Dr. Robert Brooks RBAC, Inc. Platts NGL Conference September (c) RBAC, Inc., , All Rights Reserved

Transcription

1 Dr. Robert Brooks RBAC, Inc. Platts NGL Conference September 2014 (c) RBAC, Inc., , All Rights Reserved

2 The Shale Gas Revolution Technological innovations have brought about the shale gas revolution Horizontal Drilling Hydraulic Fracturing 3D / 4D Seismic Imaging Robust, Full-Scale Deployment Enormous market changes have occurred already and will continue into the next decades But there have been no generally available tools to model the effect of investments meant to address these changes RBAC took up the challenge and built such a tool NGL-NA : the first modelling system available to the industry for studying and forecasting the NGL market of North America NGL-NA is a trademark owned by RT7K, LLC, and is used with its permission.

3 What will be needed to handle this vastly increased NGL? New gas processing New Y-grade (NGL Mix) transportation New fractionation New storage New purity NGL transportation New and expanded export terminals New markets! New and expanded ethylene and propylene plants Overseas markets for ethane, propane, and butane And maybe natural gasoline too! And all of this requires $$$

4 $billions NGL Infrastructure Capital Rqt (API-IHS) History IHS Base IHS High

5 $billions 160 NGL Infrastructure Capital Rqt (API-IHS) Cum-IHS-Base Cum-HIS-High

6 $billions Comparison: API vs INGAA INGAA (ICF) API (IHS)

7 Regional Breakdown (INGAA) $Billions $12.22 $27.47 $5.90 $4.80 Canada Central Midwest Northeast Southeast Southwest $1.20 $7.12

8 Regional Breakdown (INGAA) Percent 26% 59% 13% 10% Canada Central Midwest Northeast Southeast Southwest 3% 15%

9 How much capacity will this buy? INGAA (ICF) Study (for the period ) 35 bcf/day new gas processing (22/25) * 35 = 30.8 bcf/day 3.6 million bbl/day new NGL transmission (22/25) * 3,600,000 = 3.2 million bbl/day 151 MBOE/day new fractionation per year 151,000 x 22 yrs = 3.3 million bbl/day 64 MBOE/day new NGL export capacity 64,000 x 22 yrs = 1.4 million bbl/day API (IHS) 30 bcf/day new gas processing ( ) million bbl/day fractionation Assuming $4-5,000/bbl/day and $14.8 billion cap inv in frac

10 NGL-NA Modeling Approach Basic Design Principles Highly granular model Multiple commodities Detailed infrastructure database Basin level supply State, market, commodity level demand Multi-commodity flow model with transformation functions Gaseous and liquid mixes get separated into other commodities Optimization used to compute economically efficient results NGL market highly coupled to other markets Natural gas Crude oil refining Petrochemicals

11 Basic NGL-NA Flow Model Natural Gas Production Dry Gas Wet Gas Gas Processing Nat Gas Markets Residue Gas NGL Mix Fractionation (Ethane Propane N-Butane Iso-butane Pentanes+) Non-Petchem Propane Markets Other Butane Markets Diluent Market Export Markets Petchem Feedstock Market Gasoline Blending Market

12 Product Flow Factors Production/Supply User Input (GPCM or other) Natural Gas Wetness (GPM) NGL Composition Transportation Modes: Pipeline, Rail, Truck, Barge Origins, destinations, capacities, tariffs Value-Added Processes Gas Processing Technologies: cryogenic, absorption, refrigeration, combos NGL Fractionating Olefin Production (ethylene/propylene/butadiene/etc.) Ethylene cracking, propane dehydration (PDH) Crude Oil Refining

13 Much of future growth is in wet plays Source: NPC Paper #1-13 Natural Gas Liquids (NGLs), 15Sep11

14 Natural Gas and Liquids Process Flow Operations Modeled

15 Montney (BC) More Capacity is Needed in Prolific New Plays Natural Gas Processing Plants and Production Basins, 2009 Bakken Niobrara Marcellus / Utica Eagle Ford

16 Moving NGL Mix What about Marcellus/Utica?? Existing and Proposed Raw Mix Pipelines Source: Bentek

17 How will they flow in the future? Source: NEB

18 Supply / Demand Issues Natural gas and NGL production has expanded enormously But demand has not kept pace Ethane production growth is somewhat manageable Growth in petchem demand is accelerating Excess supply can be rejected into the natural gas stream But due to pipeline quality constraints - only up to a certain limit and these limits are being tested Propane use in ethylene plants grew from but The large-scale switch to ethane in petchem plant feedstock is beginning to reduce demand for propane (and butane) PDH plants will consume some of the excess but enough? Refinery demand for C4 and C5+ blending is not growing Blending requirements could decline with lighter crude feed slates Natural gasoline (C5+) is in high demand as diluent for growing production of Alberta bitumen But what about the recycling effect? Those molecules are coming back to the US. What will they displace?

19 Base Case Assumptions Base Case Assumptions 14Q2base natural gas supply scenario from RBAC using GPCM All existing and announced NGL infrastructure projects Gas processors, fractionators, storage, pipelines, export facilities Plus several hypothetical new Super Plants Refinery capacity utilization stays at 2013 levels Include all announced ethylene and PDH new plant builds and capacity expansions Petchem capacity utilization increases to 95% Other demand for propane and butane stays constant Steady fast rise in AB oil sands demand for diluent Imports and exports with non-north American countries (Rest of World - ROW) balance the market

20 Current Infrastructure Infrastructure Inventory (US, Canada, Mexico) Gas Processing Plants ~ 1,100 ~ 100 with partial or full fractionation Stand-Alone Fractionators ~ 50 Olefin Plants ~ 50 Refineries ~ 170 Import/Export Terminals ~ 20 Storage Terminals ~ 100 LPG Distribution Terminals ~ 250 NGL Mix and Purity Pipelines ~ 100 Also Rail, Truck, Barge and Tanker Transport

21 New Projects Gas Processing mmcfd In-Service Plant Name State GPPTech InitialCap In-Service Plant Name State GPPTech InitialCap Jan-14 Buffalo Creek TX TX CRY 200 Jan-15 Garden CreekIII ND CRY 100 Jan-14 Garden CreekII ND CRY 100 Jan-15 Leesville Plant OH CRY 200 Jan-14 Goliad plant (2014) TX CRY 200 Jan-15 Mobley 4 Gas Plant WV CRY 200 Jan-14 Lancaster CA CRY 300 Jan-15 Stonewall Plant OK CRY 200 Jan-14 Oak Grove Plant WV CRY 600 Jan-15 Zia II NM NM CRY 200 Jan-14 Parkland BC REF 28 Apr-15 Fifty Buttes WY WY CRY 200 Jan-14 Reveille Gas Plant TX CRY 200 Apr-15 Lucerne II Gas Plant CO CRY 230 Mar-14 Azure Fairway TX TX REF 25 Apr-15 Mobley 5 Gas Plant WV CRY 200 Mar-14 Tioga ND CRY 260 Apr-15 Thunder Creek WY WY CRY 200 Apr-14 Canadian Valley OK OK CRY 200 Apr-15 Zia Plant NM CRY 230 Jul-14 Bearkat TX TX CRY 60 Sep-15 Tuscarawas OH OH CRY 200 Aug-14 ETP Glasscock TX CRY 130 Dec-15 Lonesome Creek ND ND CRY 200 Sep-14 Berne OH OH CRY 200 Dec-15 Saturn II AB AB CRY 130 Dec-14 James Lake TX TX CRY 100 Jan-16 Petersburg OH OH CRY 200 Jan-15 Battle Ridge OK OK CRY 75 Dec-16 Knox OK OK CRY 200 Jan-15 Beckville Plant TX CRY 150 Total 5,718

22 Expansions Gas Processing mmcfd LastExpDate Plant Name State GPPTech New Cap Jan-2014 Altamont UT REF 20 Dec-2016 Battle Ridge OK OK CRY 125 Mar-2015 Berne OH OH CRY 400 Apr-2014 Cadiz Cryogenic processing plant OH CRY 200 Jul-2015 Dubberly Gas Plant LA CRY 200 Apr-2014 Majorsville WV CRY 750 Jul-2014 Mi Vida Plant TX CRY 165 Mar-2015 Natrium Gas Plant WV CRY 200 Mar-2014 O'Connor (Lasalle) CO CRY 50 Jan-2015 Parachute Creek Gas Plant CO REF 1,100 Jan-2015 Seneca Gas Plant OH CRY 400 Apr-2015 Sherwood Plant WV CRY 1,000 Total Expansions 4,610 New Plants plus Expansions 10,328

23 New Capacity Fractionation BBL/D In-Service FracName State NewCap Jul-2015 Sweeny Frac Plant TX 116,000 Jan-2014 Robstown TX TX 63,000 Oct-2015 Redwater III Pembina AB AB 55,000 Nov-2015 Redwater II Pembina AB AB 73,000 Jan-2014 Hopedale OH OH 60,000 Apr-2015 Gardendale TX TX 15,000 Total New Plants 382,000 LastExp FracName State NewCap Jan-2014 Casper WY 1,500 Jan-2016 Fort Saskatchewan Keyera AB 59,798 Jan-2015 Harrison Hub Scio Frac OH 45,000 Jun-2016 Houston PA Fractionation PA 90,000 Jan-2014 Mont Belvieu Lone Star TX 100,000 Oct-2014 Mont Belvieu OneOK TX 190,000 Mar-2015 Natrium WV 126,000 Jul-2014 Plaquemine Frac LA 90,000 Sep-2015 Redwater Pembina AB 9,000 Mar-2014 Tioga ND 53,800 Total Expansions 765,098 Grand Total 1,147,098

24 New Capacity Pipelines BBL/D TrnName In-Service Date InitCap ATEX Express Mar ,000 Bluegrass NGL Pipeline Jan ,000 Enterprise Ethane System (Aegis) Jul ,000 Front Range Pipeline Jan ,000 Hutchinson-Medford Jan ,000 Mariner East Jul ,000 Ohio Valley Ethane PL Sep ,000 Thunder Creek NGL Apr ,000 Unity Pipeline Jul ,000 Utica Marcellus Texas Pipeline Jan ,000 Utopia Pipeline Jul ,000 Vantage Pipeline Mar ,000 Total New Pipeline Capacity 1,535,000 TrnName Date of Last Expansion Add Cap Bakken Pipeline Apr ,000 Cajun Sibon Pipeline System Jul ,000 Cochin Pipeline Jul ,000 Explorer Pipeline Apr ,000 Mariner West Ethane Pipeline Apr ,000 Mid-America Pipeline Rocky Mtn System Jul ,000 Northern NGL System Jul ,000 Panola Pipeline Jan ,000 Southern Lights Project Jul ,000 Sterling Pipeline Jan ,500 Utopia Pipeline Jul ,000 Total Expansions 1,114,500 Total New Capacity 2,649,500

25 New Projects Export Terminals BBL/D TermName In Service Date Init Cap Moss Lake Frac Exp LA Jan ,000 New Terminal Capacity 100,000 TermName Last Expansion Date Add Cap Galena Park Oct ,000 Houston EPD Jul ,000 Marcus Hook PA Jul ,000 Sweeny Clemens Complex Jul ,000 Total Expansions 1,217,000 Total New Capacity 1,317,000

26 Ethylene and Propylene Plant Projects Ethylene and Propylene Plant Projects in North America Project Type Exp/New InService Dow Freeport LHC7 TX Ethylene Expansion Jan-2015 Dow Plaq LHC2 LA Ethylene Expansion Jan-2015 Dow Plaq LHC3 LA Ethylene Expansion Jan-2017 Equistar Corpus TX Ethylene Expansion Jan-2015 Equistar Channel 1 TX Ethylene Expansion Jan-2015 Equistar LaPorte TX Ethylene Expansion Jan-2016 INEOS Choc Bayou TX Ethylene Expansion Jan-2014 Sasol Lake Charles LA Ethylene Expansion Jan-2017 Westlake Calvert City KY Ethylene Expansion Apr-2014 Westlake Sulphur 1 LA Ethylene Expansion Jan-2015 WMB Geismar LA Ethylene Expansion Apr-2014 Formosa Pt Comf 3 TX Ethylene NewBuild Jul-2016 Exxon Baytown 3 TX Ethylene NewBuild Jul-2016 ChevPhil Baytown TX Ethylene NewBuild Jan-2017 Dow Freeport LHC9 TX Ethylene NewBuild Apr-2017 OxyChem/Mexichem Ethylene NewBuild Jul-2017 ShellChem Monaca PA Ethylene NewBuild Jan-2018 Etileno XXI MX Ethylene NewBuild Aug-2015 C3 Petro PDH TX Propylene NewBuild Oct-2015 Dow Freeport PDH TX Propylene NewBuild Jan-2015 Formosa PDH TX Propylene NewBuild Jan-2016

27 Additional Infrastructure Analysis shows that existing & currently announced projects are insufficient to handle expected new NGL volumes Proposed solution strategically located Superplants Plant Name In Service GPPTech Cap Eagle Ford Superplant TX Jan-2015 ADVCRY 2,000 Bakken Superplant ND Jan-2017 ADVCRY 1,000 Niobrara Superplant CO Jan-2020 ADVCRY 500 Montney Superplant BC Jan-2016 ADVCRY 500 Jan-2019 ADVCRY 1,000 Jan-2022 ADVCRY 1,500 Marcellus Superplant PA Jan-2016 ADVCRY 500 Jan-2018 ADVCRY 1,000 Jan-2020 ADVCRY 1,500 Jan-2022 ADVCRY 2,000 Jan-2024 ADVCRY 2,500 Total Maximum Capacity 7,500 Plus one additional pipe the Eagle Ford Express

28 Scenario Results Dry N/G Prod MMCF/D 100,000 90,000 80,000 70,000 60,000 50,000 40,000 CAN MEX USA 30,000 20,000 10,000 0

29 Scenario Results US NGL Prod BBL/D 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 NGLNA EIA IHS Base IHS High 1,000, ,000 0

30 Scenario Results US Ethane BBL/D 2,250,000 2,000,000 1,750,000 1,500,000 1,250,000 1,000, ,000 Prod MaxProd Rejection 500, ,000 0

31 Scenario Results US Propane BBL/D 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , ,000 Total Prod Net Imports Total Sales 400, , , ,000

32 Scenario Results US N-Butane BBL/D 1,000, , , , ,000 Total Prod Total Sales Net Imports 0-200, ,000

33 Scenario Results US Iso-Butane BBL/D 800, , , , , , ,000 Total Prod Total Sales Net Imports 100, , ,000

34 Scenario Results US Nat Gasoline BBL/D 600, , , , , ,000 0 Total Prod Total Sales Net Imports -100, , , ,000

35 Scenario Results US GPP Capacity BCF/D REF CRY ADVREF ADVCRY ADVABS 20..

36 Scenario Results US GPP Util% 90% 80% 70% 60% 50% 40% 30% 20% ADVCRY ADVREF REF Total CRY ADVABS 10% 0%

37 Scenario Results US Fractionation BBL/D 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 GPP Frac 1,500,000 1,000, ,000 0

38 Scenario Results US Frac Util% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

39 Scenario Results NGL Mix Transport by Pipeline 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 0 Wilprise West Texas Pipeline West Texas Gateway Wattenberg UticaMarcTex PL Tristream NGL Thunder Creek NGL Southern Hills South Dean Sand Hills Ranger Powder River Peace Pipeline Overland Pass Northern NGL System Louisiana Pipeline Liberty Pipeline Hutchinson-Medford Fort Sask Pipeline ETC Justice Enbridge Mainline Eagle Ford Express Dominion Chisholm Burgos-Poza Rica Boreal Black Lake Baton Rouge Arbuckle Wildcat Liquids West Texas LPG West Kansas Venice-Belle Rose UEO Buckeye Tri-States Texas Express South Texas Seabreeze/Wilbreeze Regency Liquids Quanah Pouce Coupe Overland Pass DJ Lateral ONEOK NGL PL MAPL Rockies Lone Star Kemp River Front Range ExxonMobil PL MIX LA ETC Freedom Empress-Kerrobert Dry Trails Co-Ed Pipeline Cajun Sibon Brazeau System Bluegrass Belle Rose Bakken

40 Conclusions An additional bcf/day gas processing capacity is enough to meet requirements for this scenario if It is located in strategic areas of high production growth Planned fractionation expansions can handle the expected growth in this scenario except in the Marcellus and in Louisiana Additional transport capacity is needed to handle expected NGL mix growth in South Texas and from North Dakota to Kansas Capacity from Pennsylvania to the Gulf would be highly utilized. Both the UticaMarcellusTexas and Bluegrass pipelines would flow If not built, more frac capacity will be needed in Marc/Utica area Exports of propane, butane, and natural gasoline grow substantially, but overseas ethane exports are limited if existing and planned ethane crackers run at 95%. However, required export capacity is less than is being planned. Substantially less infrastructure growth is required to meet the needs of the market in this scenario than in either the API or the INGAA study. New facilities will be more efficient than legacy plants

41 Data Sources US Energy Information Administration Natural Gas: marketed production, gas processed, shrinkage, plant fuel, liquids extracted (by state) NGL/LPG: production, storage, imports, exports, movements (by PADD), EIA- 757: Gas processing plant data, refinery inputs and production Federal Energy Regulatory Commission NGL pipeline tariffs US Surface Transportation Board Rail transport costs Statistics Canada Canadian natural gas and NGL supply and demand data Canadian Energy Research Institute (CERI) Canadian NGL industry operations and infrastructure PEMEX / SENER Mexican natural gas and NGL supply, demand and infrastructure LPG Almanac (Sulpetro) Processing plant, fractionator, refinery, and terminal location info, capacity, storage, and production history (US/Canada) Oil Price Information Service (OPIS) Individual Company Websites

42 RBAC Contact Information Contracts & Administration (Primary contact for NGL Model) Liam Leahy, CEO: Cell Technical Management Robert Brooks, Founder - Modeling: rebrooks@rbac.com Bethel King, Senior Energy Analyst: bking@rbac.com Aaron Brooks, Software Development: aaron.brooks@rbac.com Sales James Brooks, Director of Business Development: james.brooks@rbac.com Mailing Address: RBAC, Inc Ventura Blvd, Suite 210 Sherman Oaks CA Sales & Administration: Technical Information and Support: More information: (c) RBAC, Inc., , All Rights Reserved