Why Natural Gas Liquids are Important
to the
Wyoming Natural Gas Industry
or
Support Your Local
Cryogenic Processing Plant
Presented to
Wyoming Pipeline Authority
August 24, 2004
All rights reserved. Enterprise Products Partners L.P.
1
Why Natural Gas Liquids are Important to the
Wyoming Natural Gas Industry
• Presentation Overview
• Brief introduction to Enterprise and Mid-America Pipeline (MAPL)
• MAPL’s relationship to Wyoming and the natural gas pipeline industry
• Comparison of MAPL to natural gas pipelines
• What MAPL gives Wyoming
• What Wyoming gives MAPL
• System operation and expansion opportunities
• Future of natural gas liquids in the Rockies (Wyoming)
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2
Overview of Enterprise (EPD)
2nd largest publicly traded energy partnership serving producers and
consumers of natural gas and natural gas liquids (NGLs)
 IPO in July 1998
 Currently ranked 336th on Fortune 500 and 7th on Forbes list of
America’s 25 Fastest-Growing Big Companies
Large platform of assets across the midstream energy value chain
 Only integrated natural gas and NGL transportation, fractionation,
processing, storage and import/export network in North America
 Pending merger with GulfTerra Energy Partners (GTM) adds
complementary scale, scope and diversity to existing operations
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3
Combined System Map
SYSTEM MAP OF COMBINED
ENTERPRISE (“EPD”) AND GULFTERRA (“GTM”)
w/ South Texas Midstream Assets
ST. PAUL
ROCK SPRINGS
AUX
SABLE
CONWAY
HOBBS
MT. BELVIEU
HOUSTON
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4
Leading Business Positions Across Value
Chain
Relative Position Across the Value Chain (By Capacity)
Gas
Gathering
Gas
Processing
Raw Mix
Pipeline
Fractionation
Salt Dome
Storage
Import
Terminal
Export
Terminal
Distribution
Duke FS
Duke FS
Enterprise
Enterprise
Enterprise
Dow
Enterprise
Enterprise
Enterprise
BP
TEPPCO
Koch
TEPPCO
Enterprise
Dynegy
Dow
Williams
Enterprise
Koch
ConocoPhillips
Dow
Dynegy
BP
Williams
ChevronTexaco
Dynegy
Dynegy
Trammo
Oneok
ExxonMobil
Dynegy
El Paso
Williams
Koch
ConocoPhillips
ONEOK
BP
ExxonMobil
ConocoPhillips
KinderMorgan
Devon
ConocoPhillips
El Paso
BP
BP
ChevronTexaco
Dynegy
Devon
ExxonMobil
ONEOK
ExxonMobil
Dynegy
Dynegy
ConocoPhillips
Duke
El Paso
El Paso
Williams
ONEOK
ExxonMobil
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ChevronTexaco ConocoPhillips
TEPPCO
5
Introduction to Mid-America Pipeline
(MAPL)
• Approximately 7,500
miles of pipeline
• Transports
approximately
700,000 barrels per
day
• Operates in 14 states
• FERC regulated
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6
Mid-America Pipeline Company
Wyoming History and Relationship
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7
Mid-America Pipeline Company
Wyoming History and Relationship
• Pipeline constructed in 1982
• Expanded in 1999
• Expanded in 2006?
• Largest of two natural gas liquids
pipelines leaving Wyoming
• Transported average 106,000 bpd
in 2002
• (4.4 million gallons per day)
• Connected to 15 gas processing
plants
• Served 2.2 BCFD of gas
processing in 2003 (46% of total)
• Transports liquids 1,500 miles to
market (Gulf Coast)
• 1,250 miles as the crow flies
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8
Mid-America Pipeline Company
12
50
M
ile
s
Where Does 1,250 Miles Get You?
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9
Comparison of MAPL to Natural Gas Pipelines
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10
Comparison of MAPL to Natural Gas Pipelines
• Who are the largest natural gas transporters out of Wyoming?
2002 Volumes
MMBTU / Day
Kern River
Wyoming Interstate
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774,489
1,166,000
Trailblazer
755,477
Northwest
509,180
CIG
408,298
Kinder Morgan
311,520
Questar
194,226
Southern Star Central
164,357
Williston Basin
119,946
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Comparison of MAPL to Natural Gas Pipelines
• Who are the largest natural gas transporters out of Wyoming?
2002 Volumes
MMBTU / Day
Kern River
Wyoming Interstate
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774,489
1,166,000
Trailblazer
755,477
Northwest
509,180
CIG
408,298
Mid-America Pipeline
353,290
Kinder Morgan
311,520
Questar
194,226
Southern Star Central
164,357
Williston Basin
119,946
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Comparison of MAPL to Natural Gas Pipelines
• Who are the largest natural gas transporters out of Wyoming?
2002 Volumes
2002 Volumes
MMBTU / Day
Sales Value / Day
774,489
$ 4.9 MM
1,166,000
$ 7.3 MM
Trailblazer
755,477
$ 4.8 MM
Northwest
509,180
$ 3.2 MM
Mid-America Pipeline
353,290
$ 2.8 MM
CIG
408,298
$ 2.6 MM
Kinder Morgan
311,520
$ 2.0 MM
Questar
194,226
$ 1.2 MM
Southern Star Central
164,357
$ 1.0 MM
Williston Basin
119,946
$ 0.8 MM
Kern River
Wyoming Interstate
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13
What MAPL gives Wyoming
Processing Economics (Ethane Recovery)
Ethane
57%
Propane
25%
Isobutane
5%
Normal Butane
7%
Gasoline
6%
Weighted Average
$ 0.569
$ 0.885
$ 0.950
$ 0.968
$ 1.081
$ 0.726
Fractionation Cost @ $ 5.94 gas
(Houston Ship Channel)
$ 0.024
$ 0.024
$ 0.024
$ 0.024
$ 0.024
$ 0.024
Pipeline Transportation
$ 0.072
$ 0.072
$ 0.072
$ 0.072
$ 0.072
$ 0.072
Wyoming Liquid Value
$ 0.473
$ 0.789
$ 0.854
$ 0.872
$ 0.985
$ 0.63
BTU / gallon
66,369
91,599
99,652
103,724
110,000
79,606
Liquid Value $ / MMBTU
$ 7.13
$ 8.61
$ 8.57
$ 8.40
$ 8.96
$ 7.91
Kern River Index (8/16/04)
$ 5.02
$ 5.02
$ 5.02
$ 5.02
$ 5.02
$ 5.02
8/16/04
Mont Belvieu Liquid Price $ / gallon
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14
What MAPL gives Wyoming
Processing Economics (Ethane Recovery)
• By having access to the NGL pipeline (8/16/2004 example):
• 353,290 MMBTU is “sold” at $ 7.91 / MMBTU
• 2,310,000 MMBTU is “sold” at $ 5.02 / MMBTU
• 2,663,290 MMBTU is “sold” at $ 5.40 / MMBTU
• The NGL outlet provided a $ 0.38 / MMBTU upgrade to the gas price
• The NGL outlet provides over $ 1 Million / day upgrade to gas owners
• Approximately $ 370 Million annualized
• The NGL outlet proves approximately 20% of the value to gas owners
• Approximately 70% of this value comes from ethane and propane
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15
What MAPL gives Wyoming
Processing Economics (Ethane Rejection)
Ethane
40%
Propane
32%
Isobutane
9%
Normal Butane
10%
Gasoline
9%
Weighted Average
$ 0.392
$ 0.598
$ 0.660
$ 0.674
$ 0.798
$ 0.547
Fractionation Cost @ $ 5.27 gas
(Houston Ship Channel)
$ 0.021
$ 0.021
$ 0.021
$ 0.021
$ 0.021
$ 0.021
Pipeline Transportation
$ 0.072
$ 0.072
$ 0.072
$ 0.072
$ 0.072
$ 0.072
Wyoming Liquid Value
$ 0.299
$ 0.505
$ 0.567
$ 0.581
$ 0.705
$ 0.454
BTU / gallon
66,369
91,599
99,652
103,724
110,000
85,100
Liquid Value $ / MMBTU
$ 4.51
$ 5.51
$ 5.69
$ 5.60
$ 6.41
$ 5.33
Kern River Index (2/6/04)
$ 5.02
$ 5.02
$ 5.02
$ 5.02
$ 5.02
$ 5.02
2/6/04
Mont Belvieu Liquid Price $ / gallon
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16
What MAPL gives Wyoming
Processing Economics (Ethane Rejection)
• By having access to the NGL pipeline (8/16/2004 example):
• 214,453 MMBTU is “sold” at $ 5.33 / MMBTU
• 2,448,837 MMBTU is “sold” at $ 5.02 / MMBTU
• 2,663,290 MMBTU is “sold” at $ 5.04 / MMBTU
• The NGL outlet provided a $ 0.02 / MMBTU upgrade to the gas price
• The NGL outlet provides over $ 50,000 upgrade to gas owners
• Approximately $ 18.5 Million annualized
• The NGL outlet proves approximately 9 % of the value to gas owners
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17
What MAPL gives Wyoming
• Over the past 5 1/2 years:
• NGL pipeline has
provided an aggregate
$ 725 Million premium
to Wyoming gas
owners
• NGL pipeline has
averaged an $ 130
Million annual
premium to Wyoming
gas owners
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18
What Wyoming Gives MAPL
• Published tariff (Incentive) from
Wyoming to Gulf Coast: $ 0.072 /
gallon
• Annual volume moved during 2002:
1,619,875,110 gallons
• Revenue received during 2002:
$ 116,631,008
• Total MAPL revenue during 2002:
$ 269,367,769
• Percentage of MAPL revenue earned
from Wyoming 43 %
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19
System Operations
• Wyoming South: Capacity of 125,000 bpd
• Transports: 100,000 bpd
• Grand Junction South: Capacity of 200,000 bpd
• Transports: 125,000 bpd
• San Juan Basin South: Capacity of 215,000 bpd
• Transports: 200,000 bpd
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20
0
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May-04
Feb-04
Nov-03
Aug-03
May-03
Feb-03
Nov-02
Aug-02
May-02
Feb-02
Nov-01
Aug-01
May-01
Feb-01
Nov-00
Aug-00
May-00
Feb-00
Nov-99
Aug-99
May-99
Feb-99
Barrels Per Day (x 1,000)
System Operations
Rocky Mountain Pipeline System Utilization
225
200
175
150
125
100
75
50
25
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System Operations
Key Observations
• Since Opal expansion in 2000, MAPL has been operationally full, or declines
have matched growth almost exactly
• Ethane margins can cut MAPL volumes by 25 %
• Corresponding gas pipeline increase approximately 6%
• Next round of plant expansions will over fill pipeline, and force plants into ethane
/ propane rejection
• Without MAPL expansion NGL value enhancement opportunities will shrink or
go away
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22
System Operations
Expansion Opportunity
• MAPL is spending $ 20 Million to permit a
50,000 bpd expansion out of Wyoming
• Permit should be obtained in 4Q 2005
• Pipeline could be in service 3Q 2006
• Completed expansion would cost $ 150 - 170
Million
• 200 miles of pipe
• 23 pump stations modified and expanded
• Further information can be found at
http://www.epplp.com/mapl/EPPindex3.htm
• Unique challenge: Expansion must be full to
provide adequate return
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23
Future of NGLs in Wyoming
Summary and Dilemma
• San Juan basin has remained flat to slight increases in NGL production
• Piceance / Uintah basin experiencing growth
• Southwest Wyoming experiencing growth
• Under current philosophy, MAPL must build expansion on speculative basis, no
“Open Season”
• As regulated pipeline, difference between cost of capital and maximum allowable
return less than 10%
• Decision to expand is based more on the relative value of NGLs to natural gas,
rather than simply natural gas production growth or Wyoming gas prices
• Without pipeline expansion, value opportunities diminish or disappear as
dewpoint control volumes replace discretionary volumes
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24
Future of NGLs in Wyoming
Summary and Dilemma
• Decision to expand is made based on ratio of NGL prices to Wyoming
gas price
• Expansion decision will be made based on ethane and propane margins
• With little or no ethane and propane extraction, expansion is not
necessary, or can be delayed
All things being equal……
Best case scenario…..
Wyoming gas price increase
Wyoming gas price increase
NGL Extraction Value, MAPL volumes
NGL Extraction Value, MAPL volumes
Profitability of pipeline expansion
Profitability of pipeline expansion
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25
Future of NGLs in Wyoming
• MAPL is financially 10 - 15% committed to pipeline expansion
• We are working with producers / processors to build cryogenic plants to
preserve the option to extract ethane and propane to enhance value
• We can manage some of the ethane / propane margin risks to pipeline
• Pipeline expansion provides growth of pipeline revenue for MAPL and
value enhancement for Wyoming
• Cryogenic plants are the key to successful MAPL expansion
• Cryogenic plants provide the necessary volume, and the discretionary
ethane and propane to fill an expansion
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26
Support Your Local
Cryogenic Processing Plants
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27