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Ceri Presentation 2015 Petrochemical conf
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Jordan Cove LNGLNG Development in a Low Oil Price Environment
Vice President, Jordan Cove LNG LLC, Veresen Inc.Vern Wadey
2015 Petrochemical ConferenceJune 7 9, 2015
Certain information contained in this presentation constitutes forward-looking information under applicable Canadian securities laws. Allinformation, other than statements of historical fact, which addresses activities, events or developments that we expect or anticipate may or willoccur in the future, is forward-looking information. Forward-looking information typically contains statements with words such as "may","estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes oroutlook. Forward-looking statements in this presentation include, but are not limited to, statements with respect to: the ability of Veresen torecognize synergies between Ruby and the Jordan Cove LNG project, the cost estimate, timing of, and our ability to successfully obtainregulatory approvals for Jordan Cove LNG and the Pacific Connector Gas Pipeline, the timing of decisions to proceed with construction of, andthe in-service date of Jordan Cove LNG and the Pacific Connector Gas Pipeline and sources of gas supply to feed Jordan Cove LNG and thePacific Connector Gas Pipeline.
The risks and uncertainties that may affect the operations, performance, development and results of our businesses include, but are not limitedto, the following factors: our ability to successfully implement our strategic initiatives and achieve expected benefits; levels of oil and gasexploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price ofcapital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchangeand interest rates; our ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws andregulations; competitive factors in the pipeline, NGL and power industries; operational breakdowns, failures, or other disruptions; and theprevailing economic conditions in North America. Additional information on these and other risks, uncertainties and factors that could affect ouroperations or financial results are included in our filings with the securities commissions or similar authorities in each of the provinces ofCanada, as may be updated from time to time.
Although we believe the expectations conveyed by the forward-looking information are reasonable based on information available to us on thedate of preparation, we can give no assurances as to future results, levels of activity and achievements. Readers should not place unduereliance on the information contained in this presentation, as actual results achieved will vary from the information provided herein and thevariations may be material. We make no representation that actual results achieved will be the same in whole or in part as those set out in theforward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and, except asrequired by law, we do not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of newinformation, future events or otherwise. We expressly qualify any forward-looking information contained in this presentation by this cautionarystatement.
Forward-looking information advisory
2
Publically traded (TSX: VSN) company with a market cap of $7 billion and earnings and cash flow reflecting the reliable, consistent performance of an energy infrastructure business model
Veresen Inc.: A strong and diversified portfolio of energy infrastructure assets
3
Significant Development Activities:
Alliance Re-contracting (50% ownership): Rich gas transportation contracts post 2015 and 2020
Ruby Pipeline (50% ownership): Located to serve California and Jordan Cove LNG
Veresen Midstream (50% ownership): $1.5 billion western Canada gas processing assets. Growth prospects to $5 billion with Encana & CRP (Encana & Mitsubishi)
Jordan Cove LNG and Pacific Connector:Strategic infrastructure to export Canadian and U.S. natural gas supplies to Asia
Jordan Cove LNG Project Management Team, with significant LNG experience, led by Betsy Spomer, President and CEO of Jordan Cove LNG
Creation of a world-class LNG project management team
O&M Suitable O&M plan and structure Comprehensive O&M service agreement to the Project LNG/Cryogenic experience and hiring plans Training and handover procedures from the EPC
contractor
Customers/Commercial Agreements Optimal customer credit quality and mix Financeability of commercial agreements Appropriate risk sharing
Financing and Execution Target appropriate capital/markets for
the Project
Develop financing plan based on Project specifics
Full preparation of materials / financial modeling required
Regulatory Compliance with all relevant permits Review of regulatory strategy to ensure no
permitting delays with the development
EPC LNG and facility technology reviewed
and approved
Appropriate EPC contract form (Performance wrap LDs, contractor liquidity, etc.)
Ability of EPC contractor to provide security package and deliver project
4
Design capacity of ~1 Bcf/d for 6 mtpa LNG terminal requirements expandable to 1.5 Bcf/d (later date)
232-mile, 36-inch diameter pipeline (1,440 psig MAOP)
Ownership: 50% Veresen; 50% Williams
Terminal and pipeline facilities filed for construction with FERCJordan Cove LNG: project components
6 mtpa facility (phase 1) expandable to 9 mtpa (later date)
400+ acre site includes: marine facility; two 160,000 m3 LNG tanks; four 1.5 mtpa liquefaction trains; two gas treating facilities; and, 420 MW power plant.
Ownership: 100% Veresen
Terminal: Jordan Cove LNG Pipeline: Pacific Connector
Power PlantLiquefaction
5
Gas supply sourcing from both Canada and the United States
IDAHOOREGON
NEVADA
UTAH COLORADO
WYOMING
RUBY PipelineCheyenne Plains
OPAL Hub
MONTANA
Powder RiverBig Horn
Wind River
Denver / Julesburg
Piceance
Green River
Uinta
Raton
USRockies Basin
WIC
CIG
A L B E R T ABRITISHCOLUMBIA
SASKATCHEWAN
KingsgateBorder Point
TransCanada
Fortis
CALIFORNIA
PG&E
GTN
Spectra
Pacific Connector
Jordan Cove
AECO HUB
Malin Hub
AlbertaDeep Basin
Duverney
Horn
Alberta / SaskBakken
Cordova / Muskawa
BC / AlbertaMontney
Existing infrastructure accesses Western Canada Sedimentary Basin and U.S. Rockies
Flexibility in gas purchases Use of marketing and trading
companies Sourcing gas supplies by electronic
trading platforms Change and alter gas purchases /
sources at any time Contract purchase with producers JV for gas reserves in the ground
Western Canada Basin
Gas supply diversification and existing pipelines are Jordan Coves most unique benefits
Source: Veresen map files
6
AEGS is a significant service provider to the Alberta petrochemical industry
Jordan Coves benefit to Western Canada and the Alberta Petrochemical industry
7
Retains use of Western Canadas significant, existing natural gas infrastructure Promotes efficient use of gas gathering and
processing, field NGL extraction, significant regional gas pipeline systems
Maximizes use of the NGTL west transmission system and west straddle plants
Encourages natural gas production Gas flows through the west-leg delivery
system, for use at Jordan Cove LNG, contributes upwards of an incremental 20,000-25,000 bbl/d of ethane feedstock to Albertas petrochemical industry at Fort Saskatchewan and Joffre
LNG is outpacing global gas industry growth and justifying new, large scale capital expenditures
Globally, natural gas is becoming the dominant energy
8
0%
5%
10%
15%
20%
25%
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
International trade ~ 31%
Source: Actuals: BP Statistical Review of World Energy 2014 Outlook: Wood Mackenzie (2015)
69%
21%
10%
LNG as a share of Global Gas (%)450 MTPA Projected by 2025
2013 Global GAS consumptionApproximately 323 Bcf/d
Global shares of primary energy %
LNG
PipelineDomestic
consumption
Gas
Global LNG buyers seeking new, reliable, price competitive, LNG sourcesPlentiful amounts of natural gas, sourced from all regions of North America
Source: Geological base map by PacWest Consulting9
Multiple facilities proposed within North America.
Source: FERC website and B.C. Government website
Jordan Cove
10
Elba Island
Cove Point
Lake Charles LNGTrunkline LNG
1.) Listed by BC Government; 2.) Potential, Proposed, or Approved by FERC
Cheniere Sabine PassGolden Pass
Next Decade LNG
Magnolia LNG
Cameron LNG
SCT&E LNGVenture Global
Gasfin LNGWaller LNGG2 LNG
Cheniere Corpus ChristiGulf Coast LNG
Pangea LNG
Texas LNG
EOS / Barca LNGAnnova LNG
Live Oak LNG
CE LNGGulf LNGFreeport
Port LavacaRio Grande LNG
Port Arthur LNGAnnova LNG
Discovery LNGSteelhead LNG
Oregon LNG
WesPac LNGWoodfibre LNG
Orca LNG
Pacific NW LNGPrince Rupert LNG
Aurora LNGGrassy Point LNGNew Times LNG
Watson Island LNGWCC LNG
Kitimat LNGDouglas Channel LNG
Cedar LNGLNG Canada
Kitsault LNGStewart Energy LNG
TOTAL Proposed in Canada: 53.7 Bcf/d
Repsol LNG
Bearhead LNGGoldboro LNG
TOTAL Proposed in U.S.: 39 Bcf/d
Louisiana LNG
Main Pass LNGTorp LNGDelfin LNG
Downeast LNG
In the United States Regulatory approval, developers at-risk dollars, and existing pipeline infrastructure are key drivers:
Community acceptance and local land use permits FERC and DOE (and all other related permits and licenses) -- 5 year process FERC FEIS must be issued before U.S. DOE will consider non-FTA export application At least $70 - $100+ million at risk, per application, to reach FEIS
U.S. 3 5 year construction build after 5 year regulatory process
In Canada Social License and Economic viability issues are key drivers:
Community acceptance and local land use permits (community and First Nations) Extensive promotional and resource support by BC Government
Social license issues First nations, tax, environmental and political subjectivity Facility capital costs must be in line with global competitiveness 5 year construction build after 4 5+ year regulatory, social license process
Regulatory approval and construction timeline is at least 8 10+ years!Timeline reality for first LNG group -- prior to 2021
11
Tolling models provide a direct connection to North American gas prices and provide customers with both commodity control and destination flexibility
Asia Pacific Buyers are attracted to the characteristics and price of U.S. tolling models
Pacific Connector Gas Pipeline
Jordan Cove LNG
Gas Marketing / Transportation and
Distribution
Regasification/ Pipeline / Gas Storage
LNG Transportation / Interim LNG Storage
Gas Production & Gas Sales / Marketing to
liquid Hub
Pipeline / Liquefaction / LNG Storage / Customer
Capacity
Traditional LNG JCC or Sales & Purchase Agreement price
12
Tolling arrangements lock in the cost of infrastructure about 60% of overall costs are locked-in, with only gas commodity costs floating Traditional JCC and / or LNG Sales Agreements have 100% of infrastructure and commodity costs floating
with oil prices
Control over gas purchase and pipeline transportation strategies supply diversification (Henry Hub, Opal, AECO)
U.S. Gulf Coast brownfield tolling models have set LNG price targets for the first wave of LNG from North America before 2021
LNG delivered to Japan, at approximately $10.25 $10.75/MMBtu, based on $4 Henry Hub Gas LNG clearing price is based on U.S. / Canadian commodity gas price, pipelines, liquefaction infrastructure
cost, and cost of shipping to Asia regas facility
0.00
2.50
5.00
7.50
10.00
12.50
15.00
17.50
20.00
22.50
2011 2012 2013 2014 2015 2016 2017 2018
JCC Malin Hub Asia spot
AECO and OPAL gas prices, via Jordan Cove, are very competitive with USGC LNG pricing alternatives
Liquefaction tolling model infrastructure is priced independent of traditional JCC oil-linked LNG pricing
Source: Wood Mackenzie, ICIS, Poten & PartnersNote: Japan shown as example destination
$100
$80
$60U.S. LNG delivered cost to Japan, based on current$2.50/MMBtu gas cost at
Malin HubFuture Cost of Malin Hub Natural Gas???
Future Cost of JCC oil-linked LNG prices???
?
?
Malin Hub gas cost
Asia Spot LNG
JCC LNG cost
Del
iver
ed L
NG
into
Tok
yo B
ayU
S$/M
Mbt
u
13
Shipping distance and logistics from the U.S. west coast is a competitive advantage over the U.S. Gulf Coast
USGC LNG~9 shipping days to Europe
Source: Terminal websites, DOE; Japan as comparative market
~9 shipping days to Asia(4300 nmi)
~9 shipping days to Asia
USGC LNG~22 shipping days to Asia (9200 nmi) plus Panama Canal Costs
Prince Rupert / Kitimat
GTN
Ruby Pipeline
TransCanada Alberta
Kingsgate
Spectra / Fortis
Malin Hub
Australia LNG~7 to 9 shipping days to Asia(3100 - 4300 nmi)
Jordan Cove
Pacific Connector
AECO Hub
14
Opal Hub
Jordan Coves LNG shipping advantage offsets slightly higher capital costs versus U.S. Gulf Coast brownfield sites
Jordan Coves capital cost estimates rank well with other global LNG facilities
Source: Gas Strategies
Jordan Cove
15
A handful of large-scale LNG export facilities will be in-service prior to 2021
Cove Point
Source: Terminal websites, DOE; Japan as comparative market
Cameron
Sabine Pass
Freeport
BC west coast LNG Developments
Jordan Cove
16
Corpus Christi
Post 2021, economic expansions of these facilities are likely (DOE study examining 12 20 Bcf/d export limit )
LNG export capacity from Canada and U.S. in 2021: 11 13 Bcf/d
?
www.vereseninc.com www.jordancovelng.com
Thank you!
Vern WadeyVice President, Veresen
+1 403 213-3639vwadey@vereseninc.com
Jordan Cove LNGLNG Development in a Low Oil Price EnvironmentForward-looking information advisoryVeresen Inc.: A strong and diversified portfolio of energy infrastructure assetsCreation of a world-class LNG project management teamJordan Cove LNG: project componentsGas supply diversification and existing pipelines are Jordan Coves most unique benefitsJordan Coves benefit to Western Canada and the Alberta Petrochemical industryGlobally, natural gas is becoming the dominant energyGlobal LNG buyers seeking new, reliable, price competitive, LNG sourcesMultiple facilities proposed within North America.Timeline reality for first LNG group -- prior to 2021Asia Pacific Buyers are attracted to the characteristics and price of U.S. tolling modelsLiquefaction tolling model infrastructure is priced independent of traditional JCC oil-linked LNG pricingShipping distance and logistics from the U.S. west coast is a competitive advantage over the U.S. Gulf Coast Jordan Coves capital cost estimates rank well with other global LNG facilitiesA handful of large-scale LNG export facilities will be in-service prior to 2021Thank you!
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