Exports of LNG and LPG’s Why Now?

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Exports of LNG and LPG’sWhy Now?

Canadian Energy Research Institute

Peter HowardCanadian Energy Research Institute

April, 2014


Canadian Energy Research InstituteUpcoming Study Releases

Natural Gas Liquids (NGLs) in North America: An UpdatePart I – UpstreamForthcoming April 2014

Natural Gas Liquids (NGLs) in North America: An UpdatePart II – Midstream and Downstream InfrastructureForthcoming April 2014

Natural Gas Liquids (NGLs) in North America: An UpdatePart III – Market FundamentalsForthcoming April 2014



Natural Gas Liquids (NGLs) in North America: An UpdatePart IV – Global Markets and OpportunitiesForthcoming April 2014

Natural Gas Liquids (NGLs) in North America: An UpdatePart V – Future OutlookForthcoming May 2014

An Economic Analysis of TransCanada’s Energy East Pipeline ProjectForthcoming April 2014



Oil PathwaysForthcoming May 2014

Canadian Oil Sands Supply Costs and Development Projects (2013-2047)Forthcoming May 2014


The Story Starts Here!

North American Natural Gas Market (2013-2030)


North American Natural Gas Industry “A Tale of Two Countries”

2003 2004 2005 2006 2007 2008 2009 2010 20110

2000

4000

6000

8000

10000

12000

14000

16000

18000

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Total Complete Vertical Gas WellsTotal Completed Horizontal Gas WellsPercentage Horizontal Gas Wells

Conn

ecte

d Ga

s Wel

ls

Perc

enta

ge H

orizo

ntal

Wel

ls 2013 Alberta Gas Well Licenses• 1077 Horizontal Wells (76%)• 244 Slant/Deviated (17%)• 89 Vertical (6%) Total 1410 Gas Directed Well Licences

20052007

20092011

20132015

20172019

20212023

20252027

20290

2,0004,0006,0008,000

10,00012,00014,00016,00018,00020,00022,00024,000

Marcellus Supply: Full Speed AheadMarcellus Supply: Nowhere Fast

Gas

Pro

ducti

on (m

mcf

/day

)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

17 to 22 Bcf/day


Emerging supply sources: inter-basin gas-on-gas competition

Images from US EIA and Ziff/NEB


20102011

20122013

20142015

20162017

20182019

20202021

20222023

20242025

20262027

20282029

20300

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Export:Kingsgate Export:Northern Border Export:Alliance Export: TCPL Mainline

Deliv

ered

Vol

ume

(mm

cf/d

ay)

North American Natural Gas Demand PathwaysWCSB Export Volumes: LNG Tsunami (without LNG)

- 4.8 bcf/day


North American Natural Gas Demand PathwaysWCSB Production Forecast: LNG Tsunami (without LNG)

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

2031

2032

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

AB Solution Gas Alberta Alberta CBM British Columbia Saskatchewan Quebec

Mar

keta

ble

Natu

ral G

as (m

mcf

/day

)

Forecast


North American NGL PathwaysWCSB NGL Recovery Forecast: Ethane

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300

50,000

100,000

150,000

200,000

250,000

300,000

0

50,000

100,000

150,000

200,000

250,000

300,000

Taylor Straddle Plant (BC) Empress Straddle Plant Cochrane Straddle PlantAlberta Field Plants Other E+P Mixed Streams Vantage PipelineTotal Historical Ethane Recovered Ethane Cracking Capacity

Etha

ne R

ecov

ered

(bbl

s/da

y)


Global Competition for theAsia-Pacific Market


NE British Columbia versus

NW Alberta

1

Kitimat LNG 0.7 BCFPD

LNG Canada 1.6 BCFPDLNG Canada Expansion 1.6 BCFPDBC LNG Co-Op 0.1 BCFPD

Prince Rupert LNG 1.8 BCFPD

Pacific North-West LNG1.6 BCFPD

Kitisault Energy Project

Woodfibre LNG

Imperial Oil/Exxon LNG

Altagas LNG (West Coast)Nexen LNG (West Coast)

Pacific Trail Pipeline 1 BCFPDCoastal GasLink Pipeline 1.7 BCFPD (initial)Prince Rupert Gas Transmission 2 BCFPDBG/Spectra Pipeline (System 4.2 BCFPD)Pacific Northern Gas Looping

North American Natural Gas Demand PathwaysBC LNG Projects


ChinaKoreaJapanIndia

Alaska LNG 4.5 bcf/day

Kitimat LNGLNG Canada

Pacific Northwest LNGWest Coast LNG

Prince Rupert LNGWoodfibre LNG

Up to 20 bcf/day

Jordon CoveOregon LNG

Sabine PassFreeport LNGCameron LNG

Dominion Cove LNGLake Charles LNG

Corpus Christi LNGUp to 35 bcf/day

Australia OperatingAustralia Under Construction

Australia Proposed(2.5 bcf/day)

RussiaSakhalin Island LNG

(1.1 bcf/day)Pipeline (2.1 bcf/day)

Competition to Supply LNG in the Asia-Pacific Basin2012 LNG Trade (average per day)

Qatar LNG (8 Operating)

(Total 10.9 bcf/day)(8.0 bcf/day)

MozambiqueAnadarko

Shell Up to

6.5 bcf/day

West AfricaIndonesiaMalaysia

(7.4 bcf/day)

3.2 – 11.3 – 16.0 bcf/day

Oregon LNG


How Competitive is Western Canada?


Economic Viability of Gas Developments in the WCSBA 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.


Western Canada What Makes the Gas World WorkBC Montney Supply Cost Example

12 BBLS/MMCF

(Original)

DRY 10 bbls/MMcf

20bbls/MMcf

30bbls/MMcf

40 bbls/MMcf

50 bbls/MMcf

60 bbls/MMcf

70 bbls/MMcf

80 bbls/MMcf

90 bbls/MMcf

100 bbls/MMcf

110 bbls/MMcf

120 bbls/MMcf

$-

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

$5.5

$6.0

$6.5

$7.0

$3.8 $3.8 $3.9 $3.4

$3.0 $2.5

$2.1 $1.7

$1.3 $1.0

$0.7 $0.4 $0.2

$0.8 $-

$0.7 $1.3 $2.0 $2.6 $3.2 $3.8 $4.3 $4.9 $5.4 $5.8 $6.2 $6.5

$4.5

$3.8

$4.5 $4.7

$4.9 $5.1

$5.3 $5.5

$5.7 $5.8

$6.0 $6.2 $6.4 $6.5

Liquids Portion Gas Portion Revenue March 2012 Intra AB NIT Price ($/mcf)

$/ m

cf

2013 Average NIT/AECO Price

Average Liquid Content (40 bbls/mmcf)


Economic Viability of Gas Developments in the WCSBSupply Cost Results

Area 3

Area 11

Area 10

Area 13Area 9

Area 15

Area 14

Area 34-F5000

Area 7

Area 16Area 6

Area 18

Area 14-5240

Area 21

Area 10-3009

Area 19

Area 13-3100

Area 13-2640Area 4

Area 2

Area 13-3480Area 8

Area 10-3000$0

$2

$4

$6

$8

$10

$12

0

20

40

60

80

100

120Supply cost - gas portionLiquid content (bbls/mmcf)

Supp

ly C

sot (

$/m

cf)

Aver

age

Liqu

ids C

onte

nt (b

bls/

mm

cf)

Average Market Price 2013 (AECO C)


2013 Gas DirectedLicences

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)


Alberta• Encana

292• Peyto

116• Shell

84• Paramount

67• Tourmaline

70• Bonavista

61• Apache

48• Husky

43• Seven Generations

44

• 9 producers 825• 60% of total licences

• Total Gas Licences (AB) 1410

British Columbia• Shell

219• Progress Energy

180• Encana

94• CNRL

59• ARC Resources

74

• 5 producers 626• 70% of total licences

• Total Licences (BC) 901

North American Natural Gas Demand PathwaysNew Gas Directed Licences (2013)


Coastal GasLink1.7 Bcf/day initial3.2 Bcf/day ultimate

LNG CanadaKitimat1.6 Bcf/day initial3.2 Bcf/day ultimate

Prince Rupert GasTransmission2.0 Bcf/day

Pacific North-West LNG1.6 Bcf/dayPrince Rupert

TCPL Groundbirch Pipeline

BG-Spectra4.2 Bcf/day


North American Natural Gas Demand PathwaysWest Coast Competition: Canada versus the United States

Oregon LNG Jordan Cove LNG

Canada LNG Kitimat LNG Sabine Pass with Panama

Canal

0

2

4

6

8

10

12

14

16

18

2013 Average Spot Price Japan

Average Oil-Linked Price Japan @ 90$/Bbl oil

10.49 10.68

9.8810.48

9.39

Regasification LowCharter JapanCombinedLiquefaction Pipeline Toll ApproxSpot HUB PriceDedicated Pipeline TollField Gate Supply Cost2013 Average Spot Price JapanAverage Oil-Linked Price Japan @ 90$/Bbl oilTotal

USD

$/M

MBt

u


Producer Optionality?


North American NGL PathwaysProducer Options: Alberta Market(Field Separation)

Alberta Market (AECO)

Edmonton Diluent

Edmonton Butane

Edmonton Propane

AB Ethane Market

Gas to Liquids

Methanol

LNG Hot Gas

LNG

LPG (Butane)LPG (Propane)EthaneMethanol


North American NGL PathwaysProducer Options: Alberta Market(Field Shallow cut plant)


Edmonton Diluent

Edmonton Butane

Edmonton Propane

AB Ethane Market

Gas to Liquids

Methanol

LNG Hot Gas

LNG



North American NGL PathwaysProducer Options: Alberta Market(Field Deep Cut plant)


Edmonton Diluent

Edmonton Butane

Edmonton Propane

AB Ethane Market

Gas to Liquids

Methanol

LNG Hot Gas

LNG



North American NGL PathwaysProducer Options: LNG Exports, LPG Exports


Edmonton Diluent

Edmonton Butane

Edmonton Propane

AB Ethane Market

Gas to Liquids

Methanol

LNG Hot Gas

LNG



North American NGL PathwaysProducer Options: LNG Exports


Edmonton Diluent

Edmonton Butane

Edmonton Propane

AB Ethane Market

Gas to Liquids

Methanol

LNG Hot Gas

LNG



North American NGL PathwaysProducer Options: Alberta Market – LPG Exports


Edmonton Diluent

Edmonton Butane

Edmonton Propane

AB Ethane Market

Gas to Liquids

Methanol

LNG Hot Gas

LNG



North American NGL PathwaysBC Montney NGL Recovery Forecast: Propane, Butane

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 250

5,00010,00015,00020,00025,00030,00035,00040,00045,00050,00055,00060,00065,000

McMahon Plant Younger Plant Other Plants Shell LNG SupplyProgress LNG Supply Total Propane Recovery Historical

BC P

lant

s: Pr

opan

e Re

cove

ry

(bbl

s/da

y)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 250

5,00010,00015,00020,00025,00030,00035,00040,00045,00050,00055,00060,00065,000

McMahon Plant Younger Plant Other PlantsShell LNG Supply Progress LNG Supply Total Butane Recovery

BC P

lant

s: Pr

opan

e Re

cove

ry

(bbl

s/da

y) Butane to Edmonton ?Butane to Global Market ?

Propane to Edmonton ?Propane to Global Market ?


Let the Games Begin?


North American Natural Gas Demand PathwaysReference Case: LNG Export Potential to the Pacific Basin

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300

10

20

30

40

50

60

Other supply sourcesUnited States Potential LiquefactionUnited States LiquefactionCanada LiquefactionEast Africa Potential LiquefactionAustralian LiquefactionMiddle East Liquefaction Asian LNG Demand

BCFP

D



20112012

20132014

20152016

20172018

20192020

20212022

20232024

20252026

20272028

20292030

0

10

20

30

40

50

60

Other supply sourcesUnited States Potential LiquefactionUnited States LiquefactionCanada LiquefactionEast Africa Potential LiquefactionAustralian LiquefactionMiddle East Liquefaction Asian LNG DemandTotal Demand

BCFP

D

Russian Gas by Pipeline (6 bcf/day)

Lower 48Sabine Pass (UC)

Freeport (AA)Cameron LNG (AA)Oregon LNG (AA)Up to 4 bcf/day

UC = Under ConstructionAA = Awaiting Final Approvals



20112012

20132014

20152016

20172018

20192020

20212022

20232024

20252026

20272028

20292030

0

10

20

30

40

50

60

Other supply sourcesUnited States Potential LiquefactionEast Africa Potential LiquefactionCanada LiquefactionUnited States LiquefactionAustralian LiquefactionMiddle East Liquefaction Asian LNG Demand

BCFP

D

BC LNG Projects2 Projects (AFID) Up to 3 bcf/day

BC LNG Projects1 Project

Maybe!!!!

ADIF= Awaiting Final Investment Decision


20112012

20132014

20152016

20172018

20192020

20212022

20232024

20252026

20272028

20292030

0

10

20

30

40

50

60

United States Potential LiquefactionOther supply sourcesEast Africa Potential LiquefactionCanada LiquefactionUnited States LiquefactionAustralian LiquefactionMiddle East Liquefaction Asian LNG Demand

BCFP

DNorth American Natural Gas Demand PathwaysReference Case: LNG Export Potential to the Pacific Basin

Asia Pacific LNG

Pinch Point“GAS Olympics”


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

High

Low

Risks Associated with BC LNG Projects


Global NGL’s and Naphtha Petrochemical FeedstockIEA Forecast

20022003

20042005

20062007

20082009

20102011

20122013

20142015

20162017

20182019

20202021

20222023

20242025

20262027

20282029

20302031

20322033

20342035

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

7.8 8.1 8.6 8.5 8.7

9.1 8.8

9.2 9.8

10.2 10.6 10.8 11.0 11.2 11.5 11.7 11.9 12.2 12.4 12.5 12.7 12.8 13.0 13.1 13.2 13.3 13.4 13.5 13.6 13.7 13.8 13.9 14.0 14.1

Naphtha/ Heavy Feeds

LPG

Ethane

World Total

MM

b/d


Canadian Energy Research Institute

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Exports of LNG and LPG’s Why Now?

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