Aux Sable. Charlotte Raggett CCO & VP Supply and Marketing. Petrochemical Conference 9 June Slide 1

Transcription

1 Aux Sable CERI Petrochemical Conference 9 June 2015 Charlotte Raggett CCO & VP Supply and Marketing Slide 1

2 Overview Who is Aux Sable? Where does ethane come from? Where will ethane come from? How much ethane will be available? What does the future ethane supply picture mean for Alberta Conclusions Slide 2

3 Slide 3 Aux Sable Operations

4 Where do Ethane Molecules Come From? Traditional Sources - Straddle Plants - Volumes have been declining with drop in border gas flows offset partially by higher ethane content of gas - Field Spec Plants - Volumes have been increasing with some new projects (Rimbey, Waterton) - Fractionation Plants - Volumes have been increasing with new field deepcuts Slide 4

5 Tracking Traditional Ethane Molecule Sources Overall, ethane production in Alberta has remained relatively flat with a trend of production shifting upstream. Source: ERCB Slide 5

6 Where Will Ethane Supply Come From? Straddle Plants (165 mb/d) Empress and Cochrane Field Spec Plants (25 mb/d) Connected to AEGS Frac plants (70+ mb/d) Pembina and Keyera Offgas (10+ mb/d) Williams and Aux Sable Imports (30+ mb/d) Vantage (Bakken and SK) Alliance (30+ mb/d) Potential new source Slide 6

7 Aux Sable s View of WCSB NGL Supply Aux Sable is more optimistic than pessimistic about gas drilling in the WCSB AB Montney, especially Kakwa region, is extremely competitive versus Marcellus and Eagleford A stalling of leaner conventional gas production LNG may accelerate gas drilling activity in BC Montney Intra-Alberta demand for gas is still growing but less rapidly than before the oil price correction More gas flows to straddle plants Field infrastructure will reflect changing NGL values New Montney field plants were initially deepcuts or heavy refrig plants Now producers are building shallow cut plants (<50% C3 recovery) Recent midstream field and frac plants only targeting C3+ Overall, we expect C3+ and especially C5+ production to grow rapidly, with rich replacing leaner gas production BUT incremental ethane will only come from deepcuts and associated de-ethanizers under construction and only if they are not rejecting C2 and C3 volumes Slide 7

8 Montney Natural Gas Competitiveness Alberta Montney gas drilling still very competitive with other US regions even in a lower crude oil environment. Source: Credit Suisse Investment Research Slide 8

9 What Does This Mean For Ethane? Supply Source Volume (mb/d) Straddle Plants + 30 Comments Increased unconventional drilling leads to more exports of richer gas Field Spec Plants None Existing facilities optimized Frac Plants +30 Field deepcuts deliver incremental C2+ BUT volumes will be limited by propane rejection Offgas Potential for incremental offgas ethane Imports +25 Total 90 mb/d Increased flows on Vantage from the Bakken and Saskatchewan Not enough to support a new world scale cracker need a cushion (Aux Sable? Propane?) Slide 9

10 The Big Picture: Unconstrained C2 Supply If WCSB ethane supply is unconstrained by existing ethylene capacity, supply could increase by upwards of 90 mb/d within 5 years. Source: Aux Sable Slide 10

11 WCSB Last Big Ethane Bucket? Alliance Pipeline currently flows over 1.5 bcfd of gas ex-alberta with an ethane content of over 7.4 mol%. This equates to 70 mb/d of ethane contained in the pipeline. With more flows from the Montney and the Duvernay, Aux Sable estimates that the ethane content of Alliance will likely rise to greater than 90 mb/d. While Aux Sable extracts ethane in Chicago today, for delivery to Chicago area ethylene plants, from a desire to diversify markets, Aux Sable has investigated options to extract a portion of this ethane from the pipeline for delivery into other markets. Thus far, no significant scale of ethylene capacity expansion has gone forward in Alberta that would prompt investment in Alberta ethane extraction from Alliance. Slide 11

12 Unconstrained C2 Supply Leaves Plenty of Surplus With the inclusion of Alliance ethane, unconstrained WSCB ethane supply could increase by 150 mb/d within 5 years. Source: Aux Sable Slide 12

13 What Does Ethane Cost in AB vs USGC Ethane sold in Alberta is based on gas value (AECO) plus a fee to cover extraction, transport and frac costs Currently USGC ethane is selling for gas value (Henry Hub) Alberta fees typically exceed the gas price advantage (Henry Hub vs AECO) so that today Alberta ethane is more expensive BUT, if predictions are correct and USGC C2 prices pop up over gas value, the Alberta Advantage may return Fee Premium? Gas Value (AECO) Gas Value (Henry Hub) Slide 13

14 WCSB Market Awash in Propane Dramatic growth of propane production and modest growth of local demand implies increasing propane exports needed from Western Canada With Cochin reversal, options for export include Alliance, Enbridge (in C3+ mix) and rail Various companies are developing export facilities (Pembina, Altagas) to handle increased exports (up to 70 m/d) Until export solutions in place, Edmonton propane will continue to trade at an unprecedented discount to Conway, if not negative WCSB Propane Balances Source: Aux Sable Slide 14

15 Summary Traditional supplies of ethane (straddle and frac plants) continue to provide large stable volume of ethane These traditional supplies are being complimented by new sources of ethane including offgas, imports and potentially ethane from Alliance Propane can also support ethylene expansion potential for an E/P cracker versus traditional ethane purity crackers If timed well, a new E/P cracker could be brought online once USGC ethane prices have jumped up, but potentially still benefit from discounted propane Will anyone step up? When? Where? Slide 15

16 Contact Information Charlotte Raggett CCO and VP Supply and Marketing Slide 16