Allan Fogwill, CEOCanadian Energy Research Institute

February 2019

ASSESSMENT OF THE NATURAL GAS LIQUIDS MARKET IN WESTERN CANADA

Flagship Breakfast Overview Sponsor:

Canadian Energy Research Institute

Overview

Founded in 1975, the Canadian Energy Research Institute (CERI) is an

independent, registered charitable organization specializing in the analysis

of energy economics and related environmental policy issues in the

energy production, transportation, and consumption sectors.

Our mission is to provide relevant, independent, and objective economic

research of energy and environmental issues to benefit business,

government, academia and the public.

CERI publications include:

•Market specific studies

•Geopolitical analyses

•Energy Market reports (crude oil, electricity and natural gas)

In addition, CERI hosts an annual Petrochemical Conference and

supports Argus Energy Week.

Core Funders:

Donors:

In-kind:

Ivey Foundation

Introduction

Source: Bloomberg

• Global NGLs markets

• Historic production trends of NGLs in Western Canada

• natural gas processing plants

• crude oil refineries

• bitumen upgraders’ off-gas processing plants

• Stakeholder perceptions

• NGLs Production Forecast and Supply Demand Balances

• Conclusions

NGL Products

NGL Uses End-use Products End-use Sectors

Ethane/C2 Petrochemical feedstock for ethylene production

Plastics; anti-freeze; detergents

Industrial

Propane/C3

Space or water heating; cooking; transportation; petrochemical feedstock; oil sands solvent technologies

Fuel for cooking, heating and drying; plastics

Residential, commercial, industrial, and transportation

Butanes (normal and isobutane)

Petrochemical and petroleum refinery feedstock; motor gasoline blending; oil sands solvent technologies

Motor gasoline; solvents; plastics; synthetic rubber; lighter fuel

Industrial and transportation

Pentanes plus

Blending fuel for non-upgraded bitumen; additive to motor gasoline

Diluent; motor gasoline

Industrial and transportation

Global NGLs Production

Source: Eni

Global Demand Is Increasing

Source: IHS Markit

Source: IEA

Petrochemical Capacity

Ethane Supply and Demand

Propane Supply and Demand

Butane Supply and Demand

Pentanes plus Supply and Demand

US Production and Exports

Implied Pricing

Midstream Infrastructure: NGL plants

Province Facility #

Raw Gas

Capacity

(MMcfpd)

Sales Gas

Capacity

(MMcfpd)

Western

Canadian

Share

(%)

AB

Fractionators 11 - -

88 Straddle Plants 8 14,094 12,154

Gas Plants 623 36,851 34,614

BC

Fractionators 10 - -

11.5 Straddle Plants 1 597 548

Gas Plants 63 4,801 4,500

SK Gas Plants 32 219 173 0.5

Western

Canada

Fractionators 21 - -

100 Straddle Plants 9 14,690 12,702

Gas Plants 718 41,871 39,287

Natural Gas Production Forecast

Stakeholder Perceptions

• Limited Infrastructure development especially when compared to the

US

• Market Access Concerns by Rail

• Limited Local Demand for NGLs however the market is expected to

grow due to exports

• High fees for gas processing and transportation charges

• Governments to continue their support for the sector (e.g. incentives)

• Market and price transparency is limited

• Environmental concerns related to GHG emissions and plastic waste

• The Western Canadian NGLs market is supported by an abundant

resource base and accessible subsurface formations

• Infrastructure and export options remain both areas of weakness and

opportunity in the market

• Asian market demand is increasing and Western Canada has a

locational advantage

• The Gulf Coast NGLs market presents varying degrees of threats to

Western Canadian NGLs, fostered by higher levels of infrastructure

development, fiscal policies and a decreasing US reliance on Western

Canadian NGLs

Market Assessment

NGLs Market Opportunities

• Develop a market clearing price mechanism to increase transparency

for new entrants and foreign investors

• Export market development in particular for ethane/ethylene

• Greater collaboration between upstream and downstream NGL

infrastructure projects

• Greater collaboration between industry, government and First Nations

for regional development

• Foster long term sale and purchase agreements to provide long term

security of supply

• Liquified natural gas export projects – needed to maintain the demand

for methane

• Increased NGL recovery

Ethane Supply and Demand Outlook

Propane Production Projections

Butane Production Projections

Pentanes Plus Production Projections

Conclusions

• Natural gas production will continue to be the main driver of

NGLs supply growth in Western Canada

• Canada’s export market for NG and NGLs to the US is

shrinking. Alternative markets need to be found included value

added demand domestically

• Few companies involved with the market resulting in a

concentration of market power (processing and logistics)

• Lack of price transparency is limiting infrastructure and

petrochemical investment

• Gas processing

• Value added

• Rail

Thank You for Your Time

www.ceri.caCANADIAN ENERGY RESEARCH INSTITUTE

@CERI_CANADA

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ECONOMIC IMPACTS AND EMISSIONS PROFILES OF THE PETROCHEMICAL INDUSTRY IN CANADA