Canadian Energy Research Institute
Exports of LNG and LPG’s
Why Now?
Peter Howard
Canadian Energy Research Institute
April, 2014
1
Relevant • Independent • Objective
www.ceri.ca
Canadian Energy Research Institute
Upcoming Study Releases
Natural Gas Liquids (NGLs) in North America: An Update
Part I – Upstream
Forthcoming April 2014
Natural Gas Liquids (NGLs) in North America: An Update
Part II – Midstream and Downstream Infrastructure
Forthcoming April 2014
Natural Gas Liquids (NGLs) in North America: An Update
Part III – Market Fundamentals
Forthcoming April 2014
2
Relevant • Independent • Objective
www.ceri.ca
Canadian Energy Research Institute
Upcoming Study Releases
Natural Gas Liquids (NGLs) in North America: An Update
Part IV – Global Markets and Opportunities
Forthcoming April 2014
Natural Gas Liquids (NGLs) in North America: An Update
Part V – Future Outlook
Forthcoming May 2014
An Economic Analysis of TransCanada’s Energy
East Pipeline Project
Forthcoming April 2014
3
Relevant • Independent • Objective
www.ceri.ca
Canadian Energy Research Institute
Upcoming Study Releases
Canadian Oil Sands Supply Costs and Development
Projects (2013-2047)
Forthcoming May 2014
Oil Pathways
Forthcoming May 2014
4
Relevant • Independent • Objective
www.ceri.ca
The Story Starts Here!
North American Natural Gas Market
(2013-2030)
5
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Industry
18000
100.0%
16000
90.0%
14000
80.0%
70.0%
12000
60.0%
10000
50.0%
8000
40.0%
6000
30.0%
4000
20.0%
2000
10.0%
0
Percentage Horizontal Wells
2013 Alberta Gas Well Licenses
• 1077 Horizontal Wells (76%)
• 244 Slant/Deviated (17%)
• 89 Vertical (6%)
Total 1410 Gas Directed Well Licences
0.0%
2003 2004 2005 2006 2007 2008 2009 2010 2011
Gas Production (mmcf/day)
Connected Gas Wells
“A Tale of Two Countries”
Total Completed Horizontal Gas Wells
Total Complete Vertical Gas Wells
Percentage Horizontal Gas Wells
2012 Marcellus
• 2,000 capped gas wells
• 2,100-2,300 new wells per year
• NGLs 30-35 bbls/mmcf
• 4,5,6 wells per pad
• 90% horizontal
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
17 to 22 Bcf/day
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029
Marcellus Supply: Full Speed Ahead
Marcellus Supply: Nowhere Fast
6
Relevant • Independent • Objective
www.ceri.ca
Emerging supply sources:
inter-basin gas-on-gas competition
Images from US EIA and Ziff/NEB
7
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
WCSB Export Volumes: LNG Tsunami (without LNG)
9,000
8,000
Delivered Volume (mmcf/day)
7,000
6,000
- 4.8 bcf/day
5,000
4,000
3,000
2,000
1,000
0
Export:Kingsgate
Export:Northern Border
8
Export:Alliance
Export: TCPL Mainline
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
WCSB Production Forecast: LNG Tsunami (without LNG)
20,000
Forecast
18,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
AB Solution Gas
Alberta
Alberta CBM
9
British Columbia
Saskatchewan
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
0
2003
Marketable Natural Gas (mmcf/day)
16,000
Quebec
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Ethane Recovered (bbls/day)
WCSB NGL Recovery Forecast: Ethane
300,000
300,000
250,000
250,000
200,000
200,000
150,000
150,000
100,000
100,000
50,000
50,000
0
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Taylor Straddle Plant (BC)
Empress Straddle Plant
Cochrane Straddle Plant
Alberta Field Plants
Other E+P Mixed Streams
Vantage Pipeline
Total Historical Ethane Recovered
Ethane Cracking Capacity
10
Relevant • Independent • Objective
www.ceri.ca
Global Competition for the
Asia-Pacific Market
11
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
BC LNG Projects
Pacific Trail Pipeline 1 BCFPD
Coastal GasLink Pipeline 1.7 BCFPD (initial)
Prince Rupert Gas Transmission 2 BCFPD
BG/Spectra Pipeline (System 4.2 BCFPD)
Pacific Northern Gas Looping
NE British Columbia
versus
NW Alberta
Kitisault Energy Project
Imperial Oil/Exxon LNG
Pacific North-West LNG1.6 BCFPD
Prince Rupert LNG 1.8 BCFPD
BC LNG Co-Op 0.1 BCFPD
Kitimat LNG 0.7 BCFPD
LNG Canada 1.6 BCFPD
LNG Canada Expansion 1.6 BCFPD
Altagas LNG (West Coast)
Nexen LNG (West Coast)
Woodfibre LNG
1
12
Relevant • Independent • Objective
www.ceri.ca
Competition to Supply LNG in the Asia-Pacific Basin
2012 LNG Trade (average per day)
Qatar LNG
(8 Operating)
(Total 10.9 bcf/day)
(8.0 bcf/day)
Mozambique
Anadarko
Shell
Up to
6.5 bcf/day
West Africa
Indonesia
Malaysia
(7.4 bcf/day)
Russia
Sakhalin Island LNG
(1.1 bcf/day)
Pipeline (2.1 bcf/day)
China
Korea
Japan
India
Australia Operating
Australia Under Construction
Australia Proposed
(2.5 bcf/day)
3.2 – 11.3 – 16.0 bcf/day
13
Alaska LNG
4.5 bcf/day
Kitimat LNG
LNG Canada
Pacific Northwest LNG
West Coast LNG
Prince Rupert LNG
Woodfibre LNG
Up to 20 bcf/day
Jordon Cove
Oregon LNG
Sabine Pass
Freeport LNG
Cameron LNG
Dominion Cove LNG
Lake Charles LNG
Corpus Christi LNG
Up to 35 bcf/day
Relevant • Independent • Objective
www.ceri.ca
Oregon LNG
How Competitive is Western Canada?
15
Relevant • Independent • Objective
www.ceri.ca
Economic Viability of Gas Developments in the WCSB
A Supply Cost Comparison
• The Supply Cost value represents the natural gas price that is required to
cover all costs (capital, operating, royalties and taxes) and earn a
minimum return on investment (10 percent real).
• The Supply Cost calculation includes the uplift value of producing,
capturing and selling natural gas liquids in concert with natural gas
production.
16
Relevant • Independent • Objective
www.ceri.ca
Western Canada What Makes the Gas World Work
BC Montney Supply Cost Example
Average Liquid Content (40 bbls/mmcf)
$7.0
$6.5
$6.0
$5.5
$5.0
$4.5
$4.5
$4.7
$4.9
$5.1
$5.3
$5.5
$5.7
$5.8
$6.0
$6.2
$6.4
$6.5
$4.5
$/ mcf
$4.0
$0.8
$3.8
$0.7
$1.3
$-
$2.0
$2.6
$3.5
$3.2
$3.0
$4.3
$4.9
$5.4
$5.8
$6.2
$0.4
$0.2
$6.5
2013 Average NIT/AECO Price
$2.5
$2.0
$3.8
$3.8
$3.8
$3.9
$1.5
$3.4
$3.0
$2.5
$1.0
$2.1
$1.7
$0.5
$-
Liquids Portion
Gas Portion
Revenue
17
$1.3
$1.0
$0.7
March 2012 Intra AB NIT Price ($/mcf)
Relevant • Independent • Objective
www.ceri.ca
Economic Viability of Gas Developments in the WCSB
Supply Cost Results
Supply cost - gas portion
Liquid content
(bbls/mmcf)
Supply Csot ($/mcf)
$10
120
100
$8
80
$6
60
$4
40
Average Market Price 2013 (AECO C)
$2
20
$0
0
18
Average Liquids Content (bbls/mmcf)
$12
Relevant • Independent • Objective
www.ceri.ca
2013 Gas Directed
Licences
1 Montney (277)
2 Wilrich
(125)
3 Milk River (113)
4 Glauconitic (97)
5 Duvernay (88)
6 Falher
(86)
7 Bluesky
(56)
8 Notikewan (50)
19
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
New Gas Directed Licences (2013)
Alberta
•
•
•
•
•
•
•
•
•
Encana
Peyto
Shell
Paramount
Tourmaline
Bonavista
Apache
Husky
Seven Generations
• 9 producers
• 60% of total licences
British Columbia
•
•
•
•
•
292
116
84
67
70
61
48
43
44
825
• Total Gas Licences (AB) 1410
20
Shell
Progress Energy
Encana
CNRL
ARC Resources
219
180
94
59
74
• 5 producers
• 70% of total licences
626
• Total Licences (BC)
901
Relevant • Independent • Objective
www.ceri.ca
Prince Rupert Gas
Transmission
2.0 Bcf/day
BG-Spectra
4.2 Bcf/day
Pacific North-West LNG
1.6 Bcf/day
Prince Rupert
LNG Canada
Kitimat
1.6 Bcf/day initial
3.2 Bcf/day ultimate
TCPL Groundbirch Pipeline
Coastal GasLink
1.7 Bcf/day initial
3.2 Bcf/day ultimate
21
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
West Coast Competition: Canada versus the United States
18
2013 Average Spot Price Japan
16
Average Oil-Linked Price Japan
@ 90$/Bbl oil
14
Regasification Low
12
Charter Japan
USD $/MMBtu
10.49
10.68
Combined
10.48
9.88
10
9.39
Liquefaction
Pipeline Toll Approx
Spot HUB Price
8
Dedicated Pipeline Toll
Field Gate Supply Cost
6
2013 Average Spot Price Japan
Average Oil-Linked Price Japan @ 90$/Bbl oil
4
Total
2
0
Oregon LNG
Jordan Cove LNG
Canada LNG
Kitimat LNG
22
Sabine Pass with
Panama Canal
Relevant • Independent • Objective
www.ceri.ca
Producer Optionality?
23
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Producer Options: Alberta Market(Field Separation)
Alberta Market (AECO)
Edmonton Diluent
Edmonton Butane
LNG Hot Gas
Edmonton Propane
LNG
AB Ethane Market
LPG (Butane)
Methanol
LPG (Propane)
Gas to Liquids
Ethane
Methanol
24
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Producer Options: Alberta Market(Field Shallow cut plant)
Alberta Market (AECO)
Edmonton Diluent
Edmonton Butane
LNG Hot Gas
Edmonton Propane
LNG
AB Ethane Market
LPG (Butane)
Methanol
LPG (Propane)
Gas to Liquids
Ethane
Methanol
25
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Producer Options: Alberta Market(Field Deep Cut plant)
Alberta Market (AECO)
Edmonton Diluent
Edmonton Butane
LNG Hot Gas
Edmonton Propane
LNG
AB Ethane Market
LPG (Butane)
Methanol
LPG (Propane)
Gas to Liquids
Ethane
Methanol
26
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Producer Options: LNG Exports, LPG Exports
Alberta Market (AECO)
Edmonton Diluent
Edmonton Butane
LNG Hot Gas
Edmonton Propane
LNG
AB Ethane Market
LPG (Butane)
Methanol
LPG (Propane)
Gas to Liquids
Ethane
Methanol
27
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Producer Options: LNG Exports
Alberta Market (AECO)
Edmonton Diluent
Edmonton Butane
LNG Hot Gas
Edmonton Propane
LNG
AB Ethane Market
LPG (Butane)
Methanol
LPG (Propane)
Gas to Liquids
Ethane
Methanol
28
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Producer Options: Alberta Market – LPG Exports
Alberta Market (AECO)
Edmonton Diluent
Edmonton Butane
LNG Hot Gas
Edmonton Propane
LNG
AB Ethane Market
LPG (Butane)
Methanol
LPG (Propane)
Gas to Liquids
Ethane
Methanol
29
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
BC Plants: Propane Recovery
(bbls/day)
BC Montney NGL Recovery Forecast: Propane, Butane
65,000
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Propane to Edmonton ?
Propane to Global Market ?
BC Plants: Propane Recovery
(bbls/day)
McMahon Plant
65,000
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Younger Plant
Other Plants
Butane to Edmonton ?
Butane to Global Market ?
McMahon Plant
Younger Plant
30
Other Plants
Relevant • Independent • Objective
www.ceri.ca
Let the Games Begin?
31
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Reference Case: LNG Export Potential to the Pacific Basin
60
50
40
Other supply sources
United States Potential Liquefaction
BCFPD
United States Liquefaction
Canada Liquefaction
30
East Africa Potential Liquefaction
Australian Liquefaction
Middle East Liquefaction
20
Asian LNG Demand
10
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
32
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Reference Case: LNG Export Potential to the Pacific Basin
60
50
40
Lower 48
Sabine Pass (UC)
Freeport (AA)
Cameron LNG (AA)
Oregon LNG (AA)
Up to 4 bcf/day
Other supply sources
United States Potential Liquefaction
BCFPD
United States Liquefaction
Canada Liquefaction
30
East Africa Potential Liquefaction
Australian Liquefaction
Middle East Liquefaction
20
Asian LNG Demand
Total Demand
10
UC = Under Construction
AA = Awaiting Final Approvals
0
33
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Reference Case: LNG Export Potential to the Pacific Basin
60
50
BCFPD
40
BC LNG Projects
1 Project
Maybe!!!!
BC LNG Projects
2 Projects (AFID)
Up to 3 bcf/day
Other supply sources
United States Potential Liquefaction
East Africa Potential Liquefaction
30
Canada Liquefaction
United States Liquefaction
Australian Liquefaction
Middle East Liquefaction
20
Asian LNG Demand
10
ADIF= Awaiting Final
Investment Decision
0
34
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Reference Case: LNG Export Potential to the Pacific Basin
60
50
Asia Pacific
LNG
Pinch Point
“GAS Olympics”
40
United States Potential Liquefaction
BCFPD
Other supply sources
East Africa Potential Liquefaction
30
Canada Liquefaction
United States Liquefaction
Australian Liquefaction
Middle East Liquefaction
20
Asian LNG Demand
10
0
35
Relevant • Independent • Objective
www.ceri.ca
Risks Associated with BC LNG Projects
High
Competition in the Asia-Pacific Basin
Changing Market Prices (decoupling from Oil)
Capital Cost Overruns (Greenfield Projects)
Upstream Development Costs
Transportation Costs (Tanker)
Pipeline Tolls
Low
36
Relevant • Independent • Objective
www.ceri.ca
Global NGL’s and Naphtha Petrochemical Feedstock
IEA Forecast
16.0
14.0
12.0
10.6 10.8
9.8
10.0
9.1
8.0
7.8
11.2
11.5
11.9
12.2
Naphtha/ Heavy Feeds
10.2
LPG
9.2
8.8
Ethane
8.1
World Total
6.0
4.0
2.0
HISTORICAL
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
-
2002
MMb/d
8.6 8.5 8.7
11.0
11.7
14.1
13.8 13.9 14.0
13.7
13.6
13.5
13.2 13.3 13.4
13.0 13.1
12.8
12.7
12.4 12.5
OUTLOOK
37
Relevant • Independent • Objective
www.ceri.ca
Canadian Energy Research Institute
Thank you for your time
Please visit us at
www.ceri.ca
38
Relevant • Independent • Objective
www.ceri.ca