Aux Sable

CERI Petrochemical Conference |

Charlotte Raggett
CCO & VP Supply and Marketing

Slide 1

9 June 2015

Overview

Slide 2

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

Aux Sable Operations

Slide 3

Where do Ethane Molecules Come From?

Traditional Sources
-

Straddle Plants

Field Spec Plants

-

Volumes have been

increasing with some new
projects (Rimbey, Waterton)

Fractionation Plants
-

Slide 4

Volumes have been

declining with drop in
border gas flows offset
partially by higher ethane
content of gas

Volumes have been

increasing with new field
deepcuts

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

Where Will Ethane Supply Come From?

Straddle Plants (165 mb/d)

Field Spec Plants (25 mb/d)

Vantage (Bakken and SK)

Alliance (30+ mb/d)

Slide 6

Williams and Aux Sable

Imports (30+ mb/d)

Pembina and Keyera

Offgas (10+ mb/d)

Connected to AEGS

Frac plants (70+ mb/d)

Empress and Cochrane

Potential new source

Aux Sables View of WCSB NGL Supply

Aux Sable is more optimistic than pessimistic about gas drilling in the WCSB

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

Slide 7

More gas flows to straddle plants

Field infrastructure will reflect changing NGL values

AB Montney, especially Kakwa region, is extremely competitive versus Marcellus and

Eagleford

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

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

What Does This Mean For Ethane?

Supply Source

Volume
(mb/d)

Straddle Plants

+ 30

Increased unconventional drilling leads to more

exports of richer gas

Field Spec Plants

None

Existing facilities optimized

Frac Plants
Offgas

+ 3-5

Imports

+25

Total

Slide 9

+30

90 mb/d

Comments

Field deepcuts deliver incremental C2+ BUT

volumes will be limited by propane rejection
Potential for incremental offgas ethane
Increased flows on Vantage from the Bakken
and Saskatchewan
Not enough to support a new world scale
cracker need a cushion (Aux Sable?
Propane?)

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

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

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

What Does Ethane Cost in AB vs USGC

Slide 13

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)

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

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

Contact Information
Charlotte Raggett
CCO and VP Supply and Marketing
charlotte.raggett@auxsable.com

Slide 16