Wave of Midstream Investment Expected to Unleash Tidal ... · PDF fileWave of Midstream Investment Expected to Unleash Tidal ... vs 2.3 mb/d of current NGL production. Fractionation:

Wave of Midstream Investment

Expected to Unleash Tidal Shift in

NGL Supplies

September 21, 2012

Houston Office 700 Louisiana | Suite 1900 | Houston, Texas 77002

London Office 6 Arlington Street | London SW1A 1RE | United Kingdom

Aberdeen Office 22 Waverley Place | Aberdeen, Scotland | AB10 1XP

*Important disclosures appear in Appendix D

Jeff Dietert Managing Director

Head of Equity Research

713.546.7245

[email protected]

Mark Reichman Director

713.546.7236

[email protected]

Julie Coutu Associate

713.546.7279

[email protected]

Jeff A. Dietert | 713.546.7245 | [email protected]

Agenda

2

Executive Summary

Infrastructure Additions in the Midstream Value Chain

Natural Gas Processing

NGL Pipelines

Fractionators

Mont Belvieu

Ethane Crackers

NGL Production Projections

Ethane Supply & Demand

Propane Supply & Demand

Butanes & Natural Gasoline Supply & Demand

Conclusions


Introduction

3

1. Recent NGL supply growth has been substantial.

2. Natural gas processing plant additions will contribute to further supply growth.

3. NGL pipeline capacity additions will ease bottlenecks.

4. Step function in fractionation capacity are expected to contribute to substantial growth in NGL

purity products.

5. We expect NGL supplies to experience robust growth in 2013 and 2014.


Midstream Value Chain

4

2012-2014 Infrastructure Growth:

Natural gas plants: 9 bcfd of capacity additions, +12% vs current 77.4 bcfd of capacity.

NGL pipelines: 1.7 mb/d of new pipelines, vs 2.3 mb/d of current NGL production.

Fractionation: 1.15 mb/d of new fractionators, about a 50% increase in U.S. capacity.

NGL production growth: Growth accelerating to 15% to 20% during 2013-2014.


U.S. NGL Pipeline Additions

5

Source: Various Company Sources, Simmons & Company International.

Project Description Sponsor Capacity kb/d Start-up

West/South Texas

Sand Hills Pipeline Permian to Mont Belvieu DCP Midstream 200 / 350 Q3'13

Enterprise Eagle Ford Eagle Ford to Mont Belvieu Enterprise Products 150 Q4'12

Enterprise Eagle Ford Eagle Ford to Mont Belvieu Enterprise Products 300 Q1'14

West Texas Gateway Winkler Co. to Jackson Co. TX ETP / Regency 200 Q4'12

Justice Pipeline Jackson Co. TX to Mont Belvieu ETP 340 Q4'12

Mid-Continent to Gulf Coast

Texas Express Skellytown, TX to Mont Belvieu EPD/EEP/APC/DPM 280 / 400 Q2'13

Southern Hills Conway, KS to Mont Belvieu DCP Midstream 150 mid-2013

Sterling III Medford, OK to Mont Belvieu ONEOK Partners 193 / 250 late 2013

Marcellus NGL Pipelines

Ranger Pipeline Langley KY, to South Shore, KY MarkWest 45 Q1'12

ATEX Pipeline Marcellus to Mont Belvieu Enterprise Products 125 / 190 Q1'14

Mariner West PA to Sarnia, Ontario MarkWest / SXL 50 Q3'13

Mariner East West PA to East PA MarkWest / SXL 65 2H'14

Rockies (Bakken) to Midcon

Bakken NGL Pipeline Bakken to southern WY ONEOK Partners 60 1H'13

Bakken NGL Pipeline Bakken to southern WY ONEOK Partners 75 Q3'14

Overland Pass Southern WY to Conway, KS OKS/WPZ 60 1H'13

Front Range NGL Pipeline Weld Co. CO to Skellytown, TX EPD/EEP/APC/DPM 150 / 230 Q4'13

Mid-America Pipeline Rockies to Hobbs, NM Enterprise Products 65 Q3'14

Mont Belvieu to Louisiana

Cajun Sibon NGL Pipeline Mont Belvieu to Louisiana Crosstex 70 1H'13

Bakken to Alberta, CA

Vantage Pipeline Tioga, ND to Empress, Alberta Mistral Energy 45 / 65 Q2'13


U.S Fractionation Capacity Additions

6

Source: EIA.

Estimated NGL Production

Ethane Propane N-Butane I-Butane P Plus

43% 29% 8% 8% 12%

Gulf CoastGulf Coast Fractionators PSX 43 90% 39 Q2'12 17 11 3 3 5

Bonnie View Fractionator Southcross Energy 12 90% 10 Jul '12 4 3 1 1 1

EPD Frac VI EPD 85 90% 77 Q4'12 33 22 6 6 9

MidContinentOKS Bushton Fractionator OKS 60 90% 54 Q4'12 23 16 4 4 6

TOTAL 2012 200 180 77 52 14 14 22

Gulf Coast

Sweeny CPChem 22 90% 20 Q1'13 9 6 2 2 2

Cedar Bayou Fractionation NGLS 100 90% 90 Q1'13 39 26 7 7 11

Lone Star ETP 100 90% 90 Q1'13 39 26 7 7 11

Eunice Fractionator XTEX 40 90% 36 1H'13 15 10 3 3 4

EPD Frac VII EPD 85 90% 77 Q4'13 33 22 6 6 9

EPD Frac VIII EPD 85 90% 77 Q4'13 33 22 6 6 9

Oneok MB2 OKS 75 90% 68 Q4'13 29 20 5 5 8

Northeast

Liberty Fractionator De-ethanization MWE 38 90% 34 mid '13 15 10 3 3 4

Liberty Majorsville De-ethanization MWE 38 90% 34 mid '13 15 10 3 3 4

Utica C3+ Fractionator MWE 60 90% 54 Q4'13 23 16 4 4 6

Caiman second train WPZ 30 90% 27 2013 12 8 2 2 3

TOTAL 2013 673 606 260 176 48 48 73

Gulf CoastLone Star ETP 100 90% 90 Q1'14 39 26 7 7 11

Oneok MB3 OKS 75 90% 68 Q4'14 29 20 5 5 8

Northeast

Utica De-ethanization capacity MWE 40 90% 36 Q1'14 15 10 3 3 4

Liberty Majorsville De-ethanization MWE 38 90% 34 mid '14 15 10 3 3 4

Caiman third train WPZ 30 90% 27 2014 12 8 2 2 3

TOTAL 2014 283 255 110 74 20 20 31

TOTAL US ADDITIONS 1,156 1,040 447 302 83 83 125

Capacit

y, kb/d

Utilizati

on %

Volume,

kb/dName, Location Owner, Operator Start-up


Mont Belvieu Infrastructure Additions

7

NGL Pipelines into Mont Belvieu

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2Q

'12

3Q

'12

4Q

'12

1Q

'13

2Q

'13

3Q

'13

4Q

'13

1Q

'14

2Q

'14

3Q

'14

4Q

'14

kb/d

Atex

EPD - EF

Sterling III

Sand Hills

South. Hills

TX Express

EPD - EF

Justice

New Frac Capacity

Mont Belvieu Fractionation Additions

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2Q

'12

3Q

'12

4Q

'12

1Q

'13

2Q

'13

3Q

'13

4Q

'13

1Q

'14

2Q

'14

3Q

'14

4Q

'14

kb/d

OKS MB3

ETP - LS

OKS MB2

EPD viii

EPD vii

ETP - LS

CBF

Sweeny

EPD vi

NGLs - BV

GCF



U.S. Ethane Cracker Additions

8

Name, Location Owner, OperatorAnnual Capacity

MM tpy

Ethane

Consumption

(kb/d)

Start-up

St. Charles, LA Dow Chemical 0.6 35 end 2012

Channelview, TX LyondellBasell 0.2 14 2012

Lake Charles, LA Westlake Chemical 0.1 6 Q4'12

Lake Charles, LA Westlake Chemical 0.1 6 Fall 2014

Midwest LyondellBasell 0.05 3 2013

Chocolate Bayou, TX INEOS 0.2 13 2013

Geismar, LA Williams 0.3 16 Q3'13

Various BASF 0.6 35 Q4'13

La Porte, TX LyondellBasell 0.4 23 2014

Calvert City, KY Westlake Chemical 0.2 12 Q1'14

Expansions, Coversions & Restarts 2.7 163

Baytown, TX ExxonMobil Chemical 1.5 90 2016+

Point Comfort, TX Formosa Plastics 0.8 48 2016+

Ingleside, TX Mexichem / Oxychem 0.5 30 2016

Freeport, TX Dow Chemical 1.5 90 2017

Cedar Bayou, TX Chevron Phillips Chemical 1.5 90 TBA

Beaver County, PA Shell 1.0 60 TBA

Lake Charles, LA Sasol 1.0-1.4 72 TBA

Greenfield Additions 8.0 480

TOTAL Additions 10.7 643



Historical and Projected NGL Production

9

Source: EIA, Simmons & Company International.

kb/d 2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e

Ethane 649 676 709 701 769 869 926 1,003 1,159 1,382 1,438

Y/Y Change 4% 5% -1% 10% 13% 7% 8% 16% 19% 4%

Propane 499 501 507 512 546 586 631 695 801 951 989

Y/Y Change 0% 1% 1% 7% 7% 8% 10% 15% 19% 4%

N-Butane 134 136 128 134 136 155 157 182 212 253 263

Y/Y Change 1% -6% 5% 1% 14% 1% 16% 16% 20% 4%

I-Butane 168 163 176 173 188 187 211 215 244 286 296

Y/Y Change -3% 8% -2% 9% -1% 13% 2% 14% 17% 4%

Pentanes Plus 266 263 263 264 271 277 291 305 349 411 427

Y/Y Change -1% 0% 0% 3% 2% 5% 5% 14% 18% 4%

Total NGLs 1,716 1,739 1,783 1,784 1,910 2,074 2,216 2,401 2,766 3,282 3,413

Y/Y Change 1% 3% 0% 7% 9% 7% 8% 15% 19% 4%


U.S. Ethane Supply/Demand

10


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

mb

/d

Greenfield Crackers

Conversions/Restarts/Expansions

Implied Demand

Supply

kb/d 2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e 2016e 2017e

Gas Plant Production 649 676 709 701 769 869 926 1,003 1,159 1,382 1,438 1,438 1,438

Refinery & Blender Prod. 20 19 20 18 19 20 20 20 20 20 20 20 20

Imports 1 0 0 0 0 0 0 0 0 0 0 0 0

Total Supply 670 695 729 719 788 889 946 1,023 1,179 1,402 1,458 1,458 1,458

Implied Demand 660 707 744 685 807 880 950 950 950 950 950 950 950

Conversions/Restarts/Expansions 50 110 147 147 147 147

New Crackers 151 432

Exports 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Demand 660 707 744 685 807 880 950 1,000 1,060 1,097 1,097 1,248 1,529

Stock Build (draw) 10 (12) (15) 34 (19) 9 (4) 23 120 305 361 210 (71)


U.S. Propane Supply/Demand

11

Source: EIA, Various Company Sources, Simmons & Company International.

Propane Export Capacity

kb/d 2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e 2016e 2017e

Gas Plant Production 499 501 507 512 546 586 631 695 801 951 989 989 989

Refinery & Blender Prod. 540 543 562 519 537 560 552 552 552 552 552 552 552

Imports 233 228 182 185 147 121 158 158 158 158 158 158 158

Total Supply 1,272 1,272 1,251 1,216 1,230 1,267 1,341 1,405 1,511 1,661 1,699 1,699 1,699

Implied Demand 1,229 1,215 1,235 1,154 1,160 1,160 1,202 1,182 1,200 1,200 1,200 1,200 1,200

New PDH Units 70 98 98

Historical Exports 37 45 42 53 85 109 124 124 124 124 124 124 124

New Export Capacity 155 155 155 155 155

Total Demand 1,266 1,260 1,277 1,207 1,245 1,269 1,326 1,306 1,479 1,479 1,549 1,577 1,577

Stock Build (draw) 6 12 (26) 9 (15) (2) 15 99 32 182 150 122 122

Capacity Capacity Capacity Start-up

bbls/hr MB/month kb/d

USGC EPD 6,000 4.00 120 Existing

USGC EPD 6,000 3.50 55 Q4'12

USGC NGLS 5,000 3.00 100 Q3'13

Export

Facility

Owner,

Operator


Butanes and Pentanes Plus Supply/Demand

12

Normal Butane

Isobutane

Pentanes Plus


0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

mb

/d

Implied DemandRefinery & Blender Net InputNet ExportsSupply

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

e

20

13

e

20

14

e

20

15

e

20

16

e

20

17

e

mb

/d

Implied Demand

Refinery & Blender Net Input

Supply

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

mb

/d

Net ExportsImplied DemandRefinery & Blender Net InputSupply


Conclusions

13

1. Midstream infrastructure is experiencing a step-function increase in gas plant, NGL pipeline

and fractionation capacity.

2. NGL production growth is poised to accelerate in 2013 2014.

3. Ethane is expected to experience the greatest oversupply among purity products.

4. The petrochemical industry is expanding capacity to crack ethane, however the pace of

development is limited by the long-lead time associated with greenfield facilities.

5. The Rockies and Midcontinent regional bottlenecks are expected to be alleviated by 2014 due

to increased investment in new NGL pipelines

6. Butanes and pentane-plus products may have difficulty being absorbed into a declining U.S.

gasoline pool, and will likely need to be priced for use in the petrochemical pool or exports.


Q&A

14


Analyst Certification:

I, Jeff Dietert, hereby certify that the views expressed in this research report to the best of my knowledge, accurately reflect my personal views about the subject

compan(ies) and its (their) securities; and that, I have not been, am not, and will not be receiving direct or indirect compensation in exchange for expressing the

specific recommendation(s) or views in this research report.

Important Disclosures:

For detailed rating information, go to http://publicdisclosure.simmonsco-intl.com. Additional information is available upon request. Simmons & Company's

ratings system categorizes individual stock performance as Underweight, Neutral or Overweight relative to the performance of the S&P 500 Index and its discrete

energy sub-sector over a 12 month period. Research analysts compensation is based upon (among other things) the firm's general investment banking

revenues. Simmons & Company International may seek compensation for investment banking services from Kinder Morgan Energy Partners LP,Enterprise

Products Partners LP,Enbridge Energy Partners, L.P.,Energy Transfer Partners, L.P.,ONEOK Partners, L.P.,Williams Partners L.P. and other companies for

which research coverage is provided. The firm would expect to receive compensation for any such services.

Simmons & Company International has co-managed a public offering for Energy Transfer Partners, L.P. in the past 12 months.

Foreign Affiliate Disclosure:

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Appendix D

15

Documents

Wave of Midstream Investment Expected to Unleash Tidal ... · PDF fileWave of Midstream Investment Expected to Unleash Tidal ... vs 2.3 mb/d of current NGL production. Fractionation: