Kinder Morgan Cochin Marcellus Lateral: Getting Marcellus NGLs to Market

Transcription

1 Kinder Morgan Cochin Marcellus Lateral: Getting Marcellus NGLs to Market Hart Energy s nd Annual Marcellus Midstream Conference Pittsburgh, Pennsylvania Karen S. Kabin Office Cell Karen_Kabin@KinderMorgan.com Hart Energy s nd Marcellus Midstream Conference March, 011 1

2 Forward Looking Statements This presentation contains forward looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results or the ability to generate revenues, income or cash flow or to make distributions are forward-looking statements. Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations of Kinder Morgan Energy Partners, L.P. and Kinder Morgan Management, LLC may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond Kinder Morgan's ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future, including, among others, the ability to achieve synergies and revenue growth; national, international, regional and local economic, competitive and regulatory conditions and developments; technological developments; capital and credit markets conditions; inflation rates; interest rates; the political and economic stability of oil producing nations; energy markets; weather conditions; environmental conditions; business and regulatory or legal decisions; the pace of deregulation of retail natural gas and electricity and certain agricultural products; the timing and success of business development efforts; terrorism; and other uncertainties. There is no assurance that any of the actions, events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on our results of operations or financial condition. Because of these uncertainties, you are cautioned not to put undue reliance on any forward-looking statement. Hart Energy s nd Marcellus Midstream Conference March, 011

3 KMI / KMP: Unmatched Footprint Jet Trans Fuel Mountain Pipeline Cochin Largest independent transporter of petroleum products in the U.S. nd largest transporter of natural gas in U.S. (a) Largest provider of contracted natural gas treating services in U.S. Largest transporter of CO in U.S. nd largest oil producer in Texas Largest independent terminal operator in U.S. Only Oilsands pipeline serving Vancouver B.C. / Washington state (a) Includes NGPL Pacific Northern PRODUCTS PIPELINES PRODUCTS PIPELINES TERMINALS REX Express KMIGT FAYETTEVILLE EXPRESS PIPELINE NATURAL GAS STORAGE Trailblazer TransColorado 3 Platte CALNEV FEP 3 Pacific KMCO Katz SACROC KinderHawk ESPL MEP Claytonville Wink Cypress KMTejas Yates 4 KMTP 9 5 KMLP Eagle Ford CO PIPELINES CO OIL FIELDS TRANSMIX FACILITIES NATURAL GAS PROCESSING CRUDE OIL PIPELINES (,3,8) PETROLEUM PIPELINES PETROLEUM PIPELINES TERMINALS INDICATES NUMBER OF FACILITIES IN AREA NATURAL GAS PIPELINES GAS TREATERS TERMINALS KM HEADQUARTERS 4 REX 3 3 Plantation Central Florida 4 Hart Energy s nd Marcellus Midstream Conference March, 011 3

4 Kinder Morgan s Proven Track Record Placed in-service over,900 miles of new pipeline from Project mileage between 41 (KMIGT Colorado Lateral) and 1,679 (REX) Pipeline size between 10-inch and 4-inch Products transported include natural gas, crude, refined products, and CO Construction of REX East through Ohio completed late 009 Pictures above from HDD of Little Red River in Arkansas (FEP) Hart Energy s nd Marcellus Midstream Conference March, 011 4

5 Kinder Morgan s Proven Track Record Kinder Morgan is committed to public safety, protection of the environment, and operation of facilities in compliance with all applicable rules & regulations Kinder Morgan outperforms the industry averages in virtually all safety and release categories OSHA Total Recordable Injury Rate (TRIR) and Company Vehicle Accidents are below industry averages for all business units OSHA Days Away Restricted Time (DART) below industry averages for 4 of 5 business units KM Contractor OSHA DART and TRIR below industry averages for all US business units Onshore Pipeline Right-of-Way releases are significantly below industry averages on both a mileage and bbl-mileage basis Current detailed statistics available at Hart Energy s nd Marcellus Midstream Conference March, 011 5

6 Cochin Pipeline Description 1900-mile common carrier pipeline Transports propane from Fort Saskatchewan, Alberta to Windsor, Ontario Fort Saskatchewan Edmonton Calgary Kinder Cochin Morgan Pipe Cochin Line System Pipeline Regina Richardson Carrington Benson Mankato Mapco West New Hampton Iowa City - MAPCO Cochin East Clinton Milford Sarnia Windsor Conway product to Provident s Sarnia, Ontario Hobbsfacilities Mount Belvieu Whiting/Griffith Existing connections to MAPCO/Enterprise and ONEOK In process of reactivating the Windsor-Sarnia Pipeline connection for direct delivery of Potential future connections to LyondellBasell crackers, Aux Sable fractionation facility, and Southern Lights origin Hart Energy s nd Marcellus Midstream Conference March, 011 6

7 Location, Location, Location Cochin is strategically located near two major shale plays, three ethane cracking markets, and two large fractionators KM Cochin Chicago Marcellus Permian Basin Hart Energy s nd Marcellus Midstream Conference Why will ethane travel from Marcellus to USGC when other shale plays are closer? March, 011 7

8 Kinder Morgan Marcellus Lateral Project Sarnia Market: BP fractionator 10 MBPD C3+ mix Nova cracker 0+ MBPD E/P/B currently. (35+ MBPD Ethane with modifications) Imperial cracker 8-14 MBPD E/P Chicago Market: LyondellBasell 60 MBPD E/P Aux Sable 90 MBPD C+ Southern Lights 0+ MBPD C5+ Marcellus Lateral Project Objective: Use existing infrastructure to provide costeffective NGL transportation solution from Marcellus to the Sarnia, Ontario market Hart Energy s nd Marcellus Midstream Conference March, 011 8

9 Benefits of Kinder Morgan Marcellus Lateral Faster Cheaper Flexible Hart Energy s nd Marcellus Midstream Conference March, 011 9

10 Marcellus Lateral Project Description 48-mile, 1-16 pipeline lateral connecting to existing Cochin Pipeline 5 MBPD, 10 year aggregate commitment required for KM to move forward Target in-service during 01 Ethane or other NGL service from Marcellus to Sarnia and/or Windsor KM / Dome to facilitate the reconnection of the Windsor-Sarnia Pipeline for direct delivery of product to Provident s Sarnia, Ontario facilities Tariff rate dependent upon firm capacity commitments 9 17 cpg proposed in non-binding open season Total Firm Commitments Initial Rate 5,000 9,999 bpd 17 cpg 30,000 34,999 bpd 16 cpg 35,000 39,999 bpd 15 cpg 40,000 49,999 bpd 14 cpg 50,000 64,999 bpd 13 cpg 65,000 94,999 bpd 1 cpg 95,000 14,999 bpd 11 cpg 15, ,999 bpd 10 cpg 150,000 bpd 9 cpg Hart Energy s nd Marcellus Midstream Conference March,

11 NGL Markets North East (i.e. Marcellus area) Premium propane market, but with seasonal demand Limited local ethane, normal butane, & C5+ demand Sarnia, Ontario Premium NGL market compared to Conway Existing (currently underutilized) fractionation capacity Nova & Imperial crackers can ratably consume NGLs year-round (3+ MBPD) Storage available in Windsor, Sarnia, and Marysville Chicago, Illinois (Mid-Continent) Existing (currently underutilized) fractionation capacity LyondellBasell crackers can ratably consume ethane year round (60-70 MBPD) Southern Lights origin point for diluent (C5+) shipments to Western Canada (0+ MBPD) Storage available in Conway / Bushton US Gulf Coast No demand for incremental mixed NGL barrels due to limited fractionation capacity Large ethane demand (800+ MBPD), but very price sensitive with multiple supply sources Hart Energy s nd Marcellus Midstream Conference March,

12 Map of Proposed Marcellus Ethane Projects REX Cochin KM Lateral ( MBPD) WSP Buckeye (50-65 MBPD) Mariner (50 MBPD) Houston, PA (MarkWest) Natrium, WV (Dominion) Ft. Beeler, WV (Caiman) TEPPCO (75-15 MBPD) El Paso / Spectra ( MBPD) Mt. Belvieu, TX Baton Rouge, LA 13 day Marine RT Hart Energy s nd Marcellus Midstream Conference March, 011 1

13 Comparison of Announced Ethane Proposals MarkWest / Sunoco Mariner Project El Paso / Spectra TN Gas Reversal Enterprise** TEPPCO Reversal Buckeye Union Pipeline Kinder Morgan Marcellus Lateral Project Description 45 mile new (MW) + 50 mile 8 SXL pipe + storage + marine 850 mile reversal + 00 miles Origin / Destination ~600 mile reversal miles new Origin / Destination ~400 mile new 1 Ethane line to Sarnia 50 miles new 1-16 ; 150 miles existing 1 Start-up Early 013 Q1 013 Q (?) 01 Capacity 50 MBPD MBPD MBPD MBPD MBPD Aggregate Min Commit Not Disclosed 50 MBPD Not Disclosed 50 MBPD 5 17 cpg cpg cpg Products Ethane Ethane Ethane Y-Grade Ethane; other purity NGLs; Y-Grade Destinations USGC Baton Rouge, LA Mt. Belvieu, TX Sarnia Sarnia / Chicago Rate cpg* 18+ cpg cpg cpg 9 17 cpg *Source: BENTEK; Buckeye **Source: BENTEK (Sept 010) Benefits of KM Marcellus Lateral Sarnia market offers potential for better netback to Marcellus Producers because: Lower per barrel transportation cost (for a given commitment level) Limited ethane supply options compared to USGC Expansion opportunities beyond the Sarnia market (Chicago, Edmonton) Flexibility to batch ethane with other NGLs (propane, butane, natural gasoline or mixed NGLs) Hart Energy s nd Marcellus Midstream Conference March,

14 Status of KM Marcellus Lateral Completed Front End Engineering Design (FEED) study Actively engaged with the local communities and approving agencies Received letters of support from Ohio Laborers Union and Operating Engineers Union Hosted nine open houses across Ohio for local land owners and communities Granted access for over 90% of the proposed pipeline route Completed 75% of the required stream/wetland surveys and 50% of the endangered species surveys Submitted Application to the Ohio Power Siting Board (OPSB) Negotiating Precedent Agreements with shippers Construction expected to begin in 011 with completion in 01 Hart Energy s nd Marcellus Midstream Conference Indiana bat (left) and eastern hellbender (right) Photos by James Kiser, Stantec senior biologist Using existing Cochin pipeline (and associated presidential permit for the international border crossing) to reduce costs and construction time March,

15 Summary Faster, Cheaper, Flexible Kinder Morgan believes its proposed Cochin Marcellus Lateral is the faster, cheaper, and most flexible solution for Marcellus NGL transportation to nearby markets Faster 01 target in-service date Cheaper Lower capital cost lower tariff rate 50 miles new / 150 miles existing; Proposed rate of 9 17 cpg 5 MBPD, 10 year term aggregate minimum commitment required Flexible Purity NGL products, such as ethane, propane, butane, and natural gasoline, and/or Mixed NGLs ( Y-Grade ) Access to multiple markets (Sarnia, Windsor, Chicago, Conway, Edmonton) Initial capacity based upon shipper commitments, but capacity can be costeffectively scaled to over 150 MBPD Hart Energy s nd Marcellus Midstream Conference March,

16 KM Cochin Chicago Marcellus Karen S. Kabin Director Business Development Kinder Morgan Products Pipelines Office Cell Kinder Morgan Cochin Marcellus Lateral: The fastest, cheapest, and most flexible solution for getting Marcellus NGLs to Market Website: Hart Energy s nd Marcellus Midstream Conference March,