natural gas and electricity and certain agricultural products; the timing and success of business development efforts; terrorism; and other uncertainties. There is no assurance that any of the actions, events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on our results of operations or financial condition. Because of these uncertainties, you are cautioned not to put undue reliance on any forward-looking statement. 2

3 Opening Remarks Will Brown Macro Presentation George Wayne Break 15 Min Business Development Project Update Greg Ruben Operational/Pipeline Management Update Mark Westhoff Commercial Update/Customer Meeting Logistics Tim Dorpinghaus 3

4 West Region Gas Pipelines Tom Martin President KM Gas Pipelines Curt Moffat V.P. & Deputy General Counsel Chris Meyer President West Region Gas Pipelines Allyson Schuur Executive Assistant Mark Westhoff VP Pipeline Management Greg Ruben VP Business Development Bill Wible VP Regulatory Will Brown VP Business Management Jim Cordaro Director Pipeline Mgmt Rockies Kevin Johnson Director Pipeline Mgmt DSW Tim Dorpinghaus Director Marketing George Wayne Director Market Services Ray Jordan Director Account Services Billy English Director Asset Optimization Ken Ulrich Director Bus Dev Kim Wetzel Sr Analyst Bus Dev Laine Lobban Acct Director Bus Dev Tony Sanabria Acct Director Bus Dev Thania Delgado Acct Manager Marketing Mark Iverson Acct Director Marketing Steve Newell Acct Director Marketing Marcus Stewart Acct Manager Keystone Storage Robin Janes Acct Director Marketing Randy Barton Acct Director Marketing Tim Mang Acct Director Asset Optimization Dan Tygret Acct Manager Asset Optimization Damon McEnaney Acct Director Marketing 4

5 Kinder Morgan West Region 5

6 George Wayne Director, Market Services 6

7 Ind +3.1 Bcfd +7.7 Bcfd +9.6 Bcfd Res +1.9 Bcfd U.S. becomes net exporter Industrial demand growth Gas-fired generation increases -2.0 Bcfd Bcfd +1.5 Bcfd Less Canadian Exports to U.S. Source: ICF International and Kinder Morgan Analysis Continued supply increases More U.S. Exports to Mexico 7

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9 Supply (Dry Gas) 9

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11 Wellhead Production Wellhead production has declined 0.7 Bcf/d over last year due to continued low rig count Relative to 2015, declines are projected through 2018, followed by growth as gas prices recover. Only basin with material growth over the next decade is the Denver basin Horizontal drilling = 65% of all rigs Powder River activity increasing 9 rigs Rockies Active Rigs Basin Current Dry Production MMcf/d YOY Prod Growth MMcf/d Current Rigs Gas/Oil Green River 2,770 (355) 11/0 Piceance 1,387 (104) 6/0 Uinta 667 (144) 0/7 Denver/Julesburg 1, /25 Powder River 371 (71) 0/9 Other 106 (13) 0/1 Total 6,918 (669) 17/41 11

12 (Volumes are Wellhead Measured in MMcfd) 12

13 Active Rigs DJ Basin rigs almost 50% of total Rockies rigs. Transition to horizontal wells over last 6 years. Increased use of XRL drilling. Anticipate additional rigs added in 2017 Anadarko, Noble, PDC, Extraction, BBG 2016 to 2026 Growth +1.3 Bcfd Oil Production +600 MBo/d 13

14 Drilling activity in the San Juan Basin has been steadily declining. Coal Bed Methane (CBM) is depleting; however, we have started to see some recent horizontal drilling in the CBM. Moreover, since 2012, liquids rich plays are being develop (Gallup) with some optimistic results. 14

15 Coal Bed Methane accounts for approximately 56% of total production. Associated gas from the Gallup is projected to grow. San Juan Basin Production is expected to decline by approximately 670 MMcf/d over the next decade. Coal Bed Methane depletions are primary driver of production decline. 15

16 A B C D PNW Demand NoCal Demand Pembina is acquiring Veresen and will continue developing the Jordan Cove LNG export terminal. Key FERC filing milestones expected in late Northwest Innovation Works is developing 300 MDth/d Methanol export facility in Kalama, WA. They recently contracted I/T capacity on NWPL and may contract for additional firm capacity on upstream pipelines as needed. Future expansions in OR could bring total Methanol demand to 1 Bcf/d. Woodfibre B.C. and Pacific NW LNG projects have received full Canadian Gov t approval, but FID still pending. Woodfibre has begun remediation work at its brownfield site in preparation for possible facility construction. D $2.17 C B A Sumas Malin $2.44 $2.73 Ruby $2.66 SUPPLY $2.69 DEMAND Sumas 1,114 PNW Demand 1 2,490 GTN 2,135 NWPL 326 Malin Ruby 673 Deliveries 1,757 TOTAL 4,247 TOTAL 4,247 Prices are Prompt Month (Jun, 2017) Forwards, volumes are 2017 YTD average. 1 Excludes Vancouver, B.C. 16

17 Active Rigs Most of the Permian Basin supply growth is coming from the Midland and Delaware Basins based on superior economics. BE $35+/bo Permian Basin Forecast 400 Rigs Oil Production +3.0 MMBo/d +2.6 Bcfd +6.5 Bcfd 17

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19 Delaware Midland Midland and Delaware NGL production eclipsed 2 MMBbls. Although NGL prices have improved since 2016, they are still not anticipated by the market to exceed pre-2014 pricing in the next few years. 19

20 Design Capacity Bcfd Key Interstate Pipeline A EPNG (San Juan Crossover) B EPNG South Mainline (Cornudas West) C TW (West Texas Lateral) D NGPL (Segment 8 Capacity) E NNG (Permian system) Total Interstate Capacity R Q P Estimated Capacity Bcfd Key Intrastate Pipeline F OneOK WestTex Red River* G OneOK WestTex Elcor System* H Enbridge Palo Duro Pipeline I ATMOS J Enterprise Texas K KM Texas Pipeline L Oasis Pipeline (Energy Transfer Fuels) M Enterprise Texas P Trans Pecos (early 2017) Q Comanche Trails (early 2017) R OneOK RoadRunner ( ) Total Intrastate Capacity * OneOK WestTex Transmission includes the Elcor System between the Permian and El Paso, TX (previously owned by EPNG) and the Red River pipeline between the Permian and the Texas Panhandle. - Elcor System 20 pipeline with maximum capacity of 143 MMcfd - Red River Pipeline 24 with maximum capacity between 300 and 400 MMcfd Source: Ventyx data, KM research, CFE 20

21 Western markets and Mexico are the high value markets for Permian gas, but they are demand limited Local demand growth is driven by power generation and processing LNG and Mexico exports (South TX) are key drivers for Gulfdirected Permian gas Midwest & North Central TX markets are overflow for Permian gas as pipe capacity is filled 21

22 AECO Cheyenne Without additional western demand or Permian capacity additions to the east, Permian prices under Rockies and MidCon with continued competition from AECO and the Northeast. MidCon SoCal Border Leidy STX 22

23 Permian dry gas production Without additional pipeline capacity to the east, Permian price is lower in 2019 with greater seasonal volatility Out of Capacity Spreads Widen Further Widening of Seasonal Spreads By 2021 as production continues to grow, eastbound capacity is full; hence, Permian prices lower to compete into the MidCon By 2024, Permian production outstrips all takeaway capacity out of the basin The forward Permian basis narrows in 2020, suggesting the market is expecting expansion capacity to the east (not yet assumed in the fundamental forecast) 23

24 Source: Existing to planned capacity from Velocity Suite; Gas demand impacts derived from ICF International generation forecast data CA natural gas intensity is decreasing while overall U.S. is increasing Given the projections for existing and new renewable power, the West Region may see a maximum demand destruction in power gen of 3.2 Bcfd (1.8 winter to 4.5 summer) by

25 The EIM seeks to optimize generation resources across a broad power market region to reduce costs and emissions: Minimizes sub-hourly dispatch Reduces reserve capacity requirements Reduces renewable generation curtailments Seattle City Light, Portland General Electric, Idaho Power, and Salt River Project will also join the EIM MMcfd net impact to WECC region gas demand Since its inception, EIM has saved $146 MM and averaged 5 MMcfd of reduced gas-fired generation demand in 2016 Source: CAISO 25

26 Rising gas production in the Permian begins to decrease Permian gas price after DSW and Mexico demand increases market price. The net result is an increase in the spread to Arizona and California; especially during summer peaks. 26

27 Natural gas storage provides value due to daily, monthly, and seasonal volatility. Market changes are increasing volatility. Keystone Gas Storage Increasing supply and outflows Growing renewables Local unforeseen Events Source: CAISO, ABB, Kinder Morgan Analysis 27

28 SENER Forecasts demand in Mexico to grow by 1.3 Bcfd between 2016 and GW of renewable power generation capacity being installed between 2016 and 2030 Currently, there is no existing natural gas storage in Mexico Production in Mexico is forecasted to grow 460 MMcfd from 2016 to 2026 Imports are forecasted to grow by 850 MMcfd between 2016 and

29 MX Import Demand vs. Import Pipe Capacity 29

30 Most of the Northwest, West-Central, and some Northeast demand supplied from Rockies and Permian Much of the Northeast, and much of the Central and West- Central, demand is supplied by Eagle Ford

31 Pipeline Capacity in Western Mexico EPNG South Mainline SoCal Border KM/MGI/Mitsui - Sierrita PL ISD Oct mmcf/d (431 mmcf/d by 2020 Tucson Carso - Sam to Sasabe ISD mmcf/d Sasabe IEnova - San Isidro to Samalayuca ISD ,135 mmcf/d El Paso Hueco Roadrunner - OneOk Fermaca Consortium ISD PH1 Mar, 2016; PH2 Oct, 2016; PH mmcf/d Comanche Trails ET Consortium ISD Jan, ,135 mmcf/d Waha Puerto Libertad Guaymas IENova Samalayuca ISD mmcf/d Fermaca ISD mmcf/d IENova 30 ISD Jun, mmcf/d ISD mmcf/d El Encino San Elizario/ San Isidro Presidio/ Ojinaga IENova ISD May, ,350 mmcf/d Transpecos ET Consortium ISD Mar, ,356 mmcf/d Topolobampo Mazatlán Transcanada 30 ISD Mid mmcf/d Transcanada 24 ISD Jun, mmcf/d Fermaca ISD Jan, ,500 mmcf/d La Laguna Fermaca ISD ,150 mmcf/d Aguascalientes Information sourced from CFE Requests For Proposals and related press releases ISD In Service Date (actual or estimated) mmcf/d million cubic feet per day 31

32 Demand growth continues LNG exports and Power Generation are primary sources of demand growth Low gas prices incentivize Industrial and Residential growth Supply growth continues to outpace domestic demand Supply growth occurs in low-cost, highly productive fields Fewer imports (Canada) and more exports (LNG and Mexico) provide balance between supply and demand The Permian is an area of opportunity and challenges Highly productive with direct access to premium western market and growth in Mexico Growth may begin to test capacity Increasing price and basis volatility 32

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34 Greg Ruben V.P. Business Development 34

35 Facilities: 4 Cavern Bedded Salt Storage 4 Bcf Working Capacity 400 MM/D Withdrawal/183 MM/D Injection 15,100 HP compression, 16.6 mile 24 lateral to tie into EPNG (1100 Lines), 12.3 mile 16 lateral to tie into EPNG 2000/1600 Lines Contract: November 2020 in-service 20 year term from final Cavern In- Service (2024) Provides No-Notice Service to AGS Shippers Negotiations ongoing 35

36 Ehrenberg Phoenix Description Expand capacity of Sierrita by 230 MDth/d; total revised capacity of 431 MDth/d Incremental volumes to serve growing demand in Western Mexico Facilities New compressor station (~16,000 HP) Transportation Agreement with CFE 19.5 year term Sierrita Pipeline Sonora, Mexico Tucson Status CFE awarded capacity in Open Season: October 2015 Finalizing compressor site acquisition 36

37 SAN JUAN ANADARKO Ehrenberg Phoenix New Compression PERMIAN 17-mile Pipeline Loop Sierrita Pipeline El Paso Waha Description Expand west flow capability by 271MDth Incremental volumes to Sierrita and Ehrenberg Facilities New compression near Deming and Willcox 17-miles of 30 line loop (Hueco towards El Paso) Transportation Agreement with CFE 15+ Years Status CFE awarded capacity in Open Season: June 2016 Supplemental Open Season closes May 15 to provide up to 50MDth additional capacity 37

38 EPNG Permian Interconnection Activity Status Receipt (Mcfd) , ,000 Plains , ,566, ,337, * 3,827,000 Delaware Basin Carlsbad Hobbs Eunice Central Platform Midland Basin New Mexico Keystone Texas Guadalupe Cornudas Black River Wink Line 3162 Waha Gresham * Includes interconnects currently under construction Puckett 38

39 EPNG Permian Expansion Projects Expansion Underway Plains Potential Expansions Hobbs Eunice Carlsbad New Mexico Keystone Texas Guadalupe Cornudas Black River Orla LINE LINE 1600 Waha Gresham 493 KMTP Puckett 39

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41 CIG line 5A/B expansion project currently underway 190 MDth/d incremental capacity Open season awarded in March 2017 In-service date targeted for September 2017 ~1 Bcf/d of DJ north to Cheyenne Hub expansion potential without laying pipe 400 MDth/d on High Plains 300 MDth/d on CIG 5C 300 MDth/d on Front Range Pipeline In-service as early as 3 rd QTR

42 CIG DJ Basin Interconnect Activity WYOMING COLORADO Ft. Collins Denver Volume (Mcf/d) , , , , * 428,000 Colorado Springs * Includes interconnects currently under construction 42

43 Mark Westhoff V.P. Pipeline Management 43

44 Rawlins Wind River Lateral Cheyenne Plains Colorado Interstate Gas (CIG) El Paso Natural Gas (EPNG) Mojave Pipeline Ruby Pipeline TransColorado Wyoming Interstate Company (WIC) West Slope DJ Basin North Mainline San Juan Basin Ehrenberg South Mainline Permian Basin 44

45 Rawlins Rifle Wind River Lateral Denver Colorado Springs Trinidad Cheyenne DJ Basin Proximity to demand centers Rapid response to production issues Coordination with receipt/delivery operators Mainline flow reversals Blending rich supplies on Wind River Utilizing the assets of Western Pipes Blending limits being reached Decline of CIG west end receipts Challenges for west slope deliveries Pressure maintenance 45

46 Increasing utilization of south mainline Line 2000 segregation Ehrenberg control valves Higher base linepack More narrow linepack range Plains south constraint reversed San Juan production decline North mainline utilization decline San Juan Crossover bi-directional Transport capacity usable linepack North Mainline San Juan Basin Ehrenberg South Mainline Permian Basin 46

47 Inconsistent with EPNG current operations Impair effective communications Create false impressions, nuisance notices Maintain existing procedures, eliminate limits 7200 MMcf for high probability draft SOC 7000 and 7900 MMcf for low and high SOC Tariff sections 11.1 (a) (i) (A) and (ii) 47

48 Transport capacity at high utilization Hard lesson: April 20 Safety related testing and maintenance Coordination with stakeholders Focus on those requiring shut in General capacity impacts demanded much better communication Going forward Regular maintenance coordination Emergent work: detailed analysis and communication 48

49 Tim Dorpinghaus Director, KM West Pipeline Marketing 49

50 Coding and Testing Nominations and Scheduling, Invoicing - 75% Complete Capacity Management 80% Complete Allocations 90% Complete Contracts - 100% Complete Regulatory Update Tariff changes approved by FERC order received in November 2016 Customer Training Update WebEx refresher training sessions planned for August/September (Dates TBD) Will provide in-house assistance for October business nominations (COS) September Key Dates Complete all testing by September 1st Compliance filing for the approved Tariff Changes will be filed in September Open to Customers for October Business September 18th Additional Questions Conversion: please #DartConversionWest@kindermorgan.com Training: Patty Beavers at or patty_beavers@kindermorgan.com Training: Evelyn Spencer at or evelyn_spencer@kindermorgan.com 50

51 Dinner: Northern Sky Terrace/Rainmakers Ballroom 6pm Breakfast: Deseo Room 6:30am- 8:30 am Archers: Depart from South Terrace at 8:30 am and return at 11:30am Billy English (719) Botanical Gardens: Depart from South Terrace at 9:00 am and return 12:30pm Thania Delgado (719) Golf: Pro-shop by 7:00am for 7:30 am tee off Pro-shop go out the back of the hotel and turn left Damon McEnaney (719) South Terrace 51

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