canadian ngls outlook: “awash in liquids” ngls outlook_wbpc may 2016.pdfit is estimated that...
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Canadian NGLs Outlook: “Awash in Liquids”
Canadian Energy Research Institute
Dinara MillingtonCanadian Energy Research Institute
24th Williston Basin Petroleum ConferenceMay 24-26, 2016
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Canadian Energy Research Institute
Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, non-profit research institute specializing in the analysis of energy economics and relatedenvironmental policy issues in the energy production, transportation, and consumptionsectors.
Our mission is to provide relevant, independent, and objective economic research ofenergy and environmental issues to benefit business, government, academia and thepublic.
Our core supporters include the Canadian Government (Natural Resources Canada), theGovernment of Alberta (Alberta Energy), and the Canadian Association of PetroleumProducers (CAPP), Chemistry Industry Association of Canada (CIAC), Alberta’s IndustrialHeartland Association (AIHA), and the University of Calgary. In-kind support is alsoprovided by the Alberta Energy Regulator (AER) and Petroleum Services Association ofCanada (PSAC).
All of CERI’s research is placed in the public domain and can be accessed via our websiteat www.ceri.ca .
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Agenda
Introduction
Supply and Demand Outlooks: Ethane Propane Butane
Key Uncertainties
Market Dynamics
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NGLs
Raw natural gas recovered at a wellhead is comprised primarily of methane, but often contains other hydrocarbons and some contaminants. These other hydrocarbons, NGLs, consist of ethane, propane, butanes and pentanes plus.
NGLs are an important component of the Canadian energy mix:
Ethane is an essential feedstock for the Canadian petrochemical industry.
Propane is used for space heating in the residential and commercial sectors, and is exported in significant quantities to the U.S.
Butanes have various petrochemical applications and are used to produce refined petroleum products.
The majority of pentanes plus is also used as a blending component for heavy oil and bitumen.
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NGLs
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Ethane Supply & Demand Outlook: Western Canada26
3
255
236
251
263
276
303
268
231
214
254 29
8 281 26
5
275 26
6 321
321 40
6 372
377
378
400
412
428
453
468
486
503
530 530 530 541 561 565 559 524 490 484 508 556 568 595 607 627
685 684 767
825 826 829 841 850 867 894 915 935 956
0%
10%
20%
30%
40%
50%
60%
70%
-
200
400
600
800
1,000
1,200
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
WCSB Ethane Recovered (Western Canada + Alliance/Aux-Sable) Bakken Ethane on Vantage
Potential Ethane Left in Gas/Extracted in Other Markets Total Ethane Avaialble to Western Canada
Western Canada Derivative Capacity % of Ethane Recovered
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Add’l Ethane could be extracted in Western Canada
It is estimated that only 52% of all C2 available to Western Canada (WCSB+ Bakken) is extracted. That means about half of the available ethane isbeing left in the gas stream.
Outlook indicates that percentage will fall below 50% by 2030.
Most ethane availability growth to come from BC gas (LNG projects).
US ethane rejection economics hurts Bakken producers the most. AB is aviable alternative C2 market Future Vantage pipeline expansion opportunity
More C2 could be extracted in the WCSB via gas streaming/new straddleplants/LNG C2 extraction. Ethane availability is not the issue, extraction andend-use infrastructure is.
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Ethane Supply & Demand Outlook: Eastern Canada
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10
20
30
40
50
60
70
80
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
Mariner West: Marcellus/Utica Imports
Cochin: Conway E/P Imports
C2/C2=(C2eq.) Cochin Transfers
Total Eastern Canada Supply
Ontario Derivative Capacity (Ethane Req.)
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Propane Supply & Demand Outlook15
8
140
151
128
119
117
110
102
83
76
69
74
75
74
69
75
87
103
103 116
115
108
103
101
98
96
92
88
88
243 213
228 216 213 218 219
199 189 199 216 226 219 222 230
259 286
317 333
362 365 364 365 368 371 376 378 381 389
-
50
100
150
200
250
300
350
400
450
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
CAD Gas Plants Refineries Off-Gas Plants US Imports
Stock Changes Available for US/LPG Exports Total Domestic Demand TOTAL SUPPLY
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Butane Supply & Demand Outlook42
36
32
31
28
24
26
28
58
26
25
18 39
35
36
34
35
33
33 50
47
45
41
38
36
35
35
35
36
118 115 111
96 103
119 123 114
156
121
97
111 121 118 120 123 126 125 127
147 147 148 146 145 146 147 148 150 151
(20)
-
20
40
60
80
100
120
140
160
180
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
Total Gas Plants Refineries Off-gas Plants US Imports Stock ChangesStatistical Adjustment Avaialble for Exports TOTAL SUPPLY Domestic Demand
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Key Uncertainties1. NGLs are a by-product of natural gas production, and NGL supply is
sensitive to Canadian natural gas supply uncertainties. 2. NGL content varies between geological formations, the mix of natural gas
sources also has an impact on future NGL supply.3. North American NGL markets have changed considerably in recent years,
with rapidly increasing natural gas production in the U.S. leading to increased NGL supply.
4. Future prices of propane and other NGLs will impact the economics of targeting liquids rich natural gas plays and represents an uncertainty for NGL production.
5. Uncertainty regarding the timing and magnitude of West Coast LNG projects will affect western Canadian natural gas production, and thus NGL production.
6. Prolonged low crude oil prices could result in the delay of new projects and expansions in the oil sands, thus reducing demand for diluent.
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Market Elements and Dynamics
Canada has vast and diverse natural gas and NGLs resources, and thecountry is consistently ranked as one of the best jurisdictions for doingbusiness across the world.
Canada is one of the largest producers of natural gas and NGLs on a globalscale.
Western Canada accounts for the majority of natural gas/NGLs production, with Alberta being the largest producer in the country.
The shale gas revolution in North America has resulted in a series of eventsthat has led to a situation of increasing availability and production of NGLsin Canada.
Canada maintains an extensive, robust, and integrated set ofmidstream infrastructure assets that connects producers in WesternCanada to end-users and markets across the continent.
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Canada’s petrochemical industry is primarily based on the productionof olefins and its derivatives, and uses NGLs as its primary feedstock.
Canada’s largest petrochemical cluster is located in Alberta.
Recent and ongoing investments in midstream and downstream assetsindicate market players’ confidence in increased long-term availabilityof NGLs in Canada.
LNG represents a significant opportunity to diversify markets forCanadian natural gas, holds the potential for large investments ininfrastructure, but also large-scale increases in NGLs extraction.
Given the outlook for natural gas and ongoing dynamics in NGLsmarkets in Canada, NGLs are expected to increasingly be availablein surplus to local demand volumes over the long-term.
Market Elements and Dynamics (cont’d)
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Market Elements and Dynamics (cont’d)
Industry players are looking for ways to monetize these NGLs via the expansion of existing industries (such as petrochemicals) orexports to markets in the Asia-Pacific region.
Global energy pricing dynamics have resulted in sustained lowfeedstock prices for petrochemical producers in North America,even more so in Canada.
Open access to a large resource base, a business and investor-friendly environment, increasing NGLs availability, ongoinginfrastructure investments, and low feedstock prices, present anopportunity for investment in Canada and Alberta across thevalue chain
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Thank you!
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