Natural Gas The Energy Opportunity

Patti Piett, Director Storage &Transportation Marketing and Utilization

For Discussion

• Natural Gas Changing Landscape

• Marcellus/Utica Shale Game Changer • Dawn Value and Benefits • What is the Opportunity for Ontario?

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Spectra Energy

Diverse portfolio of assets Connecting the largest diverse markets with growing supply

Natural Gas Transmission Pipe: 30,000+ Km Natural Gas Gathering Pipe: 112,000+ Km Distribution Pipe: 64,000+ Km Natural Gas Storage Capacity: 320+ PJ

Union Gas Retail Customers: 1.4 million

Gas storage facility Gas processing plant Propane terminal NGL storage Shale gas formations Crude storage Major oil pipeline terminal

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Union Gas - A Spectra Energy Company •Major Canadian natural gas storage, transmission and distribution company based in Ontario •Over 100 years of experience and safe service to customers •Dawn Storage facility – largest underground storage facility in Canada •Assets of $6.4 billion •~2,200 employees •One of Canada's Top 100 Employers for five years in a row (2010-2015) 4

Natural Gas Changing Landscape

North American Natural Gas Supply Flows – traditional

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North American Pipeline Flows Changes to 2025

New

New

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Marcellus/Utica Shale Game Changer

North American Shale Basins Map

Source: EIA

Marcellus/Utica shale basin dwarf the other North American basins 9

Shale Gas Revolution • A drill bores into the ground ~1.5 – 3.0 km below the water table • A water and sand mixture forced down the hole at high pressure causing fractures • Gas escapes through the fractures and travels up a pipe

Source: Chemistryviews.org

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North American Gas Shale Basins Gas production U.S. and Canadian Natural Gas Production 45 40 35

Tcf

30 25

Shale

20 Offshore

15

CBM

Tight

10

Conventional Onshore

5 2000

2005

2010

2015

2020

2025

Source: ICF GMM Q2 2015 © 2014 ICF International. All rights reserved.

Shale production will make up over 80% of the overall natural gas production in North America by 2025 11

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North American Gas Shale Basins Gas production

Source: ICF GMM Q2 2015 © 2014 ICF International. All rights reserved.

Marcellus/Utica shale basin will make up over 50% of the overall shale production in North America by 2035 12

North American Gas Shale Basins Rising Marcellus and Utica production

• Original Penn State forecast for 2020 was 4.5 Bcf/d • Latest ICF forecast for 2020 is 26.5 Bcf/d

Source: Various compiled by ICF © 2014 ICF International.

Marcellus/Utica production forecast increased 560% in 5 yrs.! 13

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What is the Opportunity for Ontario?

How Can Ontario Benefit? Access to competitively priced energy • Timeliness  continue to support new pipelines to connect to new supplies • Ease  make it easy for U.S. producers to do business in Canada • Incentives  market liquidity  correct price signals  competitive pricing  availability of infrastructure  demand commitment

The time is now! 15

Attracting New Supply in Ontario Growing supply to Dawn TCPL NIAGARA/ CHIPPAWA

TENNESSEE NIAGARA EXPANSION

NEXUS – 1.6 PJ/d

ANR EAST – 0.4 PJ/d ETP Rover – 1.4 PJ/d

EMPIRE EXPANSION

TCPL, Tennessee, Empire and National Fuel – 1.0 PJ/d

NEXUS

ROVER

NATIONAL FUEL NIAGARA

ANR EAST

40% increase to current pipeline capacity serving Michigan/Dawn by 2018 16

Largest Expansion in Union’s History Incremental Capacity: •2015: 0.4 PJ/d •2016: 0.4 PJ/d •2017: ~ 0.6 PJ/d •Total: 1.4 PJ/d

TCPL King’s North Project (2015)

Parkway West & Parkway D Compressors (2015)

Maple TCPL Vaughan Market Extension (2016)

Enbridge GTA Project (2015)

Parkway

Brantford-Kirkwall Pipeline (2015)

Kirkwall

Bright Sarnia Expansion Pipeline (2015)

Parkway E Compressor (2017)

Hamilton-Milton Pipeline (2016)

Lobo Bluewater

Burlington-Oakville Pipeline (2016)

Lobo C Compressor (2016)

St. Clair

Dawn Ojibway Dawn Compressor (2017)

Bright C Compressor (2017) Lobo D Compressor (2017)

Approximately $1.5B in Union Gas expansion planned 2015 – 2017 to grow takeaway capacity by >50% 17

Threat to New Supply in Ontario Other markets competing for Marcellus/Utica supply

Source: Bentek Northeast Observer – April 15

More than 17 PJ/d of announced capacity expansions by 2017 for the U.S. Northeast, Southeast and Midwest

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Dawn - A Significant Storage and Trading Hub

• Highly liquid trading hub – Over 100 companies active on an annual basis – 2nd largest physically traded hub in North America – Largest integrated storage facility in Canada (292 PJ)

• Connected to all major supply areas but needs more connections to Marcella/Utica producing region • Growing to meet growing markets Economic and operational advantages for sourcing gas at Dawn 19

Dawn’s Benefits

Economic advantage Average of top 5 maximum prices for January - in CAD/GJ Source: Platts Gas Daily

IROQUOIS: 2014 $66.69 2015 $13.70 BOSTON: 2014 $67.29 2015 $15.91

DAWN: 2014 $15.81 2015 $3.83 NEW YORK: 2014 $95.73 2015 $18.53

Well connected Dawn Hub shows a significant price advantage Need to ensure it remains well connected 20

Expansion of Natural Gas System to Rural and Northern Communities • Escalation in energy prices for other fuels is creating unprecedented interest in conversion to natural gas • Union has had requests from a number of municipalities

• December, 2013 Provincial Long term Energy Plan commitment • In 2014 Province announced intent to fund via $230 M in municipal grants and loans

Average Ontario Estimated Annual Cost of Energy (annual average use of 82 GJ) $3,500 $3,000 $2,500 $2,000

Natural Gas: Less than half the cost of other fuels!

$1,500 $1,000 $500 $2006

2007

Propane

2008

2009

Furnace Oil

2010

2011

2012

Electricity TOU

2013

2014

2015

Natural Gas

• 2014 Minister’s Mandate Letters

• February 2015 Ontario Energy Board Invitation to parties to propose plans for natural gas expansion Chart Sources:

Propane & Heating Oil: The Kent Group. Rates taken for London for the South and Thunder Bay for the North Natural Gas: Union Gas Limited Rate Schedules Electricity: MEU time of use rates for sample of southern and northern utilities

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LNG/CNG Opportunities in Ontario • Delivering the benefits of natural gas where pipelines or other energy alternatives are not economic – Mining, industrial applications, agriculture – Power applications for mines and communities • Enables the achievement of emission regulations in the transportation sector – Long and short-haul trucks, fleet, return to base vehicles – Marine transportation • OEB decision enables the sale of LNG from Union’s Hagar facility as an unregulated business

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Gas Fired Power Generation

Natural Gas Looking back: power generation mix 2005

2014

Change in capacity

Nuclear +2,047 MW Hydro +19 MW Coal -7,600 MW Gas +5,020 MW Wind +2,483 MW

Natural gas contribution to power generation increased by 16% in 9 years

Sources: 2005 mix Ontario Power Authority, 2012; 2014 mix IESO November 2014

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Natural Gas Looking forward: power generation mix

Source: IESO LTEP 2014

Natural gas is a simple and economic way to serve peaking needs during nuclear refurbishment 25

Natural Gas

Key contributors to Ontario’s economic growth

Source: ICF GMM Q2 2015 © 2014 ICF International. All rights reserved.

55% of Ontario’s natural gas demand will be driven by industrial

& power generation by 2025 26

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Summary • Marcellus/Utica represents a tremendous opportunity for Ontario • Ontario is investing heavily in infrastructure to support growing natural gas supply and demand • Dawn is a highly liquid natural gas trading hub

• Dawn storage increases reliability of natural gas service • Ontario must take full advantage of economic energy opportunities available now through support of pipeline connections to new pipelines Pipeline expansion from Marcellus/Utica will drive economic growth in Ontario

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