NASD Summer Conference
North American Shale Supply and Demand Trends Charles Nevle, Manager Energy Analysis June 7, 2013
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2
What Bentek Studies
North America: Natural gas, crude oil, LNG, NGLs, power and infrastructure Europe: Natural gas, LNG, power and infrastructure Globally: LNG and infrastructure 3
Ket Takeaways • The shale boom for natural gas, NGL’s and oil continues • Power Generation and Industrial Demand gain market • LNG creates an outlet for growing U.S. supply of gas • Mexican gas demand continues to grow • NGL growth requires significant infrastructure development • Crude oil production growth pushes out imports • Significant investment in new infrastructure required 4
Big Ticket Infrastructure Growth • Natural Gas – – – – –
Pipelines Power Plants Processing Plants LNG Export Terminals GTL Plants
• NGL’s & Petrochem – – – –
Pipelines/Rail Fractionators Steam Crackers, PDH Units Export Terminals
Production Growth 2012 -2018 Natural Gas NGL’s Oil
25% 71% 49%
• Oil – – – –
Pipelines/Rail Condensate Splitters Rail Refined Product Export Terminals 5
$/MMBtu Equivalent
Shale Has Created Opportunity for Investment $30.00
$30.00
$25.00
$25.00
$20.00
$20.00
$15.00
$15.00
$10.00
$10.00
Value Gap $5.00
$5.00
$0.00
$0.00
CAPP
WTI
HH
MB NGL
Brent
Source: ICE, EIA as of 4/17/13
6
Natural Gas Trends
7
Long Term Holds More of the Same
Supply 100.0
Bcf/d
80.0
Demand
Exports
16.1
60.0
2.9
40.0
-1.9
20.0
2.0
3.1
4.1
2.1
-0.3
-
2010
2012
2014
2016
Changes in Bcf/d from 2012 to 2018
2018 8
Gas Production Growth Driven by Shale Plays in Texas & Northeast Markets 90.0 • Production is expected to rise over 16 Bcf/d, or 25%, between 2012 and 2018.
80.0 70.0
Bcf/d
60.0 • The Northeast and Texas lead the growth (7.9 and 5.1 Bcf/d).
50.0 40.0
30.0
• Drive to NGLs and Oil heavy areas are driving the geography of gas production.
20.0 10.0 -
NE
SE
TX
MCP
MCM
ROX
SW
9
Power Gen and LNG Exports Lead Demand Growth in U.S. Over Next 5 Years 90 80
Demand Growth 2012-2018
70
30
Bcf/d 2.9 3.1 2.0 0.2 4.1 2.1
Type Power Gen Res/Com Industrial Pipe Loss LNG Exports Exports to Mexico
20
14.3
Total
Bcf/d
60 50
40
10 0
RES/COM
INDUSTRIAL
PIPE LOSS
POWER
Exports to Mexico
LNG EXPORTS
10
Evolution of Power Sector Development By Region Through 2018
In US, nearly 14 GW of new gas under construction, in the face of 28 GW of coal retirements.
14 GW at 50% Utilization and 7.5 Heat Rate = 1.26 Bcf/d of new gas demand.
Source: BENTEK North American Power Plant Databank
US Industry Expansion
U.S. Industrial Sector Projects Regional Demand Region
Southeast Midcon Market Northeast Texas Midcon Producing Rockies Southwest Pacific Northwest To be determined Total U.S. Demand (MMcf/d) by sector
Chemical Industrial
Metals
Total Petroleum Projects
1,004 1,082 107 539 232 0 0 0 0 108
49 45 26 4 7 62 0 0 0 112
41 31 0 2 0 0 0 0 0 48
1,311 0 165 198 0 0 0 8 0 31
2,964
193
74
1,682
112 60 52 40 20 6 3 2 3 298
Estimated Demand (MMcf/d)
2,405 1,158 298 743 239 62 0 8 0 4,913
Projects from December 2012 through year-end 2018 Source: US Industrial Demand Tracker
12
Big Business: Gas-To-Liquids U.S. Gas-to-liquids Projects Project
Owner
Location
Calumet GTL Calumet Specialty Products Karns City (PA) Clean Energy Center Marcellus GTL Duncansville (PA) Mississippi Liquids Project EmberClear GTL Natchez (MS) Pennsylvania Liquids Project EmberClear GTL Pottsville (LA) G2X Energy / EMRE G2X Energy Lake Charles (LA) Westlake GTL Sasol Westlake (LA) Gulf Coast GTL Royal Dutch Shell Louisiana TBD Carbon Sciences TBD Total U.S. With a GTL project, 10 Mcf of natural gas typically equals 1 barrel of product.
Source: US Industrial Project Tracker
Region Northeast Northeast Southeast Northeast Southeast Southeast Southeast Southwest
Estimated Demand In-service (MMcf/d) 10 2014 16 2015 121 2016 121 2016 125 2017 835 2018 1,400 2019 n/a n/a 2,628
13
U.S. Shifts To Net Exporter in 2017 U.S. Supply/Demand Balance 95
2%
90 85 80 Bc/d
75
1%
70 65
2%
60 55 50
4%
45
Dry Production
US Production Forecast Source: BENTEK Cell Cast
US Demand
US Demand Forecast 14
North American Exports: Base Case Forecast
HN DC LNG Kitimat LNG LNG Canada
Gulf Coast Export Terminals: Freeport LNG– 1.76 Bcf/d (13.2 mtpa) Lake Charles – 2 Bcf/d (15 mtpa) Sabine Pass – 2.4 Bcf/d (18 mtpa) Cameron – 1.6 Bcf/d (12 mtpa)
Canadian Exports: DC LNG – 0.25 Bcf/d (1.8 mtpa) Kitimat LNG – 1.4 Bcf/d (10 mtpa) LNG Canada (Phase 1 ) - 1.6 Bcf/d (12 mpta)
North East Exports: Cove Point – 0.75 Bcf/d (5.6 mtpa)
Cove Pt. Lake Charles
South East Exports: Elba Island FLNG – 0.5 Bcf/d ( 4mtpa)
Elba Island
Freeport Existing Import + Proposed Export Proposed Export
Cameron Sabine Pass Source: BENTEK
Mexican Demand – Driven By Power – Is Growing Aqua Prieta II (2013) 463 MW CC Norte II (2013) 459 MW
P. Libertad 620 MW (2014)
CC Norte III (2015) 954 MW
Guaymas I (2015) 108 MW
CC Norte IV (2019) 918 MW
CC Guaymas II (2017) 747 MW CC Guaymas III (2018) 747 MW
Export Pipeline Expansions:
CC Norte V (2022) 944 MW
1. El Paso Wilcox Lateral: 185 MMcf/d, Apr. 2013
Topolobampo I (2016) 320 MW CC Topolobampo II (2016) 700 MW CC Topolobampo III (2017) 700 MW
CC Norte VI (2025) 918 MW
2. El Paso Norte Crossing: 366 MMcf/d, Aug. 2013 3. El Paso Samalayuca: 237 MMcf/d, Aug. 2013 4. Kinder Morgan Mier Monterrey: 275 MMcf/d , Apr. 2014 Mazatlan (2016) 300 MW
5. TETCO Reynosa: 300 MMcf/d, June 2014 CC Mazatlan (2021)
MW 6. El Paso 867 Sierrita: 200-812 MMcf/d, Oct. 2014 Mexican Power Expansion
2013 – 2025 7. Net Midstream Frontera: 2,100 MMcf/d, Nov. 2014 17,405 MW Incremental Export Capacity by 2015: 4,275 2.5 Bcf/d @ 80%; 7.5 MMcf/d heat rate Total Export Capacity by 2015: 9,598 MMcf/d Source: Comision Federal de Electricidad (CFE)
16
Exports to Mexico Expected to Rise Supporting Power Demand Growth in Mexico 4.0 3.5
• Exports to Mexico are expected to rise 1.7 Bcf/d or 114% between 2012 and 2018.
3.0
Bcf/d
2.5
• Several pipeline projects are in the works to facilitate this increase.
2.0 1.5
• Rising gas production in Eagle Ford and increasing gas fired power generation demand in Mexico is fueling the rise in exports.
1.0 0.5 -
From Southwest
From Texas
17
Transportation Scenario Vehicle Type
Total Gallons Consumed (Millions)
Bcf/d Full Conversion
130,144
44.57
Bus
1,106
0.38
Truck (Long Haul)
26,672
9.13
Rail
3,573
1.50
Marine Vessel
4,560
3.01
166,055
58.59
Passenger
Total
2018: 5% of Long Haul Trucks = 0.5 Bcf/d 80% of all Buses = 0.3 Bcf/d 0.25% of Passenger Cars = 0.1 Bcf/d 5% of Rail = 0.1 Bcf/d 5% of Marine Vessel = 0.1 Bcf/d
TOTAL = 1.1 Bcf/d Source: BENTEK, EIA, Federal Highway Administration
18
Natural Gas Liquids Trends
19
Increasing Supply Drives Exports
20
US NGL Infrastructure Additions Allows Production Growth Gas Production 2013-2018
Gas Processing 2013-2018
NGL Fractionation 2013-2018
NGL Transportation 2013-2018
+14.7 Bcf/d
+14.8 Bcf/d
+1.5 MMb/d
2.1 - 2.9 MMb/d
Proposed US NGL Projects 2,000
12,000
Mb/d
8,000
1,000
6,000 4,000
500
MMcf/d
10,000
1,500
2,000
-
2013
2014
Transport Capacity
2015 Fractionation
TBD Processing 21
U.S. NGL Production to Increase by 1.7 MMb/d 2012 – 2018 4,500 4,000
3,500 3,000
Mb/d
2,500 2,000 1,500 1,000
500 -
Ethane 43%
Propane 28%
N Butane 10%
I Butane 6%
Natural Gasoline 13% 22
Expansions, Feedslate Switching and New Steam Cracker Projects to Increase Demand for Ethane Project
Capacity Type
Year Operational
Steam Cracker Capacity (MMlbs/yr)
Ethane Demand (MB/d)
Williams - Geismar
Expansion
2013
600
16
Westlake - Lake Charles #2
Expansion
2013
240
5
Ineos - Chocolate Bayou
Expansion
2013
250
6
Dow - St Charles
Restart
2013
880
18.4
Lyondell - Channelview
Feed Slate Switch
2013
0
13
Lyondell - Clinton
Debottleneck
2013
0
2
BASF
Debottleneck
2013
0
20
Westlake - Calvert City
Feed Slate Switch
2014
0
18
Lyondell - La Porte
Expansion
2014
850
20
Dow - Plaquamine
Expansion
2014
150
11
Westlake - Lake Charles #1
Expansion
2015
250
11
Exxon
New
2017
3300
85
CP Chem
New
2017
3300
85
Occidental/Mexichem
New
2017
1100
28
Formosa
New
2018
1750
48
Dow
New
2018
3300
85
Sasol
New
2018
3300
85
Shell
New
2019
3000
79
22,270
635.4
Total Source: NGL Market Call, Data as of April 26, 2012
23
U.S. Ethane Market Long With Williston Ethane Produced, Rejection to Exceed 200 Mb/d from 2014-2018 2,000 1,800 1,600
Mb/d
1,400 1,200 1,000 800 600 400 200 0
Gas Plant Supply
Refinery Supply
Source: NGL Market Call, Data as of April 26, 2013
Petchem Demand
Exports
Rejected Volumes 24
Planned PDH Capacity in the U.S. and Canada Working to Balance North American Market Project
Capacity Type
Year Operational
PDH Capacity (MMlbs/yr)
Propane Demand (Mb/d)
Dow Chemical
New
2015
1320
30
Enterprise
New
2015
1650
35
Formosa
New
2016
1320
30
C3 Petrochemicals
New
2016
2640
59
Williams (Canada)
New
2015
1100
24
8030
178
Total
25
Growth in Propane Supply to be Relieved by Exports and Petrochemicals 1600 1400 1200
Mb/d
1000 800 600 400 200 0
Petchem Demand
Heating Demand
Exports
Propane Supply 26
Note: Updated as of 4/26/2013, Source BENTEK NGL Market Call
Export Capacity Could Expand by over 750 Mb/d Company
Status
Capacity (Mb/d)
ISD
Targa: Galena Park
Current
40
N/A
Enterprise Products Operating
Current
225
N/A
Targa: Galena Park
Expansion
60
3Q2013
Mariner East
New
45
3Q2014
Targa: Galena Park
Expansion
60-120
3Q2014
Vitol
New
90
1Q2015
Occidental
New
150
2015
Targa: Galena Park
Expansion
40-80
2015
Sunoco Logistics Partners
New
200
2015
Altagas
New
25
2017
Total Potential Capacity
1035 27
Overbuild of LPG Export Capacity On the Horizon if all Facilities Move Forward & Operate Near Design Capacity 1200 1000 Faster than Expected Growth Needed to Fill All Projects
Mb/d
800 600 400 200 0
2011 2012 Propane Exports
2013
2014 2015 Butane Exports
2016 2017 2018 Total Export Capacity 28
Exports Required to Keep Normal Butane Balanced 600
500
MBPD
400 300 200 100
0
Gas Plant Supply
Refinery Production
Imports
Petchem Demand
Isomerization Demand
Refinery Inputs
Note: Updated as of 4/26/2013, Source BENTEK NGL Market Call
Isobutane Market to Balance by Reducing Isomerization 350 300
MBPD
250 200 150 100 50 0
Gas Plant Supply Petchem
Isomerization Refinery Inputs Note: Updated as of 4/26/2013, Source BENTEK NGL Market Call
Octane Enhancement Exports
U.S. Natural Gasoline Supply Will Be Exported for Diluent in Western Canada & Potentially Abroad to Petchems 600 500
MBPD
400 300 200 100 0
Gas Plants
Imports
Petchem
Renewable Fuels
Refinery Demand
Note: Updated as of 4/26/2013, Source BENTEK NGL Market Call
Exports
Crude Oil Trends
32
U.S. Oil Production Growth Primarily From Permian, Bakken, and Eagle Ford U.S. Production Forecast 10,000 9,000 8,000
Mb/d
7,000
6,000 5,000 4,000 3,000 2,000 1,000 0
Rest of U.S. Source: HPDI & May 2013 BENTEK Crude Oil PADD Balances
Permian
Bakken
Eagle Ford
New Pipelines To Flow Canadian and U.S. Production to Coastal Markets
Bakken
Niobrara
Anadarko
Pipe with Firm Commitments
Permian Source: Petroleum Project Tracker Not All Projects Shown
Eagle Ford
Proposed Pipeline 34
Crude Oil Pipeline Projects 8,000 7,000 6,000 Miles
5,000 4,000 3,000 2,000 1,000 0 2013
2014 Other
2015
2016
2017
Crude Oil
Source: Petroleum Project Tracker Not All Projects Shown
35
Waterborne Imports to Account for Only 13% of Total U.S. Crude Supply by 2018 60%
18,000 16,000
50%
14,000
40%
Mb/d
12,000 10,000
30%
8,000
20%
6,000 4,000
10%
2,000
0%
-
Domestic Production
Canadian Imports
U.S. Waterborne Imports
% Non-Canadian
Source: BENTEK May 2013 Crude Oil PADD Balances
Ket Takeaways • The shale boom for natural gas, NGL’s and oil continues • Power Generation and Industrial Demand gain market • LNG creates an outlet for growing U.S. supply of gas • Mexican gas demand continues to grow • NGL growth requires significant infrastructure development • Crude oil production growth pushes out imports • Significant investment in new infrastructure required 37
Q&A
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