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I am here on behalf of a 160-‐year-‐old building. It is not the biggest old building in Searsport, but I think it is the preBest building in town. It was the Searsport Bank for over 100 years.
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For 8 years it was home to LeI Bank Books. They leI Searsport in June. While the threat of the tank wasn’t the only reason the owners decided to relocate to Belfast, it certainly was the 5pping point. The owners of the bookstore loved the old building and the store and the loca5on with its high traffic poten5al. They had really outgrown the space years ago but endured a liOle 5ghtness on the shelves because of all the aOributes of the building. They didn’t have to wait un5l the tank was built to witness the effects on the business climate in Searsport. As this town was fractured over the promise of a handful of jobs the decision was made for them. Despite years of success, and aOachment to the store, they leI Searsport. If you have any doubt about whether Searsport will become known as “the town with the tank”, with the implied adverse effects we all know will occur, try finding a suitable, long-‐term tenant for the preBest building in town. Know this, Searsport is already known as “the town that is building the tank” and it IS already having a s5fling effect on business. While the tank already affects my business, perhaps to its founda5on, I am also concerned about the physical founda5on of the old bank building. I would invite the members to the basement of my building and have them feel the stacked stone founda5on that has endured 160 years of traffic. You can feel the big trucks go by. An addi5on of thousands of fully laden tankers can only threaten the integrity of Main Street and my founda5on. In fact, the proposed LPG terminal threatens the economic founda5ons of this town, which is one of the many reasons under exis5ng ordinances that the Searsport Planning Board should deny this applica5on.
Truck Rack for LPG
Here is one more very compelling reason. We were told by DCP that the 144 trucks a day that is permiOed was a “theore5cal” number and couldn’t be accomplished because they didn’t have enough truck loading spots, and there wasn’t enough room for them. This is what is separa5ng us from 144 trucks a day:
When it was suggested that their true inten5on was to build an export terminal we were told that it wasn’t technically feasible to receive propane in trucks and that they couldn’t cool the propane. Yet at these hearings in November, DCP, in describing the rail loading opera5ons, said that they could remove the contents of a railcar or tank truck, if there were any ques5on about the conveyance, and cool it separately and return it to the tank. What they described was a receiving opera5on. Don’t forget, their Dr. Raj told us propane slowly evaporates, but cools quickly, it cools itself, so they only need to condense the evaporate, something they have tes5fied they are constantly doing anyway. When I ques5oned their Mr. Baldridge about why they would s5ll green light a project with the current high import prices and economics, I was told it is a vola5le market. When I suggested it was about spreads, he said it was about West Texas Intermediate and Brent crude. Mumbo Jumbo, to be sure, which brings me to the next slide:
It is a vola5le market, but as you see, we have the cheapest natural gas for any consuming na5on in the world.
And, yes, crude oil is vola5le. A $25 or $30 a barrel move, 30%, over 6 months, is vola5le. But the spread isn’t nearly so vola5le. The two types of crude move in tandem, and the spread between
them changes slowly.
*
*
spread
If anything the spread is widening, as U.S. oil supplies con5nue to expand
US Oil Produc5on is the Highest in 15 Years
Just like our natural gas and gas liquids like propane,
They are expected to rise for many years to come.
The processing of both oil and natural gas yield LPG’s. The yield is around 10%. LPG is a by-‐product and it needs to be sold. LPG supply is rising because oil and gas produc5on is rising and
exports are rising as a result. LPG imports are virtually non-‐existent, except from Canada.
There are no water borne imports.
© 2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 19
The U.S. Has Moved from a Net Importer of LPG to Become a Net LPG Exporter
U.S. Imports and Exports of LPG, Thousand Tonnes per Day
• Overall LPG trade was nearly balanced in 2010, but total LPG exports are now higher than imports.
• Waterborne LPG exports have exceeded imports since 2009
0
5
10
15
20
25
30
2003 2004 2005 2006 2007 2008 2009 2010 2011
Canada Imports
Waterborne Imports
Mexico Land ExportsWaterborne Exports
Analysts all agree on the outlook. This is from a presenta5on made to the Board of Directors of the NPGA,
the Na5onal Propane Gas Associa5on last January
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Propane will be exported, not imported
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200 thousand barrels a day of addi5onal propane….That’s 9 million gallons A Day of propane in the USA -‐ 3.285 billion gallons a year to be exported
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Roz Elliot has told us for a long 5me that their LPG will come from the North Sea, while others thought it would be Qatari LPG.
No maOer, we don’t import from there any more, we export to NWE
*
* * * Exports
Prices are from the Oil Price Informa5on Service, OPIS
(c)Copyright by Oil Price Information Service (OPIS), a division of UCG. Reproduction of this report without permission is prohibited. Europe LPG Report is published each business day. OPIS does not guarantee the accuracy of these prices. Pricing/Editorial Office: 800-275-0950. For a limited copyright waiver, call (888)301-2645.
DECEMBER OVERHANG WEIGHS ON NWE PROPANE
(Continued on Page 3)
Table of ContentsOPIS LPG Full Day PricesOPIS LPG Mont Belvieu Snapshot
OPIS Monthly Prices
OPIS Freight Rates & Netbacks
OPIS NWE Propane Forward Prices
OPIS Global Forward Prices
p. 1p. 1
p. 2
p. 2
p. 2
p. 3
Brent Crude Oil ($/bbl)
MAR 108.33 -0.64APR 107.53 -0.69
FEB 109.52 -0.50Month Price Change
WTI Crude Oil ($/bbl)
MAR 92.27 +0.97APR 92.73 +0.92
FEB 91.82 +1.02Month Price Change
ICE Brent Futures at 16:30
Energy Futures at Settlement
31 December 2012
OPIS LPG Full Day Prices ($/mt)
OPIS LPG Mont Belvieu Snapshot ($/mt)
Butane cif ARA (+4,000mt)Propane cif ARA (ToT Cargoes)Location
865.00898.00
Low
869.00902.00High
867.00900.00Mean
-25.00 906.921-10.00 972.105
Change MTD Avg
Butane FOB MedPropane FOB Med
868.00928.00
872.00932.00
870.00930.00
-15.00 903.368-10.00 983.000
Mont Belvieu Non-TET ButaneMont Belvieu Non-TET PropaneLocation
805.21461.74Mean
+7.93 797.676+1.95 413.414
Change MTD Avg
OPIS 30-Day Spot Prices ($/mt)
Calcula5on
Roz said North Sea propane so we will use that. $985 MT FOB. Freight is lower than I had postulated last November, around $25MT, so with insurance, let’s say $1015MT CIF Searsport. That’s $1.95 a gallon. Wholesale propane on the East Coast is $1.09 a gallon. So the loss isn’t as
bad as I originally guessed. It is only 86 cents a gallon, not a dollar. At that rate they only lose $19-‐1/2 million per tank full. That’s $97.6 million a year at your stated
volumes of 5 turns.
Even building the terminal and wai5ng for the markets to come their way is financially untenable. The cost of the terminal is $50 million. The interest alone, at a low 3%, is $1.5 million. Taxes, which they claim will be over $500,000, and other fixed costs like insurance are another 500,000, so at least $3
million a year.
But their opportunity costs are much higher.
North Sea Propane FOB
$985MT
Ocean Freight $25MT
Insurance $5MT
Total CIF Searsport
$1015MT = $1.95/gal
Wholesale price PADD1
$1.09/gal
LOSS $0.86/Gal
DCP’s ROCE was 28% at the end of the third quarter and 30% in 2011. That is how they measure their opportunity costs.
How much can this money make for the corpora5on?
Third Quarter 2012 Conference CallOctober 31, 2012
14
Midstream Overview
Return on Capital Employed
DCP Midstream! "#$%&'()*+%,-./%012
Other Midstream! $-.*'%(/3*/4-'5%'*+674+
8 9:7)67:4*,%:+%://6:7(;*,%:,<6+4*,%=>?%@A9B%(/)-C*%D%:3*':E*%=>?%):&(4:7%*C&7-5*,
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20%
2009 2010 2011 2012YTD
Annualized*
1
If you look at their actual results, as reported by DCP, their year to date Return on Capital Employed is an impressive 28%. So, their opportunity costs on $50 million is really $14 million a year, the minimum amount this money should be earning But, if they Export the calcula5on looks like this:
Wholesale Price $1.09/Gal $567.00MT
Ocean Freight $ 25.00MT
Insurance $ 5.00MT
TOTAL $597MT CIF ARA
Market price CIF ARA
$900MT
PROFIT $303.00MT/ $.582/gal.
Per “tank full” $13,200.00
Per year -‐5 turns $66,000,000
ROCE 88%
o Obviously, if they export their real volume would be much higher. 144 trucks a day, their permiOed level, is 1.44 million gallons a day. The 3 rail spots in their plans can unload at least 75 cars a day; that is another 2.250 million gallons a day. That’s 3.69 million gallons a day. They could fill that tank in less than a week. They could easily manage 3 vessels a month, 36 vessels a year. They could turnover 680 million gallons a year and make $400 million on a $50 million investment. So, lose a minimum of $3 million a year which is really $14 million in their view, just standing s5ll, or make almost a half of a billion dollars a year expor5ng? What would you do?
If you don’t believe me, you might believe them, at least when they are talking to their investors and the stock analysts rather than us.
Last June, Greg Garland, Chairman and CEO of Phillips 66, told financial analysts:
“We consider growth in this area around frac7ona7on, around LPG exports, etcetera, in this space, as we think about this midstream space and growth in that.”
This is what they showed their investors last October:
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Note -‐“Export capability increases…” by 200 to 250 MBPD – thousand Barrels Per Day That is 9 to 11.25 million gallons a day.
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As you can see, DCP told their investors that they are going to increase their LPG exports by 200 to 250 thousand barrels a day. That’s up to 11.25 million gallons a day or 4.1 billion gallons a year. That is almost 8 million tons of addi5onal exports a year, or 175 large, ocean-‐going LPG Tankers. Their proposed mega-‐tank holds around 43,000 Metric tons; a large LPG tanker holds around 45,000MT. That is their stated plan, to export their growing surplus. And when your growth plan is that aggressive, every ½ billion gallons, or 36 vessels full, helps. Think about it, they need 5 new terminals the size of this one just to handle their new exports. I spoke to the Army Corps of Engineers. Once this terminal is built the CORPS would have no jurisdic5on nor review if the applicant wanted to export rather than import. In fact, neither would the Planning Board nor the Town of Searsport. It seems that it would require no more than a no5fica5on to the DEP and Coast Guard. I hope that it is now clear that it is a virtual impossibility that this is an import terminal and a virtual certainty that it is an export terminal. This company exports propane, it does not import it. This is why it maOers.
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It means that DCP misled everyone. The DEP, ACOE, the SPB, all of us. It means we can’t trust anything they say. It means that all of the nega5ve effects you have heard such a great deal of tes5mony on will be much, much worse. That is why they misled us and con5nue to mislead us. Imports are seasonal, they said, when the tourists are gone, and they will lead to energy security and lower prices for Maine. But exports never stop. They aren’t seasonal. They are year round. On wet roads, dry roads, icy roads, foggy roads, roads full of tourists, roads in the gloom of winter’s late aIernoon, or in the pink glow of summer’s night, in the bright sunlight and the dark of night, propane will flow towards Searsport. It means that the traffic impact will be constant, summer and winter, 24/7/365, as 144 full tanker trucks a day head toward Searsport. 288 trucks a day in and out of the terminal, one every 5 minutes. It means that there will be propane accidents on our roads. It means that the effect on our infrastructure will be much worse. It means the costs to the Town will be much higher.
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It means the effects on our businesses, on the jobs lost, on our property values, and on the quality of our lives will be much, much worse. It also means higher prices for Maine propane and greater energy insecurity as our surplus is exported. There is no good reason for this terminal, and every reason, under many of our ordinances, to deny their applica5on. Thank you for your aOen5on. Good luck in your delibera5ons. David Italiaander Searsport Bank Building LLC
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