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Wave of Midstream Investment
Expected to Unleash Tidal Shift in
NGL Supplies
September 21, 2012
Houston Office 700 Louisiana | Suite 1900 | Houston, Texas 77002
London Office 6 Arlington Street | London SW1A 1RE | United Kingdom
Aberdeen Office 22 Waverley Place | Aberdeen, Scotland | AB10 1XP
*Important disclosures appear in Appendix D
Jeff Dietert Managing Director
Head of Equity Research
713.546.7245
Mark Reichman Director
713.546.7236
Julie Coutu Associate
713.546.7279
Jeff A. Dietert | 713.546.7245 | [email protected]
Agenda
2
Executive Summary
Infrastructure Additions in the Midstream Value Chain
Natural Gas Processing
NGL Pipelines
Fractionators
Mont Belvieu
Ethane Crackers
NGL Production Projections
Ethane Supply & Demand
Propane Supply & Demand
Butanes & Natural Gasoline Supply & Demand
Conclusions
Jeff A. Dietert | 713.546.7245 | [email protected]
Introduction
3
1. Recent NGL supply growth has been substantial.
2. Natural gas processing plant additions will contribute to further supply growth.
3. NGL pipeline capacity additions will ease bottlenecks.
4. Step function in fractionation capacity are expected to contribute to substantial growth in NGL
purity products.
5. We expect NGL supplies to experience robust growth in 2013 and 2014.
Jeff A. Dietert | 713.546.7245 | [email protected]
Midstream Value Chain
4
2012-2014 Infrastructure Growth:
Natural gas plants: 9 bcfd of capacity additions, +12% vs current 77.4 bcfd of capacity.
NGL pipelines: 1.7 mb/d of new pipelines, vs 2.3 mb/d of current NGL production.
Fractionation: 1.15 mb/d of new fractionators, about a 50% increase in U.S. capacity.
NGL production growth: Growth accelerating to 15% to 20% during 2013-2014.
Jeff A. Dietert | 713.546.7245 | [email protected]
U.S. NGL Pipeline Additions
5
Source: Various Company Sources, Simmons & Company International.
Project Description Sponsor Capacity kb/d Start-up
West/South Texas
Sand Hills Pipeline Permian to Mont Belvieu DCP Midstream 200 / 350 Q3'13
Enterprise Eagle Ford Eagle Ford to Mont Belvieu Enterprise Products 150 Q4'12
Enterprise Eagle Ford Eagle Ford to Mont Belvieu Enterprise Products 300 Q1'14
West Texas Gateway Winkler Co. to Jackson Co. TX ETP / Regency 200 Q4'12
Justice Pipeline Jackson Co. TX to Mont Belvieu ETP 340 Q4'12
Mid-Continent to Gulf Coast
Texas Express Skellytown, TX to Mont Belvieu EPD/EEP/APC/DPM 280 / 400 Q2'13
Southern Hills Conway, KS to Mont Belvieu DCP Midstream 150 mid-2013
Sterling III Medford, OK to Mont Belvieu ONEOK Partners 193 / 250 late 2013
Marcellus NGL Pipelines
Ranger Pipeline Langley KY, to South Shore, KY MarkWest 45 Q1'12
ATEX Pipeline Marcellus to Mont Belvieu Enterprise Products 125 / 190 Q1'14
Mariner West PA to Sarnia, Ontario MarkWest / SXL 50 Q3'13
Mariner East West PA to East PA MarkWest / SXL 65 2H'14
Rockies (Bakken) to Midcon
Bakken NGL Pipeline Bakken to southern WY ONEOK Partners 60 1H'13
Bakken NGL Pipeline Bakken to southern WY ONEOK Partners 75 Q3'14
Overland Pass Southern WY to Conway, KS OKS/WPZ 60 1H'13
Front Range NGL Pipeline Weld Co. CO to Skellytown, TX EPD/EEP/APC/DPM 150 / 230 Q4'13
Mid-America Pipeline Rockies to Hobbs, NM Enterprise Products 65 Q3'14
Mont Belvieu to Louisiana
Cajun Sibon NGL Pipeline Mont Belvieu to Louisiana Crosstex 70 1H'13
Bakken to Alberta, CA
Vantage Pipeline Tioga, ND to Empress, Alberta Mistral Energy 45 / 65 Q2'13
Jeff A. Dietert | 713.546.7245 | [email protected]
U.S Fractionation Capacity Additions
6
Source: EIA.
Estimated NGL Production
Ethane Propane N-Butane I-Butane P Plus
43% 29% 8% 8% 12%
Gulf CoastGulf Coast Fractionators PSX 43 90% 39 Q2'12 17 11 3 3 5
Bonnie View Fractionator Southcross Energy 12 90% 10 Jul '12 4 3 1 1 1
EPD Frac VI EPD 85 90% 77 Q4'12 33 22 6 6 9
MidContinentOKS Bushton Fractionator OKS 60 90% 54 Q4'12 23 16 4 4 6
TOTAL 2012 200 180 77 52 14 14 22
Gulf Coast
Sweeny CPChem 22 90% 20 Q1'13 9 6 2 2 2
Cedar Bayou Fractionation NGLS 100 90% 90 Q1'13 39 26 7 7 11
Lone Star ETP 100 90% 90 Q1'13 39 26 7 7 11
Eunice Fractionator XTEX 40 90% 36 1H'13 15 10 3 3 4
EPD Frac VII EPD 85 90% 77 Q4'13 33 22 6 6 9
EPD Frac VIII EPD 85 90% 77 Q4'13 33 22 6 6 9
Oneok MB2 OKS 75 90% 68 Q4'13 29 20 5 5 8
Northeast
Liberty Fractionator De-ethanization MWE 38 90% 34 mid '13 15 10 3 3 4
Liberty Majorsville De-ethanization MWE 38 90% 34 mid '13 15 10 3 3 4
Utica C3+ Fractionator MWE 60 90% 54 Q4'13 23 16 4 4 6
Caiman second train WPZ 30 90% 27 2013 12 8 2 2 3
TOTAL 2013 673 606 260 176 48 48 73
Gulf CoastLone Star ETP 100 90% 90 Q1'14 39 26 7 7 11
Oneok MB3 OKS 75 90% 68 Q4'14 29 20 5 5 8
Northeast
Utica De-ethanization capacity MWE 40 90% 36 Q1'14 15 10 3 3 4
Liberty Majorsville De-ethanization MWE 38 90% 34 mid '14 15 10 3 3 4
Caiman third train WPZ 30 90% 27 2014 12 8 2 2 3
TOTAL 2014 283 255 110 74 20 20 31
TOTAL US ADDITIONS 1,156 1,040 447 302 83 83 125
Capacit
y, kb/d
Utilizati
on %
Volume,
kb/dName, Location Owner, Operator Start-up
Jeff A. Dietert | 713.546.7245 | [email protected]
Mont Belvieu Infrastructure Additions
7
NGL Pipelines into Mont Belvieu
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2Q
'12
3Q
'12
4Q
'12
1Q
'13
2Q
'13
3Q
'13
4Q
'13
1Q
'14
2Q
'14
3Q
'14
4Q
'14
kb/d
Atex
EPD - EF
Sterling III
Sand Hills
South. Hills
TX Express
EPD - EF
Justice
New Frac Capacity
Mont Belvieu Fractionation Additions
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2Q
'12
3Q
'12
4Q
'12
1Q
'13
2Q
'13
3Q
'13
4Q
'13
1Q
'14
2Q
'14
3Q
'14
4Q
'14
kb/d
OKS MB3
ETP - LS
OKS MB2
EPD viii
EPD vii
ETP - LS
CBF
Sweeny
EPD vi
NGLs - BV
GCF
Source: Various Company Sources, Simmons & Company International.
Jeff A. Dietert | 713.546.7245 | [email protected]
U.S. Ethane Cracker Additions
8
Name, Location Owner, OperatorAnnual Capacity
MM tpy
Ethane
Consumption
(kb/d)
Start-up
St. Charles, LA Dow Chemical 0.6 35 end 2012
Channelview, TX LyondellBasell 0.2 14 2012
Lake Charles, LA Westlake Chemical 0.1 6 Q4'12
Lake Charles, LA Westlake Chemical 0.1 6 Fall 2014
Midwest LyondellBasell 0.05 3 2013
Chocolate Bayou, TX INEOS 0.2 13 2013
Geismar, LA Williams 0.3 16 Q3'13
Various BASF 0.6 35 Q4'13
La Porte, TX LyondellBasell 0.4 23 2014
Calvert City, KY Westlake Chemical 0.2 12 Q1'14
Expansions, Coversions & Restarts 2.7 163
Baytown, TX ExxonMobil Chemical 1.5 90 2016+
Point Comfort, TX Formosa Plastics 0.8 48 2016+
Ingleside, TX Mexichem / Oxychem 0.5 30 2016
Freeport, TX Dow Chemical 1.5 90 2017
Cedar Bayou, TX Chevron Phillips Chemical 1.5 90 TBA
Beaver County, PA Shell 1.0 60 TBA
Lake Charles, LA Sasol 1.0-1.4 72 TBA
Greenfield Additions 8.0 480
TOTAL Additions 10.7 643
Source: Various Company Sources, Simmons & Company International.
Jeff A. Dietert | 713.546.7245 | [email protected]
Historical and Projected NGL Production
9
Source: EIA, Simmons & Company International.
kb/d 2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e
Ethane 649 676 709 701 769 869 926 1,003 1,159 1,382 1,438
Y/Y Change 4% 5% -1% 10% 13% 7% 8% 16% 19% 4%
Propane 499 501 507 512 546 586 631 695 801 951 989
Y/Y Change 0% 1% 1% 7% 7% 8% 10% 15% 19% 4%
N-Butane 134 136 128 134 136 155 157 182 212 253 263
Y/Y Change 1% -6% 5% 1% 14% 1% 16% 16% 20% 4%
I-Butane 168 163 176 173 188 187 211 215 244 286 296
Y/Y Change -3% 8% -2% 9% -1% 13% 2% 14% 17% 4%
Pentanes Plus 266 263 263 264 271 277 291 305 349 411 427
Y/Y Change -1% 0% 0% 3% 2% 5% 5% 14% 18% 4%
Total NGLs 1,716 1,739 1,783 1,784 1,910 2,074 2,216 2,401 2,766 3,282 3,413
Y/Y Change 1% 3% 0% 7% 9% 7% 8% 15% 19% 4%
Jeff A. Dietert | 713.546.7245 | [email protected]
U.S. Ethane Supply/Demand
10
Source: EIA, Simmons & Company International.
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
mb
/d
Greenfield Crackers
Conversions/Restarts/Expansions
Implied Demand
Supply
kb/d 2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e 2016e 2017e
Gas Plant Production 649 676 709 701 769 869 926 1,003 1,159 1,382 1,438 1,438 1,438
Refinery & Blender Prod. 20 19 20 18 19 20 20 20 20 20 20 20 20
Imports 1 0 0 0 0 0 0 0 0 0 0 0 0
Total Supply 670 695 729 719 788 889 946 1,023 1,179 1,402 1,458 1,458 1,458
Implied Demand 660 707 744 685 807 880 950 950 950 950 950 950 950
Conversions/Restarts/Expansions 50 110 147 147 147 147
New Crackers 151 432
Exports 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Demand 660 707 744 685 807 880 950 1,000 1,060 1,097 1,097 1,248 1,529
Stock Build (draw) 10 (12) (15) 34 (19) 9 (4) 23 120 305 361 210 (71)
Jeff A. Dietert | 713.546.7245 | [email protected]
U.S. Propane Supply/Demand
11
Source: EIA, Various Company Sources, Simmons & Company International.
Propane Export Capacity
kb/d 2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e 2016e 2017e
Gas Plant Production 499 501 507 512 546 586 631 695 801 951 989 989 989
Refinery & Blender Prod. 540 543 562 519 537 560 552 552 552 552 552 552 552
Imports 233 228 182 185 147 121 158 158 158 158 158 158 158
Total Supply 1,272 1,272 1,251 1,216 1,230 1,267 1,341 1,405 1,511 1,661 1,699 1,699 1,699
Implied Demand 1,229 1,215 1,235 1,154 1,160 1,160 1,202 1,182 1,200 1,200 1,200 1,200 1,200
New PDH Units 70 98 98
Historical Exports 37 45 42 53 85 109 124 124 124 124 124 124 124
New Export Capacity 155 155 155 155 155
Total Demand 1,266 1,260 1,277 1,207 1,245 1,269 1,326 1,306 1,479 1,479 1,549 1,577 1,577
Stock Build (draw) 6 12 (26) 9 (15) (2) 15 99 32 182 150 122 122
Capacity Capacity Capacity Start-up
bbls/hr MB/month kb/d
USGC EPD 6,000 4.00 120 Existing
USGC EPD 6,000 3.50 55 Q4'12
USGC NGLS 5,000 3.00 100 Q3'13
Export
Facility
Owner,
Operator
Jeff A. Dietert | 713.546.7245 | [email protected]
Butanes and Pentanes Plus Supply/Demand
12
Normal Butane
Isobutane
Pentanes Plus
Source: EIA, Simmons & Company International.
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
mb
/d
Implied DemandRefinery & Blender Net InputNet ExportsSupply
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
e
20
13
e
20
14
e
20
15
e
20
16
e
20
17
e
mb
/d
Implied Demand
Refinery & Blender Net Input
Supply
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
mb
/d
Net ExportsImplied DemandRefinery & Blender Net InputSupply
Jeff A. Dietert | 713.546.7245 | [email protected]
Conclusions
13
1. Midstream infrastructure is experiencing a step-function increase in gas plant, NGL pipeline
and fractionation capacity.
2. NGL production growth is poised to accelerate in 2013 2014.
3. Ethane is expected to experience the greatest oversupply among purity products.
4. The petrochemical industry is expanding capacity to crack ethane, however the pace of
development is limited by the long-lead time associated with greenfield facilities.
5. The Rockies and Midcontinent regional bottlenecks are expected to be alleviated by 2014 due
to increased investment in new NGL pipelines
6. Butanes and pentane-plus products may have difficulty being absorbed into a declining U.S.
gasoline pool, and will likely need to be priced for use in the petrochemical pool or exports.
Jeff A. Dietert | 713.546.7245 | [email protected]
Analyst Certification:
I, Jeff Dietert, hereby certify that the views expressed in this research report to the best of my knowledge, accurately reflect my personal views about the subject
compan(ies) and its (their) securities; and that, I have not been, am not, and will not be receiving direct or indirect compensation in exchange for expressing the
specific recommendation(s) or views in this research report.
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Appendix D
15