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Natural Gas Liquids

Future outlook and


(NGLs) in North America:
West Coast LPG export
Focus on Western
opportunities
Canada
November 13, 2014
Peter Howard
President Emeritus
&
Carlos A. Murillo
Economic Researcher
Canadian Energy Research
Institute
(CERI)
Image Sources: Husky, Pembina, and Lyondellbasell

Relevant Independent Objective


www.ceri.ca

Presentation Outline

About CERI and our work


Upstream: Perspectives on Western Canada Gas Development
Midstream & Downstream: Infrastructure and ongoing investments
NGLs Market Fundamentals: LPG market dynamics and
outlook/opportunities

North American LPG export availability and West Coast opportunity

Opportunities for cooperation


Q&A/Discussion

Image Source: Nova Chemicals

Relevant Independent Objective


www.ceri.ca

Canadian Energy Research Institute (CERI)


Founded in 1975, CERI is an independent, non-profit research institute specializing in the
analysis of energy economics and related environmental policy issues in the energy production,
transportation, and demand sectors.
Our mission is to provide relevant, independent, and objective economic research in energy and
related environmental issues. A central goal of CERI is to bring the insights of scientific research,
economic analysis, and practical experience to the attention of government policy-makers,
business sector decision-makers, the media, and citizens of Canada and abroad.
Our core supporters include the Government of Canada (Natural Resources Canada), the
Government of Alberta (Alberta Energy), and the Canadian Association of Petroleum Producers
(CAPP). In-kind support is also provided by the Alberta Energy Regulator (AER) and the University
of Calgary.
All of CERIs research is publicly available on our website at:

www.ceri.ca
3

Relevant Independent Objective


www.ceri.ca

Our Work:
Current Work (2014 2015):
LNG Update
Canadian Rail System
Electricity Requirements for Oil Sands Industry
Others
Recently Released Reports (2013 2014):

Canadian Economic Impacts of New and Existing Development in Alberta

Oil Sands Environmental Impacts

Natural Gas Liquids (NGLs) in North America: An Update (Parts I V)

Others
Periodicals/Monthly Reports:

Crude Oil Commodity Report

Natural Gas Commodity Report

Geopolitics of Energy (Subscription Service)


Annual Conferences:

Natural Gas Conference (March 2015)

Oil Conference (April 2015)

Petrochemical Conference (June 2015)


4

Relevant Independent Objective


www.ceri.ca

Upstream: Perspectives on Western


Canada Gas Developments

Image from Husky

Relevant Independent Objective


www.ceri.ca

Natural Gas In North America

Alberta

Canada

Images from US Energy Information Administration (EIA), Canadian Centre for Energy Information, and Government of Alberta (GOA)

Relevant Independent Objective


www.ceri.ca

UPSTREAM

NGLs in Canada: Sources and End-Uses


Natural Gas, Crude Oil, and Crude Bitumen

MIDSTREAM

Gas Plant Liquids


(C2, C3, C4s, C5+)

Upgrader/Off-gas plants
Synthetic Gas Liquids (SGLs)
(NGLs/Olefins Mix)

Wellhead or Field
Condensate (C5+)

PROCESSING, TRANSPORTATION, AND STORAGE INFRASTRUCTURE


Ethane (C2)

DOWNSTREAM

Refinery Liquefied
Petroleum Gases (LPGs)
(Primarily C3, C4s)

Propane

Butanes

(C3)

(C4s)

Non-energy Use:

Energy: Retail

Non-energy use

Petrochemical Feedstock
Enhanced Oil Recovery
(EOR)

Commercial/Institutional
Residential
Transportation
Agriculture

Gasoline blending
Petrochemical
Feedstock
Oil sands diluent
Solvent Flood (EOR)

Heating, Other
(left in gas)

Pentanes Plus/
Condensate
(C5+)
Non-energy Use:
Oil Sands Dliuent
Gasoline blending
Petrochemical
Feedstock

Energy: Wholesale (Industrial)


Oil & Gas
Manufacturing
Construction

Non-energy Use
Petrochemical Feedstock
Solvent Flood (EOR)

Relevant Independent Objective


www.ceri.ca

Midstream & Downstream:


Infrastructure & Ongoing
Investments

Image from Veresen

Relevant Independent Objective


www.ceri.ca

NGLs: from Reservoirs to Markets


UPSTREAM (SOURCES)

MIDSTREAM (PROCESSING & TRANSPORTATION)


Transporation
Refineries &
Infrastructure
Upgraders

Crude Oil

DOWNSTREAM (END-USE MARKETS)

Refined Petroleum Products to Markets

Crude Oil &


Condensate

Spec NGLs

~9%
Spec NGLs

Crude Oil & Condensate

Spec NGLs
Fractionators

NGLs Mix
Spec NGLs
Natural Gas

Straddle Plants

~91%
Sales
Gas

Raw Gas

Sales
Gas

Sales Gas to Export Markets


Gas Processing Plants
Images from Canadian Centre for Energy Information, Keyera, Imperial Oil, Inter-pipeline Fund, and US EIA. Figure by CERI

Sales Gas to Local Markets

Relevant Independent Objective


www.ceri.ca

Canadian Midstream Infrastructure:


From natural gas to NGLs to end-use markets
NGLs

Figure by CERI, with data from PenWell MAPSearch

NATURAL GAS

Robust and extensive midstream and


marketing infrastructure in Canada
targeting local and US markets
Large natural gas storage and marketing
hub (AECO-C) with takeaway export
capacity exceeding 15 bcf/d out of Western
Canada
Approximately 700 gas extraction plants
(including over 50 deep-cut facilities) with
over 30 bcf/d of extraction capacity and 15
bcf/d of re-processing or straddle plant
capacity with ability to extract large
volumes of NGLs
Approximately 400 kb/d of NGLs gathering
pipeline capacity to Ft. Sk, ~400 kb/d of
NGLs pipeline import capacity and ~200
kb/d of NGLs pipeline export capacity
Over 1 MMb/d of fractionation capacity at
the field and merchant levels with 300 kb/d
located at Ft. Sk and >100 kb/d in Sarnia
~40 MMb of NGLs storage capacity
Integrated rail and truck NGL loading and
offloading terminals
Ethylene cracking facilities with capacity to
absorb ~300 kb/d of NGLs and produce 11
MMlbs/yr of ethylene derivatives

10

Relevant Independent Objective


www.ceri.ca

NGLs Pipelines and Storage


Boreal

Pipeline
Est. Capacity (kb/d)
Product
Raw Mix Pipelines to Ft. Saskatchewan
Peace HVP System (NGLs)
76 C2+/ C3+
Cochrane-Edmonton (Co-Ed) System
68 C3+
Brazeau NGL Gathering System
57 C2+
Peace LVP System (Condensate)
52 C5+ (Includes Crude)
Northern System
49 C2+/ C3+
Boreal
43 NGLs/ Olefins Mix
Bonnie Glen
33 C5+ (Includes Crude)
Judy Creek
30 C3+
Total Raw Mix Pipelines Est. Capacity
408
Petrochemical Feedstock Pipelines
Alberta Ethane Gathering System (AEGS)
334 Spec C2
Ethylene Delivery System (EDS)
86 Ethylene
Joffre Feedstock Pipeline (JFP)
48 NGLs
NGL Export Pipelines
Enbridge Mainline (Lines 1/5)*
Kerrobert (to Enbridge)
Alliance Pipeline
Cochin Pipeline
Petroleum Transmission Company**
Total NGL Export Pipelines Est. Capacity

NGLs Storage Capacity (MMb)

Ft.
Saskatchewan,
AB
23.0
61%

Kerrobert, SK
2.5
6%

Sarnia/
Corunna, ON
12.4
33%

NGL Import Pipelines


Southern Lights/ Line 13
Mariner West (Late 2013/ Early 2014)
Vantage Pipeline (2014)
UTOPIA Pipeline (2017-18)***
Total NGL Import Pipelines Est. Capacity
*Net of Kerrobert/ **CERI Estimate/ ***Announced

127
124
93
71
27
442

C3+ Mixes
C3+ Mixes
NGLs in Gas
Spec C3/ USMW E/P Mix
Spec C3/ C4

171
48
43
59
321

C5+
Spec C2
Spec C2
Spec C2/ Spec C3

Total: 38 MMb

Figure by CERI, with data from IHS Energy (University of Calgary), AER, BCME, OGJ, SOEP, various industry sources . Logo from Alberta Industrial Heartland Association (AIHA) and City
of Edmonton

11

Relevant Independent Objective


www.ceri.ca

North American Class I Railways and Major Canadian NGL Handling


Facilities and Rail Car Fleet
225

2,000
200

200
176

1,800

183

1,600

175

159

kb/d of LPG

141

1,400
137

129

123
104

102

1,000

100

800
75

600

50

400

25

200

2002

Facility
Redwater
Alberta Diluent Terminal (ADT)
Edmonton Terminal
Rimbey Rail Terminal
Gilby and Nevis Rail Terminals
Sarnia/ St. Clair/ Windsor
Total

Onwer/ Operator
Pembina Pipeline Corporation
Keyera Corp.
Keyera Corp.
Keyera Corp.
Keyera Corp.
Pembina/ Plains

Type
C5+ rail off load facility
C5+ rail off load
C3,C4, C5+ loading/ offloading
C3, C4, C5 loading
C3, C4, C5 loading
C3, C4, C5 loading

Capacity (kb/d)
75
50
34
13
7
45
225

Location
AB NGL Hub
AB NGL Hub
AB NGL Hub
WCSB
WCSB
Southern ON

Facility
NGLs Infrastructure
NGLs Infrastructure
Redwater Rail Cars
Empress/ Sarnia Rail Cars
LPG Railcars
Total

Onwer/ Operator
Altagas Corp./ Petrogas
Keyera Corp.
Pembina Pipeline Corporation
Pembina Pipeline Corporation
Gibsons Energy

Type
NGLs Rail Cars
NGLs Rail Cars
NGLs Rail Cars
NGLs Rail Cars
NGLs Rail Cars

# of Railcars
1,500
1,300
700
300
500
4,300

Location
WCSB/ US
AB NGL Hub
AB NGL Hub
AB NGL Hub/ ON
WCSB/ US

Figure from AAR. Data from industry sources, tables by CERI

1,200

125

# of railcars

146

150

2003

2004

2005

2006

2007

2008

2009

Canadian Propane Exports

Canadian Butane Exports

Total LPG Exports

Estimated # of Railcars required

2010

2011

2012

Total LPG Exports via Rail

In 2012, 2/3 (or 88 kb/d) of all Canadian LPG exports (123 kb/d)
moved via rail (C3/C4 split: 75/25)
All exports to US markets
CERI estimates that about 1,700 pressure-rated tank cars would
have been used to transport those volumes, assuming a two-week
return trip
Rail transport is an important component of the LPG supply chain
in Canada
Going forward, most LPG exports from Canada will move via rail

12

Relevant Independent Objective


www.ceri.ca

NGLs Pipeline and Fractionation Utilization


350

kb/d

300

100%

80%

BC NGL Mixes

70%

Straddle Plants NGL Mixes (Exc. Empress)

60%

250

50%

200
150

Overall NGLs gathering system capacity utilization


increasing over the last few years
While overall system utilization levels are estimated at around
80%, utilization levels at certain systems (i.e., Peace system) are
estimated to be well above 90% and various expansions have
been announced
Pembinas Peace NGL pipeline system expected to expand
rapidly and significantly between 2011 and 2016/17
Keyera is currently gauging producers interest in an
alternative NGLs gathering pipeline system (ALPS) between
Gordondale and Ft. Saskatchewan

C5+/ Condensate

40%

AB Field NGL Mixes

30%

Pipeline Capacity to Ft. Sk.

100

20%

50

10%

(1)

Off-Gas SGL Mixes

90%

0%

Total Liquids to Ft. Sk.


Utilization (%)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

300
268

250
200

237

100%

KFS

95%
227

217

221

216

209
196

190

192

DFS

90%

194

RFS

85%

kb/d

(2) A similar situation is developing around fractionation


plants: utilization increasing
RFS (Pembina), KFS (Keyera), and DFS (Dow) are estimated to
be running at close to capacity while PFS (Plains) utilization
is lower
- Expansion announcements by both Pembina and Keyera
- Higher NGL mix volumes are estimated to be moving
east on Enbridge system to Sarnia fractionator
Expansion of pipelines and fractionation capacity indicates
confidence on increased NGL production/availability in
Western Canada as a long-term sustained trend

150

80%
75%

100

400

450

PFS
Total Ft. Sk. Frac. NGLs

70%
Ft. Sk. Fractionation Cap.

50

65%

60%

Utilization (%)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

RESULT: Multi-year, multi-billion $ expansion of NGLs midstream infrastructure in Alberta. Most pipeline and fractionation investments
are expansions of existing assets, while new gas processing plants will be developed at the field level
Crude oil and condensate storage and transportation logistics infrastructure would also be expanding
Figure by CERI, with data from AER and Pembina Pipelines

13

Relevant Independent Objective


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Midstream and Downstream Investments


(1) The midstream business in AB is dominated by a few large firms.
In 2012, the top 15 companies accounted for 93% of all extracted
spec NGLs
Top third-party midstream players include Keyera Energy,
Pembina Pipelines, Plains Midstream, Inter-pipeline Fund, Spectra
Energy, and Altagas
Other large midstream players are integrated either upstream or
downstream: Shell, CNRL, Husky, Suncor, Conoco, Dow, etc.
(2) Utilization rates for both NGL pipelines and fractionators are high
and expected increases in NGL volumes have led to close to $11
billion (B) in investments on midstream infrastructure (2011
2016/17) (Average $1.6 B/yr)
- A large portion of these investments is in deep-cut gas processing
plants targeting incremental ethane extraction (IEEP)
(3) Meanwhile, close to $4 B in downstream investments have been
announced including ethane and propane based petrochemical
facilities as well as LPG export terminals (2011 2016/17) (Average
$0.6 B/yr)
That is a total of close to $15 B (avg. $2.1 B/yr) in midstream and
downstream investments between 2011 and 2016-17 to monetize
NGLs in Western Canada. Will there be a second wave post-2017?

Figures and Analysis by CERI, with data from AER and Industry Data

Keyera Energy Ltd.


1%
1%
1%
1%
1%
2%
3%

7%

Pembina NGL Corporation


15%

Plains Midstream Canada ULC


Inter Pipeline Extraction Ltd.
Dow Chemical Canada ULC

7%

Spectra Energy Empress Management Inc.

13%

AltaGas Ltd.
1195714 Alberta Ltd.

8%

Shell Canada Energy


Canadian Natural Resources Limited

11%
9%

ATCO Midstream Ltd.


Husky Oil Operations Limited

11%

10%

Suncor Energy Resources Partnership


SemCAMS ULC

ConocoPhillips Canada (BRC) Partnership

Top 15 = 425 kb/d (93% of Total)


Other (87) = 30 kb/d (7%)
Total (107) = 455 kb/d

Spec NGLs

Deep Cut Plants Expansion & New Builds / Straddle Plants/ Co-stream Facilities

$563
5%

$1,785
16%

Other (87)

$2,953
27%

NGLs Pipelines
Other Gas Processing/ NGLs Extraction Facilities (Mainly Shallow Cut)

$1,358
13%

Producer-owned Midstream Divestitures

$1,385
13%

NGLs Fractionation

$2,855
26%

Other Midstream Assets (Storage & Logistics)

Total: $10,899 MM (2011 - 2016)

3
LPG Export Terminals

$900
23%
$1,500
38%

Ethane/ Ethylene Petrochemicals

Propane Petrochemicals (PDH)


$1,550
39%

Total: $3,950 MM (2011 - 2016)

14

Relevant Independent Objective


www.ceri.ca

New Markets for WCSB gas and Required Infrastructure:


Liquefied Natural Gas (LNG) Proposed Projects and Pipelines

Infrastructure requirements for such projects will be significant and costly: Multiple billions of dollars
Required infrastructure includes gas gathering systems, gas processing plants, large-diameter/high-volume
gas transportation systems, gas liquefaction plants, NGLs pipelines, fractionation facilities, storage and
logistics facilities
Table and map from NEB

15

Relevant Independent Objective


www.ceri.ca

Projected Midstream Infrastructure Investments in North America:


2014 2035 (ICF International, 2014: INGAA Study)
(1)

Figures from INGAA study by ICF International

A recently released study by ICF International completed


for the Interstate Natural Gas Association of America
(INGAA) estimates that between 2014 2035 $641 B in
midstream capital expenditures are required in North
America of which about 22% or $139 B are required in
Canada at an average of $6.7 B/yr
(2)
This includes $58 B in natural gas infrastructure (42% of
Canadas total) including gathering and transmission
pipelines, compression, lease, storage, and processing
facilities ,as well as LNG export facilities (avg. $2.8 B/yr)
(3)
Also included are $12 billion in NGLs infrastructure (9% of
Canadas total) including transmission pipelines,
fractionation, and export facilities (avg. $0.6 B/yr)
(4)
The remaining $69 B are allocated to crude oil
infrastructure (49% of Canadas total) including gathering
and transmission pipelines, as well as lease and storage
equipment (avg. $3.3 B/yr)
These estimates might be conservative and the largest share is
likely to occur at the front-end of the projection period (before
2025). The magnitude is by any means very significant and
highlights the capital intensity of midstream infrastructure
investments

16

Relevant Independent Objective


www.ceri.ca

NGLs Market Fundamentals:


Propane/Butanes (LPG) Market
Dynamics &
Outlook/Opportunities

Image from Encana

17

Relevant Independent Objective


www.ceri.ca

Canadian Propane Supply & Disposition


300
250

Total Exports to US
229
217

214

Wholesale

220

220

215

2012 Domestic Demand: 147 kb/d

Non-energy Use

248

244
207

199

Retail

189

200

4%

Statistical Adjustment

2%
4% 3%

8%

Stock Changes
150

46%

kb/d

Imports
Off-Gas Plants

Refineries
Gas Plants/ Fractionators
Total Supply

100
50

Domestic Demand
Total Disposition

S
(50)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

32%
Ontario
Alberta
Quebec
British Columbia
Saskatchewan
Atlantic provinces
Manitoba
Yukon, Northwest Territories and Nunavut

Supply (Grey bars):

About 75% of propane supply extracted at gas plants/ fractionators in Canada, other 25% consists of production from refineries, upgraders,
imports, and stock changes

About 50% of propane extracted in Western Canadas gas plants moves to Ontario as an NGL mix to be fractionated

Increased production of NGLs in Western Canada is being driven primarily by increases in propane production
Disposition (Red bars):

Domestic demand increasing rapidly driven by energy uses in the mining, oil and gas extraction, and manufacturing sectors, followed by increase
propane use as a petrochemical feedstock in Ontario, and increased use for propane in the residential and commercial sectors

In 2012, Ontario (46%), Alberta (32%), and Quebec (8%), combined, accounted for 86% of domestic propane demand

Overall exports to the US have been declining (shrinking LPG market) with the largest drop occurring in regards to exports to the US Midwest
(PADD II), while increased Canadian exports to the US northeast (PADD I) have displaced US overseas propane imports

Majority of exports to the US now move via rail = higher transportation costs

Edmonton prices are the lowest across North America

North America is in an oversupply position and USGC LPG export terminals are acting as a relief valve, keeping prices afloat
Figures and Analysis by CERI, with data from AER, BCMNGD, NEB and Statistics Canada

18

Relevant Independent Objective


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Increasing Demand for Propane in North America = Feedstock Competition


1

Propane Dehydrogenation (PDH) Projects in North America


Location

Company

Start-up Year Output (tonnes/ yr) Output (t/ d) C3 Feed (t/d) C3 Feed (kb/d)

PetroLogistics
PetroLogistics
Dow Chemical
Enterprise

Houston, TX
Houston, TX
Freeport, TX
Chambers Co., TX

United States
2010
2014
2015
2015

C3 Petrochemicals
Formosa Plastics
Dow Chemical
Total US

Alvin, TX
Point Comfort, TX
USGC (TX/ LA)

2015
2016
2018

Williams
Total Canada

Strathcona (AIH), AB

582,400
582,400
682,500
623,350

1,596
1,596
1,870
1,708

2,026
2,026
2,375
2,169

25
25
29
27

582,400
728,000
500,500
4,281,550

1,596
1,995
1,371
11,730

2,026
2,533
1,741
14,897

25
31
22
185

500,500
500,500

1,371
1,371

1,741
1,741

22
22

4,782,050

13,102

16,639

207

Canada

Total North America

2016

(2) High global LPG prices and improved propane netbacks in North
America through an existing arbitrage opportunity have resulted in
various LPG export project proposals/expansions

Including two in the West Coast targeting WCSB LPGs with the
potential to export ~70 kb/d to the Asia-Pacific market

Petrogas/Altagas/Idemitsu (JV) recently agreed to purchase


Chevrons Ferndale, WA LPG import/ export terminal (~30 kb/d)

Altagas indicated this is in addition to their BC coast plans

Pembina has applied for an NEB export license plus made a deal
with the Portland (OR) Port Authority for an LPG export site

Potential future WCSB LPG exports: 90-100 kb/d of WCSB LPG,


primarily C3
Figures and Analysis by CERI, with data from Propane Research Council (PRC) and Industry

(1) Various PDH projects have been proposed in North


America to take advantage of increased C3 availability and to
produce on-purpose propylene as ethylene crackers move to
lighter feeds (reducing co-product yields)

Including a PDH facility in AB (25 kb/d C3 feed) aiming to


attract derivative investors. Williams has indicated the
possibility of building up to two or three PDH plants

Feedstock requirements: 50 75 kb/d of WCSB C3

LPG Export Projects in North America


Company

Enterprise
Targa
Chevron (Acquired by Petrogas)
Other
Total Operating

Sunoco Logistics (Mariner East)


Vitol
Phillips 66
Enterprise (Expansion)
Targa (Expansion)
Sunoco Logistics (Mariner South)
Williams/ Boardwalk
Enterprise (Expansion)
Occidental
Total Proposed US

Pembina Pipeline Corp.


Altagas Corp./Petrogas/Idemitsu Kosan
Total Proposed Canada

Location
In Operation
United States
Houston, TX
Galena Park, TX
Ferndale, WA
Miami, Norfolk, NY,
Seatlle, LA

Start-up Year

n/a
n/a
n/a

3,780
1,764
460

247
115
30

n/a

26
6,030

2
393

600
1,500
2,218
756
1,008
3,024
3,532
3,528
1,150
17,316

39
98
145
49
66
197
230
230
75
1,130

Proposed
United States
Marcus Hook, PA
Beaumont, TX
Baytown, TX
Houston, TX
Galena Park, TX
Nederland, TX
Moss Lake, LA
Houston, TX
Corpus Christi, TX

2014
2014
2014
2015
2015
2015
2016
2016
2017

Canada
Portland, OR
BC Coast

2018
2017

Total Proposed North America


Total Existing + Proposed North America

LPG Export Capacity


LPG Export
(MMgal/ yr)
Capacity (kb/d)

570
460
1,030
18,346
24,376

19

37
30
67
1,197
1,590

Relevant Independent Objective


www.ceri.ca

Butanes Supply and Disposition


160

US Exports

Non-energy Use

140
118

115

120

119

111

123

122
114

Statistical Adjustment

115

103

96

100

96

Stock Changes
Imports
Off-Gas Plants

80
kb/d

(1) Butanes
SUPPLY: Production from gas plants flat.
Refinery LPG production decreasing.
Extraction from synthetic gas liquids is
minimal. Flat import volumes from US

Refineries

60

Gas Plants/ Fractionators

40

Total Supply

20

Domestic Demand
Total Disposition

DEMAND: Domestic refining and


petrochemical demand is flat to declining.
Diluent demand is increasing.

(20)
(40)
2002

2003

2004

2005

2006

2008

2009

2010

2011

2012

120
95

100
80

76

80

98

97

Solvent Flood
95

86

80

Diluent

75

72

65
kb/d

Export volumes to the US decreasing similarly


as with the case with propane. Need to find
new markets such as LPG exports or new local
demand sources such as oil sands solvents

2007

60

Petrochemical

40

Refinery Feedstock

20

Domestic Demand

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Figures and Analysis by CERI, with data from AER, BCMNGD, EIA, NEB, Statistics Canada and Industry Data

20

Relevant Independent Objective


www.ceri.ca

MT BELVIEU ETHANE @ USGC ($/BBL)

MT BELVIEU PROPANE @ USGC ($/BBL)

AB PROPANE @ EDM ($/BBL)

MT BELVIEU BUTANES @ USGC ($/BBL)

MT BELVIEU % OF WTI

Propane Pricing
100%

90%
$100.00

80%
70%

$80.00
$60.00

50%

$/BBL

60%

40%
$40.00

30%
20%

$20.00

10%

0%
Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul

$-

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$12.00

$120.00

USGC - Edmonton Propane Differential ($/bbl)

$100.00

% of Propane Exports via Rail

$10.00

PRICING BAND
WCSB - ASIA PACIFC ARBITRAGE ($/BBL)
AB PROPANE @ EDM ($/BBL)
MT BELVIEU PROPANE @ USGC ($/BBL)
SAUDI PROPANE CP FOB @ ME ($/BBL)
SAUDI % OF CRUDE OIL (BRENT)

60%

55%

$8.00

50%

$6.00

45%

$4.00

40%

$2.00

35%

120%

100%

$80.00
80%

$60.00
60%
$40.00
40%
$20.00
20%

$-

$(20.00)

$-

30%
2002

2003

2004

2005

2006

2007

2008

2009

Data from industry and various data sources. All figures by CERI

2010

2011

2012

0%

Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul

USGC - EDM C3 DIFF ($/bbl)

65%

% of C3 exports moved via rail

$14.00

(1) In North America (NA), prices are set at Mt. Belvieu, TX (USGC).
C3 normally trades at a price range between the price of C2 (floor:
petrochemical feedstock) and butanes (ceiling: fuels market).
Given propanes widespread use in the heating market, weather is
an important pricing factor Across
(2) North American C3 prices: Edmonton trades at a discount to
Conway which in turn trades at a discount to Mt. Belvieu (USGC).
The USGC-EDM differential has widened to reflect increasing
transportation costs as more LPG moves via rail to export markets
(3) Internationally, globally traded prices are set according to the
Saudi contract price (CP), which is highly correlated to crude oil
prices, thus creating a large arbitrage opportunity between
Western Canada and areas served by Saudi CP contracts such as the
Asia-Pacific region

$120.00

PROPANE PRICING RANGE

$/BBL

2002

2003

2004

2005

2006

2007

2008

2009

21

2010

2011

2012

2013 2014

Relevant Independent Objective


www.ceri.ca

Butanes Pricing

1
$180.00

(1) Mixes butanes prices in North America generally trade a price


range between the price of propane (floor: petrochemical
feedstock/fuel market) and crude oil (ceiling: refining/gasoline
market)
(2) Since 2008 prices at Conway have traded at a discount to
USGC, while Edmonton has become a premium market, trading at
premiums to the USGC, Conway, and even Sarnia
(3) Internationally, globally traded prices are set according to the
Saudi contract price (CP), which is highly correlated to crude oil
prices, thus creating a small arbitrage opportunity between
Western Canada and areas served by Saudi CP contracts such as
the Asia-Pacific region
PRICING BAND
AB BUTANES @ EDM ($/BBL)
SAUDI BUTANES CP FOB @ ME ($/BBL)

$140.00

WCSB - ASIA PACIFC ARBITRAGE ($/BBL)


MT BELVIEU BUTANES @ USGC ($/BBL)
SAUDI % OF CRUDE OIL (BRENT)

140%

$160.00

120%

$140.00
100%

$100.00

80%

$80.00

60%

$/BBL

$120.00

$60.00
40%
$40.00
20%

$20.00

0%

Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul

$-

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013 2014

$20.00

140%

$10.00

$120.00

120%

$100.00

$-

80%

$40.00

60%

$(10.00)

$60.00

$/BBL

100%

$80.00

$(20.00)

$20.00

40%

$-

USGC-EDM ($/BBL)
USGC-CONWAY ($/BBL)

$(30.00)

20%

$(20.00)

0%

Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul

$(40.00)

2002

2003

2004

2005

2006

2007

2008

2009

2010

Data from industry and various data sources. All figures by CERI

2011

2012

2013 2014

CONWAY-EDM ($/BBL)

$(40.00)

Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct
Mar
Aug
Jan
Jun
Nov
Apr
Sep
Feb
Jul

$/BBL

PENTANES PRICING RANGE


AB BUTANES @ EDM ($/BBL)
MT BELVIEU PENTANES PLUS @ USGC ($/BBL)
AB PENTANES PLUS @ EDM ($/BBL)
CANADIAN FURNACE OIL (WHOLESALE RACK PRICE) ($/bbl)
EDM % OF WTI

2002

2003

2004

2005

2006

2007

2008

22

2009

2010

2011

2012

2013 2014

Relevant Independent Objective


www.ceri.ca

Propane netbacks example


$80.00

Netback @ Wellhead

$70.00
$60.00

Port to Port Marine Freight


$20
$32

$31

$19

$23

$16

$33
$21

$40.00

Terminal Storage and Loading Fees


$29

$15

Rail to Source Port/ Destination

$20

$5

Pipeline Transport to Destination


$19

$17

$30.00

$14

$17

$17

$17

Japan

China

India

$17

$17
Mt. Belvieu, TX

$14

Sarnia, ON

$14

Edmonton, AB

India

$14

Mt. Belvieu, TX

$14

Via Rail

$14

Via Pipeline

$14

China

$14

Japan

$14

India

Shrinkage Costs/ Heating Value

$14

China

$10.00

Spec Product T&S @ Market Source


NGL Mix T&F

$20.00

Japan

$/bbl

$50.00

$32

$-

WCSB to Asia Pacific via


West Coast

WCSB to Asia Pacific via


USGC

WCSB to Sarnia WCSB to WCSB to


USGC Local
Market

USGC to Asia Pacific

Market Price @ Destination

USGC to USGC to
Sarnia Local
Market

Netback = Price at target market location marketing costs to get the product to market location
Marketing costs include: processing, fractionation, storage, and transportation costs
In the figure above, work from the black dot (market price at destination) and subtract all the marketing costs (green,
orange, and light blue bars) to get to the estimated netback (bright blue bars)
Data from industry and various data sources. All figures by CERI

23

Relevant Independent Objective


www.ceri.ca

World/Asia-Pacific LPG Market

3.5

Asia-Pacific LPG Supply/Demand


3.0
2.7
2.5

3.1

3.1

2.5
2.3

2.8

2.7

Refinery Production

Gas Plant Production

2.9
2.8

Imports

2.6

Statistical Adjsutment

2.3

MMb/d

Res./Comm./Agr., For., & Fish.


Petrochemical Feedstock

2.0

Transportation
1.5

Industrial Use
Transformation Processes

1.0

Industry Own-Use
Exports

0.5

Total Supply
Estimated Domestic Demand

2002

2003

2004

2005

2006

2007

2008

Image from BP. Data from IEA. Figures by CERI

2009

2010

2011

2012

Total worldwide end-use LPG demand in 2012 was


7.7 MMb/, out of which 3.1 MMb/d (or 40% of
total) occurred in the Asia-Pacific region (Japan: 0.6
MMb/d)
Asia-Pacific is fastest growing region in terms of
population, economic growth, and energy-use
Residential/Commercial and petrochemical uses
for LPG are the largest and fastest growing end-use
sectors
Global trade in 2012 was about 2.9 MMb/d or 37%
of total demand
Global trade is characterized by large surplus
volumes available for exports from OPEC countries
and large import requirements from the AsiaPacific region

Large degree of import dependency in AsiaPacific (40% of supply)

Most local supplies from refineries

But refined crude is also imported to a large


extent
Pricing dominated by Saudi contract prices
North American supplies emerging as a new supply
source

24

Relevant Independent Objective


www.ceri.ca

LNG Tsunami Propane Outlook


400

75

77

76

75

76

71

US Imports
Off-Gas Plants

83
89

Refineries

82

CAD Gas Plants

82

95

90

Statistical Adjustment
Stock Changes

Available for US/LPG Exports

81

110

100

117

119

151

128

158

150

205
188

96

198

200

140

kb/d

216 213 218 219

99

228
213

378

369

Non-Energy Demand

81

250

356 362

65

266
246 242 240 243 244

243

79

297 295

84

288

300

71

350

74

339 345
330 330 331 335

Retail Energy Demand


100

Wholesale Energy Demand


TOTAL SUPPLY

50

HISTORICAL/ACTUAL

158
151
140

140

2030

2029

2028

2027

2026

2025

2024

2023

2022

OUTLOOK

180

128

Export to PADD V

Export to PADD IV

Export to PADD III

Export to PADD II

Export to PADD I

West Coast LPG Eports

Pembina: Portland, OR

Altagas/Idemitsu: BC Coast

Petrogas: Ferndale, WA

LPG Export Capacity

Available for US/LPG Exports

119 117

120

110
99
90

96 95
89
82 82

81 81

84

83

79

76 75 76 77
75 74
71 71

2023

100
100

2022

160

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

kb/d
80

65
60
40

20

HISTORICAL/ACTUAL

2030

2029

2028

2027

2026

2025

2024

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

(1) Canadian Propane S/D


Supply:
- Gas plant production fluctuates with overall increasing volumes
(assumes one large BC LNG project recovers C3+ NGLs)
- Off-gas plants production increases
- Refinery LPG production continues to fall
- Assumes UTOPIA pipeline (Marcellus/Utica ON) can bring ~75
kb/d of C3 to Eastern Canada from USNE
Demand:
- Industrial (Wholesale) and Retail demand continue to grow, but
at a slower pace than over the last decade
- Petrochemical demand increases rapidly after 2016 as PDH
plants get built
(assumes 3 PDH plants in Western Canada by 2021)
(2) Exports: Post 2012, an average of 80 kb/d of C3 are available
for exports. (Almost enough to fill three LPG export facilities in BC
and WA the US West Coast)
Upside potential: - Marcellus/Utica ON C3 volumes above and
beyond UTOPIA pipeline capacity
- Wholesale and retail demand could increase at a slower pace
than expected freeing up barrels for export market
Downside risk: - No C3+ extraction from BC LNG projects
- Lower flows from US CAD (price competition and market
optionality) = lower supply available (BIGGEST RISK!)
- Wholesale and retail domestic energy demand could increase at
a faster pace than expected
- Lower supply and higher domestic demand leads to less propane
volumes available for petrochemical facilities and exports

OUTLOOK

25

Relevant Independent Objective


www.ceri.ca

Evolving Propane dynamics in Canada: What is required for West Coast LPG exports?
Eastern Canada

Western Canada

120

Western Canada Propane Supply/Demand

100

250

kb/d

80

89

94 91 91

98
89

96
82

60

72 75

102

96 94

160

90

80
72
44 47

45

56
50 53

60 63

67

71

75

35

20

26

100

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

HISTORICAL/ACTUAL

120
100

80
60

50

Eastern Canada Propane Supply/Demand

140

40

150

40

20

OUTLOOK

Refinery Production
Statistical Adjustment
Available for Exports

90

80

Western Canada Exports to US

83

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

HISTORICAL/ACTUAL

OUTLOOK
Upgrader SGLs
Stocks
Est. Transfers to Eastern Canada

2004

2002

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

HISTORICAL/ACTUAL
Gas Plants Extraction
Imports
Local Demand

2003

OUTLOOK

Gas Plants Etraction


US Imports
Local Demand

Refinery Production
Stocks
Eastern Canada Exports to US

Transfers from Western Canada


Statistical Adjustment
Eastern Canada Supply

70
68

80

Western Canada C3 LPG Exports


79

70
60

30

84

83

79

75 74

71 71

76 75 76 77

65
45

50

42 44

20

70

39

- - - - - - - - - - - - 8

83
75

74

60

26
19

10

90

80

45 45

5 - - - - - - - - - - - -

50

61 59
52

40

49

46
39 38

30
20

44 44

38
26
18

10

OUTLOOK

5 - - - - - - - - - - - -

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

30

20

Eastern Canada Exports to US

90

54

HISTORICAL/ACTUAL

30
10

50

58 58 59

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

50
40

40

100
54

18

HISTORICAL/ACTUAL

OUTLOOK

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

HISTORICAL/ACTUAL

80

OUTLOOK

70
60

76 76 76 76 76 76 76 76 76 76 76 76

Eastern Canada US Imports

kb/d

50

52

40
30

Global/Asia-Pacific
LPG Market

28

20

US Markets

10

2 2 2 2 2 1 0 1 2 4 4 4 4 4 4

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

90

50

kb/d

kb/d

60

kb/d

kb/d

200

180

Est. Transfers to Eastern Canada

kb/d

300

HISTORICAL/ACTUAL

26

OUTLOOK

Relevant Independent Objective


www.ceri.ca

LNG Tsunami Butanes Outlook

kb/d

16

14

13

10

11

12

13

16

Statistical Adjustment
Stock Changes

US Imports

20

16

28

28

101 98

129 131
123 126

Off-gas Plants

25

96

17

111 110 112 112 109


107
28

24

26
28

31

80

117 116 116 117 118 119


20

115

28

36

32

42

96

122
114

111
103

100

123

20

119
24

120

118 115

12

140

Refineries
Total Gas Plants

60
Avaialble for Exports
Solvent Floods/Oil Sands Solvents

40

Diluent
20
Petrochemical
-

Refinery Feedstock
TOTAL SUPPLY

(20)

20022003200420052006200720082009201020112012201320142015201620172018201920202021202220232024202520262027202820292030
HISTORICAL/ACTUAL

45

OUTLOOK

42

Export to PADD V
Export to PADD IV
Export to PADD III
Export to PADD II
Export to PADD I
LPG Exports
Avaialble for Exports
LPG Terminals Spare Export Capacity Available

40
36
35
30

kb/d

(1) Canadian Butanes S/D


Supply:
- Gas plant production fluctuates with overall increasing volumes
(assumes one large BC LNG project recovers C3+ NGLs)
- Off-gas plants production increases
- Refinery LPG production continues to fall
- Assumes flat import levels from US of about 10 kb/d
Demand:
- Refinery and petrochemical demand flat over outlook period
- Demand for C4s as diluent increases slightly
- Increased used of C4s as a solvent in SAGD projects
- (2) Exports: Post 2012, an average of 16 kb/d of C4s are available
for exports (Assumes any spare capacity in LPG export terminals
from C3 will be filled with C4s)
Upside potential:
- Increased levels of US imports
- Demand levels in the refining and petrochemical could fall
overtime resulting in more volumes available for export
Downside risk: - No C3+ extraction from BC LNG projects
- Increased demand from oil sands projects (either as a diluent or
as a solvent) could result in lower volumes of C4s available for
exports

25

32

31

28

28

28 28 28

26
24

25

24
20

20

20

20
17

16

16

16

13 12

15

11 10

12

13

14

10

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
HISTORICAL/ACTUAL

OUTLOOK

27

Relevant Independent Objective


www.ceri.ca

Canadian LPG Export Scenarios


POWER WAVE
120

FULL SPEED AHEAD


120

LPG Export Capacity


Butanes

100

76

80

97 97 97 97 97 97 97 97

Propane

84

Total LPG Exports

85

Total LPG Exports


75
69

76

80

70

65

kb/d

60

58

60

43
40

30

18

20

30

18

20
0

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

HISTORICAL/ACTUAL

OUTLOOK

100

120
97 97 97 97

Propane

100

91

Total LPG Exports

kb/d

50
43
NO LNG PROJECTS

2013

2012

2011

2010

2009

2008

2007

2006

2005

HISTORICAL/ACTUAL

OUTLOOK

HISTORICAL/ACTUAL

2029

2028

2027

2026

2025

2024

2030
2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2004

2003

2023

18

20

2002

2022

30

8
0

2021

43

40

18

20

93

60

45

30

2002

kb/d

60

88 88 90
82 81

69

64
56

88 86

76

80

71

97 95

91

Propane

81

76

40

2020

2019

2018

LPG Export Capacity

Butanes
94

Total LPG Exports


80

2016

OUTLOOK

LNG TSUNAMI

LPG Export Capacity


Butanes

2015

HISTORICAL/ACTUAL

NOWHERE FAST
120

2014

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2003

2002

8
-

47

43
40

2017

kb/d

100

91

Propane

LPG Export Capacity


Butanes

97 97 97 97 97 97 97

OUTLOOK

28

Relevant Independent Objective


www.ceri.ca

Potential North American LPG Exportable Surplus


North American LPG Export Surplus by Type
1,600

1,400

1,400

1,200

1,200

1,000

1,000

kb/d

1,600

800

800
600

400

400

200

200

HISTORICAL
Canadian LPG Exportable Surplus

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

600

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

OUTLOOK

HISTORICAL

US LPG Exportable Surplus

Propane Exportable Surplus

Canadian LPG Export Surplus by Type

Butanes Exportable Surplus

US LPG Export Surplus by Type

250

1,600
1,400

200

1,200

kb/d

150
100

1,000
800

600
400

50

200

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

kb/d

OUTLOOK

HISTORICAL
Propane Exportable Surplus

OUTLOOK
Butanes Exportable Surplus

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

kb/d

North American LPG Export Surplus by Country

HISTORICAL
Propane Exportable Surplus

OUTLOOK
Butanes Exportable Surplus

29

Relevant Independent Objective


www.ceri.ca

Opportunities for Cooperation


Asia-Pacific

Increasing demand for energy


and end-use products

Import dependency on OPEC


countries

Energy security concerns

Supply diversification

Local firms have market


knowledge and expertise

Local firms have the ability to


work as joint-venture partners
with producers and
midstream/marketing
companies from North America

North America/Western Canada

Surpluses above local demand levels are


developing across various energy
commodities including LPG

Need to diversify markets

Proximity to Asia-Pacific market

Existing robust midstream/marketing


infrastructure

Producers and midstream companies looking


for capital to fund growth projects

Midstream companies provide steady and


safe returns with low commodity risk
exposure (depending on commercial
agreements)

There are also opportunities for investment in


value-added (locally)
30

Relevant Independent Objective


www.ceri.ca

Thank you!
Questions and/or
Comments?
Please visit us at:
www.ceri.ca
31

Relevant Independent Objective


www.ceri.ca

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