An assessment of NGL takeaway capacity - Aux Sable Product Markets... · Examining Local and Export NGL Markets: An assessment of NGL takeaway capacity ... (unit train) Pipeline -

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Examining Local and Export NGL Markets:

An assessment of NGL takeaway capacity

and transportation costs

Bakken Product Markets & Takeaway Capacity Congress

Denver, Colorado | January 30, 2014

President & CEO

Tim Stauft

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Overview

NGL Production Volumes vs. Takeaway Capacity

Existing (Planned) NGL Infrastructure

NGL Supply & Demand

Unlocking NGL Value

Conclusions

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Aux Sable Operations

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Channahon NGL Extraction Facility

Extraction: (2) 1.05 Bcf/d extraction trains

Fractionation: C2+: 102,000 bpd

Storage: 200,000 bbls onsite (9 spheres)

170,000 bbls at Monee, Il (underground)

Pipelines: Own and operate NGL Pipelines connecting to local refineries, Enterprise, and ONEOK.

Rail: 16 spot rail rack served by CN 150 Rail Storage Yard Opened

Truck: Propane Loading Terminal at Monee, IL Pipeline connections to ONEOK Truck Loading Terminal

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North Dakota Supply and Takeaway Capacity

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Bakken Crude Forecast vs Pipe Transport Takeaway Capacities

Source: NDIC

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Source: NDIC

North Dakota Gas Production

Current Gas Take Away Options

Williston Basin – approx. 300 MMcfd

Prairie Rose (ASM) – 150 MMcfd

Tioga Lateral (Alliance) – 150 MMcfd

Northern Border and Flare are the remaining options

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Source: NDIC

North Dakota NGL Production Forecast

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North Dakota: Bakken Supply

Palermo Conditioning Plant Prairie Rose Pipeline

Alliance Pipeline

Conditioning Plant

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North Dakota: Bakken

Location of Supply: Bakken Shale Oil/Gas

Transport Source: Gas Gathering systems from wellhead to field extraction,

fractionation and/or “conditioning”

Local Markets: seasonal market for propane, some butane

Regional Markets: a. Liquids rich gas to Chicago via Aux Sable/Alliance

b. C2 to Empress via Vantage (Hess)

b. Propane markets via truck or rail

c. C4/C5+ by rail to Alberta diluent market

d. NGL mix moved to Conway (pipeline via OneOK)

Facilities: 45 kbd Fractionation Capacity (+)

Storage: essentially 0 mmbbls

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North Dakota Gas Processing Capacity

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NGL Takeaway Options

Local Processing (no fractionation)

Oneok Bakken Pipeline with ultimate destination of Conway

Y-Grade truck delivered into Palermo or transloaded onto railcars

Rich Gas through Prairie Rose/Alliance to Aux Sable Liquid Products

Alliance Pipeline high-pressure, dense phase system

Designed to transport dense phase natural gas. Allows for transportation of richer gas streams and NGL injections (up to 1,500 btu/cf)

Transporting NGLs within the gas stream provides for a higher energy value, or heat content, which reduces the volumetric transportation cost

Reduces need for expensive field processing plants

Provides producers with a cost competitive means to access large, transparent, and premium growth markets for NGLs in the U.S. and Internationally.

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NGL Transportation Costs from N.D.

N.D. to Conway: Rail 28 cpg (single car) 21 cpg (unit train) Pipeline - 15 cpg

N.D. to Mt. Belvieu: Rail 39 cpg (single car) 29 cpg (unit train) Pipeline - 24 cpg

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Takeaway Infrastructure

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North American NGL Markets & Supply Areas

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Conway

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Conway

Location of Supply: KS, CO, WY, UT, ND

Supply Logistics: Primarily gathering pipelines from field

extraction plants NGL mix (C2+)

Local Markets: Refiners

Regional Markets: a. C2 Crackers in IA, IL

b. Refiners in IL, IN

c. Propane markets in WI, IL, IN, MI

d. EP, NGL product markets in USGC (MB)

Facilities: no adjacent Extraction Capacity

515 kbd Fractionation Capacity (+)

5 kbd Isomerization Capacity

Storage: ~50 mmbbls

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Alberta

Source: Aux Sable; Various Company Sources

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Alberta: Edmonton/Fort Saskatchewan

Location of Supply: AB, BC

Transport Source: Pipelines NGL mix (C2+, C3+) via Pembina,

Plains, Keyera

Local Markets: Refiners in Edmonton, Petchems in FSK/Joffre,

Regional Markets: Refiners (SK, MT)

Propane markets in AB, BC, SK, US upper Midwest

Heavy oil blending


Storage: ~40 mmbbls

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Sarnia

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Sarnia

Location of Supply: AB, BC, US

Transport Source: Pipeline NGL mix (C3+) via Enbridge

(note: Cochin is essentially zero)

Local Markets: Refiners, Petchems in Sarnia

Regional Markets: a. Refiners in Ontario

b. Propane markets in ON, PQ, MI, US NE

Facilities: 150 kbd Fractionation Capacity (flat)

Storage: ~25 mmbbls

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Marcellus/Utica

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Marcellus/Utica

Location of Supply: Marcellus/Utica Shale gas

Transport Source: Gas gathering, local extraction and fractionation

(focused on C3 and C4+)

Local Markets: PA, OH, WV propane markets, Refiners

Regional Markets: a. Pipeline C2 to Sarnia via Mariner West

b. Pipeline C2/EP to USGC (being developed)

c. Pipeline C2+ to USGC (being developed)

Facilities: 100 kbd Fractionation Capacity (+++)

Storage: ~ 3 mmbbls (C3/C4 underground)

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Chicago

Aux Sable NGL Extraction

and Fractionation Facilities

Alliance Pipeline

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Chicago

Location of Supply: AB, BC, ND

Transport Source: High pressure rich gas via Alliance Pipeline

Local Markets: Chicago Refiners (iC4 for Alkylation,

nC4 for winter gasoline), Lyondell Morris (C2)

Regional Markets: a. Lyondell Clinton (C2)

b. Propane markets IL,WI,IN,MI,OH,PADD IA&B

c. Diluent Market in Alberta (C5+)


10 kbd Isomerization Capacity

Storage: 0.5 mmbbls

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Why Fractionate in the Midwest?

Location of raw gas production

Proximity to salt storage

Local/regional need for one or more spec products

Aggregate NGL mix via pipelines to obtain scale for fractionation facilities

“Straddle” gas to extract NGLs at high gas volume points

Aux Sable-Alliance rich gas system minimizes field extraction in production region, reduces effective cost of gas transport and centralizes extraction/fractionation in a demand location (Chicago)

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Fractionation Capacity

Fractionation

Location

2004

(kbd)

2012

(kbd)

Conway area 400 515

Edmonton/FSK 225 275

Sarnia 150 150

Channahon 85 102

Marcellus/Utica N/A 100

North Dakota 30 45

Total ~900 kbd ~1200 kbd

Source: PIRA, IHS, Various Company

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Drivers of NGL fractionation and Takeaway Growth in the Midwest Location of raw gas production

Local/regional need for one or more spec products

Conversion of existing pipeline infrastructure to move NGL mix to USGC fractionators will result when local markets are saturated

Utilization of the Alliance high pressure, dense-phase system to keep transport costs of gas down

Leverage Aux Sable-Alliance rich gas system to minimize new field extraction in production region and economically expand fractionation in Chicago

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Fractionation Capacity

Fractionation

Location

2004

(kbd)

2012

(kbd)

Estimated

Future Capacity

(kbd)

Conway area 400 515 575

Edmonton/FSK 225 275 325

Sarnia 150 150 150

Channahon 85 102 140

Marcellus/Utica N/A 100 475

North Dakota 30 45 60

Total ~900 kbd ~1200 kbd ~1,700 kbd

Source: PIRA, IHS, Various Company

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NGL Supply and Demand

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NGL Value Still Driving Liquids Focus

Henry Hub and WTI Prices Energy Spread: WTI - Henry

Source: Petral

$-

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

20002001200220032004200520062007200820092010201120122013

US$

/MM

Btu

HH Cash Price WTI @ Cushing

$(2)

$-

$2

$4

$6

$8

$10

$12

$14

$16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US$

/MM

Btu

Energy Spread: WTI-HH

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NGL Extraction Spreads Resilient

Source: OPIS

-50

0

50

100

150

200

250

Jun

-06

Sep

-06

De

c-0

6

Mar

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Jun

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Sep

-07

De

c-0

7

Mar

-08

Jun

-08

Sep

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De

c-0

8

Mar

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Jun

-09

Sep

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De

c-0

9

Mar

-10

Jun

-10

Sep

-10

De

c-1

0

Mar

-11

Jun

-11

Sep

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De

c-1

1

Mar

-12

Jun

-12

Sep

-12

De

c-1

2

Mar

-13

Jun

-13

Sep

-13

De

c-1

3

USc

pg

NGL Extraction Spreads at Mont Belvieu, Texas

Frac Spread Ethane Frac Spread Propane Frac Spread Butane (normal) Frac Spread Condensate

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Average Annual Ethane Prices in North America

Source: OPIS, NGX

*AECO+$5/bbl

**YTD

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

USc

pg

Conway (in E-P) MB (Purity) Alberta*

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Average Annual Propane Prices in North America

Source: OPIS, Government of AB

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

2003* 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013**

Usc

pg

Conway MB (TET) Edm (OPIS) AB Ref Price

*Edm, AB Ref (Jul-Nov 2013) **YTD

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North American NGL Supply/Demand Snapshot: 2012

Source: EIA, NEB, Petral, IHS

C2 C3 C4s C5+ Total

Supply (mmbpd) Gas Plants 1.2 0.8 0.5 0.4 2.9

Refineries - 0.6 0.1 0.0 0.7

Total Supply 1.2 1.4 0.6 0.4 3.6

Demand (mmbpd)

Chemical feedstock 1.2 0.6 0.2 - 2.0

Heating/Commercial/Ind’l - 0.7 - - 0.7

Refinery (Gasoline Blending) - - 0.3 0.1 0.4

Heavy Oil Diluent - - - 0.2 0.2

Other, Net Exports - 0.1 0.1 0.1 0.3

Total Demand 1.2 1.4 0.6 0.4 3.6

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C2 C3 C4s C5+

Supply Direction

Gas Plants UP UP UP UP

Refineries - flat- flat- flat-

Demand Direction

Petrochemical Feedstock UP balance up up?

Heating/Commercial/Ind’l - flat/down - -

Refinery (Gasoline Blending) - - down down

Heavy Oil Diluent - - up UP

Dehydro (PDH/BDH), MTBE - UP ? -

Net Exports - UP up -

Key Trends 1. NGL production up from Gas Plants (“oily” gas focus in shales)

2. Ethane balanced by increased Petchem feedstock demand

3. Propane balanced by increased exports, PDH

4. Butanes balanced by increased exports, MTBE

North American NGL Supply/Demand Trends 2013-2020

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U.S. Gulf Coast

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Mont Belvieu

Conway

Sarnia (2.6 B lbs/Yr)

Fort

Saskatchewan

(2.6 B lbs/Yr)

Chicago

ENTERPRISE

ONEOK

COCHIN

ENBRIDGE

ALLIANCE

PTC Empress

Salt Storage

ENTERPRISE

Cochrane

AEGS

North American Ethylene Plants

Extraction Facilities

Ethylene Plant

Joffre (6.0 B lbs/Yr)

USGC (55 B lbs/Yr)

Clinton (1.1 B lbs/Yr)

Morris (1.3 B

lbs/Yr)

Calvert City (0.4 B lbs/yr)

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World Ethylene Cash Cost Comparison

0

10

20

30

40

50

60

70

Western Canada US Ethane US WeightedAverage

US Coprod. Int.Light Naphtha

US LightNaphtha

West Europe Southeast Asia

US

Ce

nts

Per

Po

un

d

December-12 December-13

US Spot Average Ethylene USGC Delivered Price December 2013 $55.54 cents/pound

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Significant Ethane Demand Growth in US

US Ethane Demand for Ethylene Production (Existing Facilities + Announcements)

Source: Aux Sable, Company Reports

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Global LPG Trade

East of Suez West of Suez

2012 2025

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Propane Netbacks* Today Support US Exports

NWE Margin** (cpg)

12/52/29

Japan Margin** 11.5/52/32

** Margin = Netback less Mt Belvieu average contract price for that month

Source: Waterborne

June 2012/Mar 2013/Dec 2013

Mt. Belvieu Netback (cpg) Japan = 89.79/137.03/156.69 NWE = 90.52/137.70/154.39

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U.S. Propane Export Capacity Growing Rapidly

Historical and Forecast US Gulf Coast LPG Export Capacity

Source: CIBC, Oil & Gas Journal, Company Reports.

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Aux Sable Midstream Operations

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Unlocking Value through Aux Sable via Alliance Pipeline

Aux Sable owns and operates a 2.1 bcf/d world scale extraction/frac plant at the terminus of Alliance Pipeline (Channahon, IL) capable of extracting and fractionating ~100,000 bpd of specification NGL products (ethane, propane, normal butane, iso-butane and natural gasoline)

Aux Sable Canada and Aux Sable Midstream perform supply functions for the Channahon plant and provide a fee-based energy processing infrastructure along the Alliance Pipeline corridor

― Owns Septimus Gas Plants (60 mmcfd) & Septimus Pipeline (operated by Crew)

― Owns and operates the Palermo Conditioning Plant (80 mmcfd) and the Prairie Rose Pipeline (120 mmcfd) in ND

― Offgas processing/fractionation facilities in Fort Saskatchewan, Alberta

― Developed NGL access to end-use markets in US north-east, US mid-west and USGC via pipelines, rail and truck

― Developed capability to offload NGL mixes via railcar from shale plays

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Aux Sable Provides Market Access and Value to Producers & Reliable NGL Supplies Downstream Producers are realizing the value of our services:

CROCCOTA: “Access to United States markets for propane and butane that are larger and more competitive than in Alberta. Avoid the potential oversupply of propane and butane in Alberta”

SUMMIT: “This agreement … allows us to immediately offer our existing and future customers improved natural gas processing economics for their rich associated natural gas production.”

ND GOVERNOR J. Dalrymple: “Aux Sable and Summit Midstream are playing an important role in our ongoing effort to reduce flaring and add value to our energy resources”

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Conclusions

NGL supply continues to grow

The NGL markets in North America continue to be oversupplied. Continued export growth should help balance markets.

Infrastructure has been slow to keep up with rapid growth in production. N.D. takeaway capacity is not keeping pace with production.

Significant takeaway opportunities exist in N.D. and build out should grow with increased demand and supply.

Dense-phase transport provides producers with lower-cost alternatives

Transporting NGLs within the gas stream provides for a higher energy value that reduces the volumetric transportation cost.

Competitive alternative to access large, transparent, and premium growth markets for NGLs in the U.S. and Internationally using existing infrastructure.

Aux Sable provides premium value to rich gas producers

Aux Sable has established a significant presence in North Dakota and is strategically located to capture opportunities presented by associated gas that might otherwise be flared or less efficiently handled through field facilities.

Aux Sable is actively pursuing projects in Canada and the U.S. that will bring incremental NGL to market along the Alliance and Aux Sable footprint.

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Contact Information

Tim Stauft, President & CEO

403.508.5868

[email protected]

Documents

An assessment of NGL takeaway capacity - Aux Sable Product Markets... · Examining Local and Export NGL Markets: An assessment of NGL takeaway capacity ... (unit train) Pipeline -