canadian ngls outlook: “awash in liquids” - index :: ceri ngls outlook_wbpc may... · canadian...

Canadian NGLs Outlook: “Awash in Liquids”

Canadian Energy Research Institute

Dinara MillingtonCanadian Energy Research Institute

24th Williston Basin Petroleum ConferenceMay 24-26, 2016

Relevant • Independent • Objectivewww.ceri.ca

Relevant • Independent • Objectivewww.ceri.ca2

Canadian Energy Research Institute

Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, non-profit research institute specializing in the analysis of energy economics and relatedenvironmental policy issues in the energy production, transportation, and consumptionsectors.

Our mission is to provide relevant, independent, and objective economic research ofenergy and environmental issues to benefit business, government, academia and thepublic.

Our core supporters include the Canadian Government (Natural Resources Canada), theGovernment of Alberta (Alberta Energy), and the Canadian Association of PetroleumProducers (CAPP), Chemistry Industry Association of Canada (CIAC), Alberta’s IndustrialHeartland Association (AIHA), and the University of Calgary. In-kind support is alsoprovided by the Alberta Energy Regulator (AER) and Petroleum Services Association ofCanada (PSAC).

All of CERI’s research is placed in the public domain and can be accessed via our websiteat www.ceri.ca .

http://www.ceri.ca/


Agenda

Introduction

Supply and Demand Outlooks: Ethane Propane Butane

Key Uncertainties

Market Dynamics


NGLs

Raw natural gas recovered at a wellhead is comprised primarily of methane, but often contains other hydrocarbons and some contaminants. These other hydrocarbons, NGLs, consist of ethane, propane, butanes and pentanes plus.

NGLs are an important component of the Canadian energy mix:

Ethane is an essential feedstock for the Canadian petrochemical industry.

Propane is used for space heating in the residential and commercial sectors, and is exported in significant quantities to the U.S.

Butanes have various petrochemical applications and are used to produce refined petroleum products.

The majority of pentanes plus is also used as a blending component for heavy oil and bitumen.


NGLs


Ethane Supply & Demand Outlook: Western Canada26

3

255

236

251

263

276

303

268

231

214

254 29

8 281 26

5

275 26

6 321

321 40

6 372

377

378

400

412

428

453

468

486

503

530 530 530 541 561 565 559 524 490 484 508 556 568 595 607 627

685 684 767

825 826 829 841 850 867 894 915 935 956

0%

10%

20%

30%

40%

50%

60%

70%

-

200

400

600

800

1,000

1,200

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%

kb/d

WCSB Ethane Recovered (Western Canada + Alliance/Aux-Sable) Bakken Ethane on Vantage

Potential Ethane Left in Gas/Extracted in Other Markets Total Ethane Avaialble to Western Canada

Western Canada Derivative Capacity % of Ethane Recovered


Add’l Ethane could be extracted in Western Canada

It is estimated that only 52% of all C2 available to Western Canada (WCSB+ Bakken) is extracted. That means about half of the available ethane isbeing left in the gas stream.

Outlook indicates that percentage will fall below 50% by 2030.

Most ethane availability growth to come from BC gas (LNG projects).

US ethane rejection economics hurts Bakken producers the most. AB is aviable alternative C2 market Future Vantage pipeline expansion opportunity

More C2 could be extracted in the WCSB via gas streaming/new straddleplants/LNG C2 extraction. Ethane availability is not the issue, extraction andend-use infrastructure is.


Ethane Supply & Demand Outlook: Eastern Canada

-

10

20

30

40

50

60

70

80

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

kb/d

Mariner West: Marcellus/Utica Imports

Cochin: Conway E/P Imports

C2/C2=(C2eq.) Cochin Transfers

Total Eastern Canada Supply

Ontario Derivative Capacity (Ethane Req.)


Propane Supply & Demand Outlook15

8

140

151

128

119

117

110

102

83

76

69

74

75

74

69

75

87

103

103 116

115

108

103

101

98

96

92

88

88

243 213

228 216 213 218 219

199 189 199 216 226 219 222 230

259 286

317 333

362 365 364 365 368 371 376 378 381 389

-

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

kb/d

CAD Gas Plants Refineries Off-Gas Plants US Imports

Stock Changes Available for US/LPG Exports Total Domestic Demand TOTAL SUPPLY


Butane Supply & Demand Outlook42

36

32

31

28

24

26

28

58

26

25

18 39

35

36

34

35

33

33 50

47

45

41

38

36

35

35

35

36

118 115 111

96 103

119 123 114

156

121

97

111 121 118 120 123 126 125 127

147 147 148 146 145 146 147 148 150 151

(20)

-

20

40

60

80

100

120

140

160

180

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

kb/d

Total Gas Plants Refineries Off-gas Plants US Imports Stock ChangesStatistical Adjustment Avaialble for Exports TOTAL SUPPLY Domestic Demand


Key Uncertainties1. NGLs are a by-product of natural gas production, and NGL supply is

sensitive to Canadian natural gas supply uncertainties. 2. NGL content varies between geological formations, the mix of natural gas

sources also has an impact on future NGL supply.3. North American NGL markets have changed considerably in recent years,

with rapidly increasing natural gas production in the U.S. leading to increased NGL supply.

4. Future prices of propane and other NGLs will impact the economics of targeting liquids rich natural gas plays and represents an uncertainty for NGL production.

5. Uncertainty regarding the timing and magnitude of West Coast LNG projects will affect western Canadian natural gas production, and thus NGL production.

6. Prolonged low crude oil prices could result in the delay of new projects and expansions in the oil sands, thus reducing demand for diluent.


Market Elements and Dynamics

Canada has vast and diverse natural gas and NGLs resources, and thecountry is consistently ranked as one of the best jurisdictions for doingbusiness across the world.

Canada is one of the largest producers of natural gas and NGLs on a globalscale.

Western Canada accounts for the majority of natural gas/NGLs production, with Alberta being the largest producer in the country.

The shale gas revolution in North America has resulted in a series of eventsthat has led to a situation of increasing availability and production of NGLsin Canada.

Canada maintains an extensive, robust, and integrated set ofmidstream infrastructure assets that connects producers in WesternCanada to end-users and markets across the continent.


Canada’s petrochemical industry is primarily based on the productionof olefins and its derivatives, and uses NGLs as its primary feedstock.

Canada’s largest petrochemical cluster is located in Alberta.

Recent and ongoing investments in midstream and downstream assetsindicate market players’ confidence in increased long-term availabilityof NGLs in Canada.

LNG represents a significant opportunity to diversify markets forCanadian natural gas, holds the potential for large investments ininfrastructure, but also large-scale increases in NGLs extraction.

Given the outlook for natural gas and ongoing dynamics in NGLsmarkets in Canada, NGLs are expected to increasingly be availablein surplus to local demand volumes over the long-term.

Market Elements and Dynamics (cont’d)


Market Elements and Dynamics (cont’d)

Industry players are looking for ways to monetize these NGLs via the expansion of existing industries (such as petrochemicals) orexports to markets in the Asia-Pacific region.

Global energy pricing dynamics have resulted in sustained lowfeedstock prices for petrochemical producers in North America,even more so in Canada.

Open access to a large resource base, a business and investor-friendly environment, increasing NGLs availability, ongoinginfrastructure investments, and low feedstock prices, present anopportunity for investment in Canada and Alberta across thevalue chain


Thank you!

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canadian ngls outlook: “awash in liquids” - index :: ceri ngls outlook_wbpc may... · canadian...

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