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