Download - Midwest Fractionation Ovreview.pdf

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Midwest Fractionation Overview Platts NGLs Conference| September 24, 2013

President & CEO Bill McAdam


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Slide 2

Outline 1. Basics of Gathering, Processing, Fractionation, Storage

2. Overview of North American NGL Supply/Demand

3. What drove building of Midwest fractionation facilities?

4. What will drive expansion of Midwest fractionation?

5. Summary


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Slide 3

Natural Gas and NGL Value Chain Natural Gas Production

Processing & Treating

Natural Gas Transmissio

n

Straddle Plant

Natural Gas Transmissio

n

NGL Fractionation

NGL Storage

NGL Product Transportation

Natural Gas Storage

Residential/ Commercial/ Industrial

Power Plants

Natural Gas Distribution

Spec NGL Products

C2+ NGL Mix Transportation

Refined Products

Petrochem Industry

Residential/ Commercial

C2+ or C3+

C2+ or C3+


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Slide 4

Key Drivers to locate/build Facilities 1. Location of Raw Gas Production

2. Access to “salt” underground storage

3. Quality/Quantity of the Raw Gas

4. Natural Gas specs to transport processed Gas

5. Proximity to NGL mix takeaway systems

Truck, Rail, Pipeline

6. Proximity to NGL spec product customers

Fractionation primarily built close to end-user demand

Producers are faced with three primary decisions with regards to how best to handle their Raw (NGL rich) Gas:

1. Extract NGL Mix in field and transport to Fractionate in selected Market.

2. Extract NGLs, Fractionate in the field and distribute to local Markets.

3. Transport NGL rich gas to Market, Extract/Fractionate in this Market.


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Slide 5

Typical NGL Schematic


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C2 C3 C4s C5+ Total Supply (mmbpd) Gas Plants 1.2 0.8 0.5 0.4 2.9 Refineries - 0.6 0.1 0.0 0.7 Total Supply 1.2 1.4 0.6 0.4 3.6

Demand (mmbpd) Chemical feedstock 1.2 0.6 0.2 - 2.0 Heating/Commercial/Ind’l - 0.7 - - 0.7 Refinery (Gasoline Blending) - - 0.3 0.1 0.4 Heavy Oil Diluent - - - 0.2 0.2 Other, Net Exports - 0.1 0.1 0.1 0.3 Total Demand 1.2 1.4 0.6 0.4 3.6 Source: EIA, NEB, Petral, IHS

North American NGL Supply/Demand Snapshot: 2012


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Slide 7

Alliance Pipeline

Aux Sable

Rich Gas Shales will be Developed and Add to NGL Supply


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Slide 8

C2 C3 C4s C5+ Supply Direction Gas Plants UP UP UP UP Refineries - flat- flat- flat- Demand Direction Petrochemical Feedstock UP balance up up? Heating/Commercial/Ind’l - flat/down - - Refinery (Gasoline Blending) - - down down Heavy Oil Diluent - - up UP Dehydro (PDH/BDH), MTBE - UP ? - Net Exports - UP up -

Key Trends 1. NGL production up from Gas Plants (“oily” gas focus in shales) 2. Ethane balanced by increased Petchem feedstock demand 3. Propane balanced by increased exports, PDH 4. Butanes balanced by increased exports, MTBE

North American NGL Supply/Demand Trends 2013 - 2020


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Slide 9

Mont Belvieu

Conway

Sarnia (2.6 B lbs/Yr)

Fort Saskatchewan (2.6 B lbs/Yr)

Chicago

ENTERPRISE

ONEOK

COCHIN

ENBRIDGE

ALLIANCE

PTC Empress

Salt Storage

ENTERPRISE

Cochrane

AEGS

North American Ethylene Plants

Extraction Facilities

Ethylene Plant

Joffre (6.0 B lbs/Yr)

USGC (55 B lbs/Yr)

Clinton (1.1 B lbs/Yr)

Morris (1.3 B lbs/Yr)

Calvert City (0.4 B lbs/yr)


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Slide 10

North American NGL Infrastructure…in transition


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Slide 11

Key Midwest Areas Conventional (historic):

Conway area (Conway/Bushton/Hutchinson/Medford)

Edmonton/Fort Saskatchewan

Sarnia

Channahon

New Areas driven by Shale Plays:

Bakken (ND) other

Marcellus/Utica (PA/OH/WV)

Montney/Duvernay (AB/BC)


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Slide 12

Conway Area Location of Supply: KS, CO, WY, UT, ND

Supply Logistics: Primarily gathering pipelines from field extraction plants NGL mix (C2+)

Local Markets: Refiners

Regional Markets: a. C2 Crackers in IA, IL

b. Refiners in IL, IN

c. Propane markets in WI, IL, IN, MI

d. EP, NGL product markets in USGC (MB)

Facilities: no adjacent Extraction Capacity

515 kbd Fractionation Capacity (+)

5 kbd Isomerization Capacity

Storage: ~50 mmbbls


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Slide 13

Conway Area


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Edmonton/Fort Saskatchewan Area Location of Supply: AB, BC

Transport Source: Pipelines NGL mix (C2+, C3+) via Pembina, Plains, Keyera

Local Markets: Refiners in Edmonton, Petchems in FSK/Joffre,

Regional Markets: Refiners (SK, MT)

Propane markets in AB, BC, SK, US upper Midwest

Heavy oil blending

Facilities: 275 kbd Fractionation Capacity (+)

Storage: ~40 mmbbls


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Slide 15

Edmonton/Fort Saskatchewan Area

Major Straddle Plants Estimated Capacity (MMcf/d) Cochrane 2,500 Empress 9,700

Other 1,200 Total 13,400

Source: ERCB; Various Company Public Reports

Major Fractionators

(Fort Saskatchewan) Estimated Capacity (kbd)

Redwater (C2+) 65 (25/40)

Dow (C2+) 70 (35/35)

Keyera (C3+) 35 (C3+ only)

Plains (C3+) 50 (C3+ only)

Total 135 C2+, 85 C3/C4+

McMahon/Younger

Judy Creek

Fort SK

Edmonton

West Pembina

Caroline

Harmattan Cochrane

Empress

Waterton

AEGS

Alliance

Cochin

Pembina

Enbridge


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Slide 16

Sarnia Area

Location of Supply: AB, BC

Transport Source: Pipeline NGL mix (C3+) via Enbridge

(note: Cochin is essentially zero)

Local Markets: Refiners, Petchems in Sarnia

Regional Markets: a. Refiners in Ontario

b. Propane markets in ON, PQ, MI, US NE

Facilities: 150 kbd Fractionation Capacity (flat)

Storage: ~25 mmbbls


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Slide 17

Sarnia Area


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Slide 18

North Dakota: Bakken Area Location of Supply: Bakken Shale Oil/Gas

Transport Source: Gas Gathering systems from wellhead to field extraction, fractionation and/or “conditioning”

Local Markets: seasonal market for propane, some butane

Regional Markets: a. Rich gas to Chicago via Aux Sable/Alliance

b. C2 to Empress via Vantage (Hess)

b. Propane markets via truck or rail

c. C4/C5+ by rail to Alberta diluent market

d. NGL mix moved to Conway (pipeline via OneOK)


Storage: essentially 0 mmbbls


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Slide 19

North Dakota: Bakken Area

Palermo Conditioning Plant Prairie Rose Pipeline

Alliance Pipeline

Conditioning Plant


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Slide 20

Marcellus/Utica Area

Location of Supply: Marcellus/Utica Shale gas

Transport Source: Gas gathering, local extraction and fractionation (focused on C3 and C4+)

Local Markets: PA, OH, WV propane markets, Refiners

Regional Markets: a. Pipeline C2 to Sarnia via Mariner West

b. Pipeline C2/EP to USGC (being developed)

c. Pipeline C2+ to USGC (being developed)

Facilities: 100 kbd Fractionation Capacity (+++)

Storage: ~ 3 mmbbls (C3/C4 underground)


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Slide 21

Marcellus/Utica Area


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Slide 22

Chicago Area

Location of Supply: AB, BC, ND

Transport Source: High pressure rich gas via Alliance Pipeline

Local Markets: Chicago Refiners (iC4 for Alkylation, nC4 for winter gasoline), Lyondell Morris (C2),

Regional Markets: a. Lyondell Clinton (C2)

b. Propane markets IL,WI,IN,MI,OH,PADD IA&B

c. Diluent Market in Alberta (C5+)


10 kbd Isomerization Capacity

Storage: 0.5 mmbbls


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Slide 23

Chicago Area

Aux Sable NGL Extraction and Fractionation Facilities

Alliance Pipeline


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Slide 24

Aux Sable Operations


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Alliance Pipeline and Aux Sable

Alliance Owns and operates a 450 mile gathering system in NE BC and NW Alberta with 52 receipt

points starting at Highway, BC

Owns and operates a 1850 mile, 1.6 bcf/d, high pressure, rich gas transportation pipeline to Chicago, IL with 7 primary delivery points (Nicor, NGPL, Integrys, MW, Vector, ANR, ASLP)

Two receipt points in ND (Bantry (operating) and Tioga (under construction))

Aux Sable Owns Septimus Gas Plants (60 mmcfd) & Septimus Pipeline (operated by Crew)

Owns and operates the Palermo Conditioning Plant (80 mmcfd) and the Prairie Rose Pipeline (110 mmcfd) in ND

Owns and operates a 2.1 bcf/d world scale extraction/fractionation plant at terminus of Alliance (Channahon, IL)

Developed NGL access to end-use markets in US north-east, US mid-west and USGC via pipelines, rail and truck

Developed capability to offload NGL mixes via railcar from shale plays

“Gathering and Processing System”


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Slide 26

Alliance and Aux Sable Position in the NGL/Gas

Natural Gas Production

Processing & Treating

NGL Product Transportation

and Storage

Refined Products

Petrochem Industry

Residential/ Commercial

Natural Gas Storage

Residential/ Commercial/

Industrial Power Plants

Natural Gas Distribution

Exports

Value Chain


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Slide 27

Aux Sable Midstream Operations


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Slide 28

Gathering Systems Connected to ASM’s Palermo Conditioning Plant


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Slide 29

Aux Sable Canada Operations


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Slide 30

Simplified Process Flow Diagram

Inlet Composition Mol% C1 (Methane): 90.00% C2 (Ethane): 7.00% C3 (Propane): 2.00% IC4 (Isobutane): 0.40% NC4 (Normal Butane): 0.45% C5+ (Pentanes Plus): 0.15%

Total: 100%


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Slide 31

Aux Sable’s Channahon NGL Facility


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Slide 32

What drove building of current Midwest fractionation facilities?

1. Location of raw gas production

2. Proximity to salt storage

3. Local/regional need for one or more spec products

C2 in Alberta (Joffre/FSK), C2/EP for Equistar, C2 in Sarnia for NovaChem/EssoChem

seasonal propane markets in populated areas

iC4 for Alkylation, nC4 for gasoline blending

4. Aggregate NGL mix via pipelines to obtain scale for fractionation facilities

5. “Straddle” gas to extract NGLs at high gas volume points (Empress/Cochrane)

C2 to Joffre and C3+ mix moved to fractionation locations (FSK or Sarnia)

6. Aux Sable-Alliance rich gas system minimizes field extraction in production region, reduces effective cost of gas transport and centralizes extraction/fractionation in a demand location (Chicago)


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Slide 33

Midwest Fractionation Capacity by Location

Fractionation Location 2004 2012

Conway area 400 515

Edmonton/FSK 225 275

Sarnia 150 150

Channahon 85 102

Marcellus/Utica N/A 100

North Dakota 30 45

Total ~900 kbd ~1200 kbd

Source: PIRA, IHS, Various Company

All values shown in kbd.


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Slide 34

What will drive expansion of Midwest fractionation facilities?

1. Location of raw gas production

rich shale gas production has been the prime driver since 2005/2006 and will continue to drive facility needs in the future

2. Local/regional need for one or more spec products

Up to the saturation point

Need to address seasonal demand versus ratable supply without access to cost effective storage

Provide feedstock for “Midwest” petchems that want to expand on C2 feedstock

Isomerization facilities (new or expanded) may be harder to justify in face of flat demand from refiners and increasing iC4 in raw gas production

3. Conversion of existing pipeline infrastructure to move NGL mix to USGC fractionators will result when local markets are saturated

4. Leverage Aux Sable-Alliance rich gas system to minimize new field extraction in production region, reduce cost of gas transport and economically expand fractionation in Chicago


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Slide 35

Midwest Fractionation Capacity by Location

Fractionation Location 2004 2012 Estimated

Future Capacity

Conway area 400 515 575

Edmonton/FSK 225 275 325

Sarnia 150 150 150

Channahon 85 102 140

Marcellus/Utica N/A 100 475

North Dakota 30 45 60

Total ~900 kbd ~1200 kbd ~1,700 kbd

Source: PIRA, IHS, Various Company

All values shown in kbd.


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Slide 36

Summary Midwest Fractionation facilities will be expanded by about 500 kbd,

driven by growth in end-user needs Ethane demand to support petchem growth at existing or new sites

Overall Propane demand projected to be flat/declining in Midwest. Backing out supply delivered into PADD 1A and 1B will continue.

Refinery demands for iC4/nC4 projected to be flat or perhaps decline with lower overall demand and requirement to blend ethanol

C5+ demand for diluent in Alberta is growing

Midwest demand for spec NGLs is becoming saturated Focus is now turning on delivering y-Grade to USGC facilities versus further

expanding facilities currently under construction

Industry now looking to access international markets for C3/C4s

Expansion of ethane petchem industry will grow modestly in the Midwest with most growth concentrated in USGC

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