2013-03-19-internationallpgseminar.pdf

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Canadian Gas and NGL Market Developments

International LPG Seminar, Houston | March 19, 2013

President, Aux Sable Canada

Tim Stauft



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Slide 2

Outline

Who is Aux Sable

Canadian Natural Gas Markets

NGL Supply Fundamentals

Canadian NGL Infrastructure Developments

NGL value drivers

Utilizing the Aux Sable Value Chain

Conclusion



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Slide 3

Aux Sable OperationsA world-class rich gas gathering and processing system bringing value to producers



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Slide 4

Alliance Pipeline and Aux Sable Provide a value added option to field processing to minimize investment/

maximize value



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Slide 5

Canadian Natural Gas Prices Still Depressed

AECO prices lowest in 10 yrs

Storage levels near capacity

in Canada

Gas well completion in

WCSB down

Shale gas development has

altered the supply/demand

balance in North America

Expect gas prices to remain

low for the foreseeable

future, which will continue

to impact marginal gas

production in the WCSB

Source: GLJ



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Slide 6

Alberta Storage Levels



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Slide 7

Gas Wells Completed

Source: Daily Oil Bulletin



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Slide 8

Alberta Field Receipts Down

Source: TransCanada Pipelines



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Slide 9

British Columbia Production Slowing

Source: BC Ministry of Energy, Mines and Natural Gas



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Slide 10

Canadian Gas Exports Continue to Decline

Source: EIA



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Slide 11

Natural Gas Infrastructure Developments

Market shift

Gas from the WCSB faces increasing competitive in traditional Eastern markets

― Trans Canada Mainline Restructuring decision expected soon from NEB

Demand within the WCSB continues to grow – fuelled mostly by growth in oilsands

Natural gas production propped up by NGL prices

A New Hope?

Numerous LNG projects and pipelines have been announced off the West Coast

― Proposed Pipeline projects

TransCanada – 3.4 bcf/d to 7.4 bcf/d (Coastal Link and Prince Rupert Transmission Project)

Spectra – 4.2 bcf/d

KM LNG – 1.0 bcf/d

Three export licenses granted by NEB

Potential NGL exports via west coast LNG but hurdles exist

Role for Canadian Gas in the US

Canadian gas and NGLs continue to be competitive with US markets in the Midwest

& Gulf Coast



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Slide 12

NGLs Critical to Drilling Decisions

March 2012

Raw Gas (C$3.53/mcf)

NGLs = C$2.10/mcf (60%)

Methane $1.42Pentanes+ $0.94

Ethane $0.27Propane $0.31

March 2002

Raw Gas (C$3.84/mcf)

NGLs = C$1.18/mcf (31%)

Methane $2.65

Pentanes+ $0.31

Ethane $0.47

Propane $0.24

Butanes $0.16

Note: Based on March 2012 gas and Edmonton NGL reference prices, netted back to the plantgate,

assuming recoveries of 80% C2, 97% C3, and 100% C4+, from 1100 btu/cf raw gas. Netbacks prices

only, no deduction for field plant extraction and capital costs.

Butanes $XXXX

in Western Canada



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Slide 13

NGL Markets in Western Canada

McMahon/Younger

Judy Creek

Fort SK

Edmonton

West Pembina

Caroline

HarmattanCochrane

Empress

Waterton

AEGS

Alliance

Cochin

Pembina

Enbridge

Ethane (C2) Market

Supply from straddle plants (via AEGS) and

Fort Saskatchewan de-ethanizers (supplied

by field deepcut plants connected to the

Pembina gathering system)

Only two ethane buyers (NOVA & Dow)

who can crack up to 265 kb/d of ethane

Specification ethane (i.e. spec barrels in

Fort Saskatchewan) typically trades at a

gas value plus premium (i.e. AECO NIT

price plus $5 to $7/bbl)

No export capacity (i.e. if disruption at

crackers, C2 must be flared or reinjected

into gas stream/storage)

Ethane can access premium US markets

only via Alliance and Aux Sable

Alberta NGL Facilities



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Slide 14

NGL Markets in Canada

Propane (C3)

Western Canada is a significant net exporter of C3 into mainly space heating and crop drying markets

Pricing typically driven off Conway, KS postings less a discount of 5 to 25 cents per gallon

Expect market to become oversupplied with Kinder Morgan of reversal of Cochin pipeline and conversion to C5+ service in 2014

Potential export via west coast LNG

Butane (fC4)

Field butane is used as a feedstock in the production of iso-octane and as a heavy oil diluent

Pricing is typically based on a volatile discount or premium to Mont Belvieu, ranging from a discount of 2 cents per gallon to a premium of as a high as 20 cents per gallon

Condensate (C5+)

Used almost exclusively as a heavy oil diluent

Pricing based on a differential to WTI that trades daily on NGX

Cochin reversal will add C5+

Southern Lights reaching capacity



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Slide 15

Announced Expansions of NGL Facilities

NGL Pipelines

Pembina announced expansion of 54,000 mb/d to Northern NGL system (old Federated

pipeline) by mid-2015 and 55,000 mb/d on Peace Pipeline to Edmonton by mid-2014

Fractionation

Keyera is constructing a 30,000 bpd deethanizer at its Ft Saskatchewan facility,

additional storage capacity and development of a new brine pond

Pembina expanded its Redwater Fractionator in 2012 by 8,000 bpd, with planned

increase to 73,000 bpd by 4Q2015. Saturn II Expansion of 13,000 bpd by 2015.

Pembina is also in the processes of developing 7 fee-for-service storage caverns, the

first which came into service September 2012.

Fracs will almost certainly require long-term take or pay before facilities proceed

Terminals

Small truck terminal projects underway, mostly crude oil driven

Pembina considering 35,000-40,000-barrel-per-day export terminal BC Export Terminal for Propane



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Slide 16

For Western Canada, Access to U.S./InternationalNGL Markets is Critical

0

200

400

600

800

1000

1200

1400

1600

AB Supply

AB Demand

US Supply

US Demand

Mb/d

(T

housa

nd B

arr

els

/ D

ay)

Rail Exports

Conway

Mt. Belvieu

Chicago

Alliance Pipeline

—— Cochin

—— Enbridge

Edm/Ft. Sask.

Empress

Sarnia

Ethane

NGL Pipelines

Source: Petral, En*Vantage, Aux Sable.

Propane

NGL Markets: Edmonton,

Sarnia, Conway & Mt Belvieu.

Conway & Mt Belvieu are liquid,

have transparent pricing, and

are significant in size.

0

200

400

600

800

1000

1200

1400

1600

AB Supply

AB Demand

US Supply

US Demand

Mb/d

(T

housa

nd b

arr

els

/ d

ay)

+2016 Prodn.

+2016 Imports

+2016

Prodn. +2016

Demand

20122012

20122012

Exports to Canada

on Vantage and

Mariner East

Excess Supply

+2016

Demand

2012 2012

+2016

Exports

Exports on ENB

2012/16

Cochin

Exports to

US 85% of

Supply

2012 Exports

Net Waterborne

Exports 18% of

Supply

+2016 Prodn.

+2016

2012



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Slide 17

Ethylene Value Share: US vs Western Canada

Western Canada US Gulf Coast

Alberta ethane producers enjoy a much lower percentage of the ethylene

value chain than their US counterparts.

Source: Petral and Aux Sable

Feedstock Gas Value

35%AB Petchem Share

50%

C2 Producer Share

15%

Feedstock Gas Value

39%

US Petchem Share

29%

C2 Producer Share

32%



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Slide 18

Efficient, Lower Cost Access to Liquid Markets

Lean Gas

to TCPL

Produce

Raw

Gas

Dew-Point

Plant

(C5+ Extracted)

Rich Gas to

Alliance

Pipeline

Extraction

Premium from

Aux Sable

Alliance Aux Sable

Produce

Raw

Gas

Refrig or

Deepcut

Plant

C3+ or C2+ to

Edmonton

Frac/Market

TCPL / Pembina

Alberta Gas Market

Edmonton NGL Market

Alberta/Chicago Gas

U.S. NGL Markets

C5+ Edmonton

Produce

Raw

Gas

Dew-Point

Plant

(C5+ Extracted)

Rich Gas to

Spectra/TCPL

West Coast LNG

Rich Gas to Asia as LNG

C5+ Edmonton



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Slide 19

Alliance Aux Sable Value Proposition

Provides value directly to producers,

reflective of the market value of their NGLs

Rich Gas Aux SableAlliance

Trading

Pool

Chicago

Gas

Alliance

Receipt Toll

(paid by

producer)

Alliance

Long-haul Toll

(paid by

Long Haul

Shipper)

Aux Sable provides

competitive gas netback

with Alberta market

Aux Sable provides

Extraction Premium

for NGLs



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Slide 20

Summary

WCSB natural gas continues to face challenges amidst shale gas boom

Significant new volumes of NGLs will be produced in North America driven by high

NGL frac spread, low gas prices and rich gas directed drilling activities

Frac spread seems to have structurally shifted to a new higher level, with

temporary weakness as the local and global market absorbs new volumes

Infrastructure investments are required in the filed in Western Canada,

and in Edmonton

Existing infrastructure to premium US NGL markets exists (via Alliance)



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Slide 21

Contact Information

Tim Stauft

President, Aux Sable Canada

1.403.508.5868

[email protected]

2013-03-19-internationallpgseminar.pdf

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