Mid-Continent Overview and Field Trip. Wichita, Kan. June 11-12, 2012

Transcription

1 Mid-Continent Overview and Field Trip Wichita, Kan. June 11-12, 2012

2 Andrew Ziola Manager, Investor Relations Dan Harrison Vice President, Investor Relations & Public Affairs Page 2

3 Tonight s Agenda PRESENTATION Overview of NGLs in Mid-Continent Pierce Norton, Chief Operating Officer 5:30 Adapting to Changing NGL Market Dynamics Competitive Advantage Sheridan Swords, President Natural Gas Liquids Well Positioned for Future Growth Questions NGL Operations Panel 6:30 DINNER 6:45 Page 3

4 Attendees ONEOK Partners Pierce Norton Chief Operating Officer ONEOK Partners Natural Gas Liquids Sheridan Swords President Natural Gas Liquids Wes Christensen Senior Vice President ONEOK Partners Operations Roger Thorpe Vice President NGL Operations Scott Schingen Vice President NGL Fractionation and Storage Page 4

5 Forward-Looking Statements Statements contained in this presentation that include company expectations or predictions should be considered forward-looking statements that are covered by the safe harbor provisions of the Securities Act of 1933 and the Securities and Exchange Act of It is important to note that the actual results could differ materially from those projected in such forward-looking statements. For additional information that could cause actual results to differ materially from such forward-looking statements, refer to ONEOK s and ONEOK Partners Securities and Exchange Commission filings. Page 5

6 Pierce Norton Chief Operating Officer Page 6

7 What We ll Cover Key Points Overview of NGLs in the Mid-Continent ONEOK Partners entry into the NGL business The whole is greater than the sum of its parts Adapting to changing NGL market dynamics Bushton facility: Conversion of a natural gas gathering and processing straddle plant to an NGL fractionator Hutchinson facility: Upgraded and expanded railcar capabilities Integration of NGL assets is a competitive advantage Well-positioned for the future Growth projects with attractive returns under way to add operational flexibility and meet customer needs What to expect on the tour Page 7

8 Overview of NGLs in Mid-Continent Page 8

9 Well Positioned in Shale Plays Our Fairway Active in and evaluating numerous shale plays Producer supply commitments are key Exposure to NGL-rich resource development Provides platform for future growth Bakken Shale Williston Basin Marcellus Shale Niobrara Shale Utica Shale Granite Wash Page 9 Natural Gas Basins Natural Gas Shale Plays OKS Basins Shale Plays Source: EIA Mississippian Lime Cana-Woodford Permian Basin Eagle Ford Fayetteville Haynesville Shale Woodford Shale Barnett Shale Natural Gas Gathering & Processing Natural Gas Pipelines Natural Gas Liquids Gathering Pipelines Natural Gas Liquids Distribution Pipelines

10 1999 How We Got Here Timeline Leased Conway NGL pipelines from Texaco with option to acquire Acquired Conway NGL assets from Texaco Acquired NGL system from Koch Acquired North System NGL and refined petroleum products pipeline system from Kinder Morgan Announced internal growth projects: Stateline I plant Bushton fractionator expansion Stateline II plant Bakken NGL pipeline Overland Pass pipeline expansion Divide County Natural Gas Gathering System MB-2 fractionator Sterling III pipeline Reconfigure Sterling I & II pipelines Canadian Valley plant Bakken Crude Express pipeline Began storing and marketing NGLs through acquired gathering and processing assets Built NGL pipeline from Bushton to Conway, linking assets acquired in 2000 and 2003 Internal growth projects completed: Overland Pass Piceance Lateral D-J Lateral Related NGL Projects- (Bushton Expansion) Acquired/upgraded NGL storage Arbuckle Pipeline Internal growth projects completed: Sterling I expansion Garden Creek plant Cana-Woodford/Granite Wash NGL plant connections Arbuckle NGL gathering pipeline expansion Page 10

11 NGL Industry Environment Key Points NGL supply growing from liquids-rich regions Petrochemical demand growth in Gulf Coast NGLs enjoy significant price advantage vs. crude-oil based feedstock NGL fractionation capacity is tight New capacity is being built at Mont Belvieu Conway-to-Mont Belvieu NGL pipeline capacity is limited Infrastructure build-outs will connect previously constrained supply to markets New pipelines between Conway and Mont Belvieu under construction NGL price differentials between Conway and Mont Belvieu remain volatile NGL prices are more sensitive to Brent versus WTI crude-oil pricing Page 11

12 Adapting to Changing NGL Market Dynamics Page 12

13 Bushton Complex Accommodating New NGL Supply Sources Formerly one of the largest natural gas processing straddle plants in the U.S. with limited NGL fractionation capabilities Large NGL storage capability : Overland Pass Pipeline built to link the high-growth Rockies NGL production to fractionation facilities in Mid-Continent Currently expanding Overland Pass capacity by 60,000 bpd to 255,000 bpd to accommodate Bakken raw NGLs 2008: Bushton fractionation capabilities significantly increased to 150,000 bpd to accommodate Overland Pass raw NGLs Currently expanding fractionator to 210,000 bpd to accommodate Bakken raw NGLs NGL purity products are transported via North System pipelines to upper Midwest, Conway or via Sterling pipelines to Gulf Coast Important NGL storage capabilities at Bushton Page 13

14 Bushton Complex Overland Pass North System Storage To Conway To Sterling Page 14

15 Hutchinson Facility 50,000 bpd Fractionator, Storage and Rail Terminal Koch Industries purchased Hutchinson fractionator from Trident (OXY) in 1993 ONEOK Partners purchased Koch NGL assets in 2005 Raw NGL supply sources: Kansas and Oklahoma Overland Pass Pipeline Bakken Shale/Williston Basin via rail from Riverview terminal in Sydney, Mon. NGL purity products distributed by: Rail to local markets State-of-the art rail facility completed in 2011 Pipelines within ONEOK Partners integrated system to upper Midwest or Gulf Coast Page 15

16 Hutchinson Facility Gathering from western Kansas Fractionator Upgraded Railcar loading terminal Storage To Medford Page 16

17 Conway Assets From Bushton Conway Fractionator 10% owner Conway Storage To Hutchinson To Medford To Medford Page 17

18 NGL Storage Enhances Full-Service Capabilities 19 million barrels in Mid- Continent Depth: 600-1,000 feet 4 million barrels at Mont Belvieu Depth: 1,700 3,500 feet Readily expandable Unused caverns Brine expansions ~ 600-3,500 Feet Page 18

19 Volume Growth Natural Gas Liquids 2012 gathering volumes increase by 25%; fractionation volumes increase by 13% Significant volume growth in the Mid-Continent from 30 new processing plants and growth from existing plants Currently developing over 15 new supply connections Rockies and Barnett Shale provide additional growth Gathering Volume (Mbpd) 142% growth since Fractionation Volume** (Mbpd) 94% growth since * 2010* G G *Excludes NGL barrels gathered on Overland Pass Pipeline as a result of deconsolidation in September 2010 **Includes NGL fractionation volumes at third-party facilities Page 19

20 Delivering NGL Purity Products Delivering NGL Purity Products Volumes almost doubled since 2007 North System purchased from Kinder Morgan in 2007 Bushton fractionator expansion increases availability of NGLs Increased demand for NGLs in upper Midwest due to competitive pricing at Conway Competitive advantage: Integrated NGL assets increase efficiency and reliability MBbl/d NGLs Transported - Distribution Lines Customers prefer bundled services by ONE company Page 20

21 Competitive Advantage Sheridan Swords President Natural Gas Liquids Page 21

22 Integrated Mid-Continent NGL Assets The Whole is Greater Than The Sum of Its Parts NGL Gathering Pipelines NGL Distribution Pipelines NGL Market Hub NGL Fractionator Overland Pass Pipeline (50% interest) NGL Storage Page 22

23 Natural Gas Liquids Competitive Advantage Scale and scope of assets and services Supplier of choice Broad footprint provides growth opportunities Mid-Continent, Rockies and Midwest Asset base is well positioned to capitalize on supply development and shale plays Integrated infrastructure provides full-service capabilities Difficult and expensive to duplicate Availability of supply Flexibility and connectivity to key market hubs Exploration & Production Midstream Natural Gas Midstream NGLs Distribution Marketing Markets Page 23

24 Natural Gas Liquids Competitive Position Integrated assets and services Non-discretionary services Flexibility to offer bundled services Maximize customer value Integrated infrastructure Flexibility and connectivity Availability of supply Large and significant operator of NGL pipeline capacity connecting Conway with Mont Belvieu Asset base well positioned to capitalize on supply development from shale plays Page 24

25 Natural Gas Liquids Contract Structures Fee-based Exchange and storage gather, fractionate and store NGLs Transportation gather raw NGL feed from supply basins and distribute NGL products to market centers Shift to frac-or-pay contracts for fractionation services Ship-or-pay contracts for transportation services Marketing services purchase for resale Drivers of pricing and terms Amount of capacity requested Geographic location of gathering assets Services desired (bundled) Page 25

26 Well Positioned for Future Growth Page 26

27 NGL Supply NGL Production is Growing Producers are focused on crude oil and liquids-rich regions NGL supply is still short of peak levels reached in 2000 Decline rate of base NGL production from current gas supply must be factored into long-term estimates Industry studies indicate U.S. natural gas production base decline rate could be in excess of 20% per year Ethane portion of NGL barrel is growing Technology enables processing plants to extract and recover more ethane and to operate more efficiently Natural gas processing capacity is expanding in shale plays to accommodate volume growth Bottlenecks are being resolved with infrastructure build-outs NGL Processing, Fractionation and Transportation Solutions Required Page 27

28 Mid-Continent Supply Growth Strategic Fit Arkoma-Woodford, Cana-Woodford, Granite Wash and Mississippian Lime Major growing supply basins inside our Texas, Kansas and Oklahoma footprint Expanding our ability to move NGLs between Conway and Mont Belvieu Enhances our competitive position and helps us remain the preferred NGL service provider in the Mid-Continent region Increased capacity between Conway and Mont Belvieu Positions us to capture future growth opportunities in the Mid-Continent, Bakken, Niobrara and Rockies Supply growth across our systems has put utilization rates at or near capacity Providing fractionation services in conjunction with other exchange services Allows for full asset integration and utilization Page 28

29 NGL Demand Driven by Petrochemical Companies Petrochemical demand remains robust Operating rates over 90 percent Several chemical companies announcing debottlenecks, expansions and new plants More than 400,000 bpd of additional ethane demand by 2017 Net exporter of propane, expansions continue Proven track record of U.S petrochemical plants remaining competitive globally Third-party interest remains strong in shipping diluent Used in production and transportation of heavy Canadian crude oil Source: En*Vantage, various industry and company research More than 400,000 bpd of Additional Ethane Demand Expected by 2017 Page 29

30 Bakken Shale Natural Gas Liquids Investments Bakken NGL Pipeline $450-$550 million 525-to 615-mile, 12-inch diameter, NGL pipeline from Bakken Shale to Overland Pass Pipeline Initial capacity to transport 60,000 bpd of unfractionated NGLs, expandable to 110,000 bpd with more pumps Expected to be completed in first half of 2013 Overland Pass Pipeline expansion $35-$40 million (50% interest) Expansion of existing pump stations Additional pump stations Fractionator expansion at Bushton $110-$140 million Increase capacity to 210,000 bpd from 150,000 bpd Expected to be completed in fourth quarter 2012 Primarily fee-based contracts $595 million to $730 million Overland Pass Pipeline Expansion (50% interest) Bakken NGL Pipeline Bushton Fractionator Expansion Niobrara Shale Bakken Shale 100% of Available Initial Capacity Committed Page 30

31 Page 31 Cana-Woodford Shale and Granite Wash Natural Gas Liquids Investments Natural Gas Liquids Expanded partnership s existing Mid- Continent NGL gathering system Connected three new processing plants and expands capacity at three existing plants Adds 75,000-80,000 bpd to existing NGL gathering systems Increased Arbuckle Pipeline capacity to 240,000 bpd Completed in April 2012 Expanded Oklahoma NGL gathering system Well positioned for future Mid- Continent processing plant development $265 million to $285 million NGL Gathering Pipelines NGL Distribution Pipelines New Pipelines NGL Market Hub NGL Fractionator NGL Fractionator MB-2 100% of Available Capacity Committed

32 Sterling NGL Pipelines and Fractionator Investments $910 million to $1.2 billion Build new Sterling III pipeline Flexibility to transport purity products and unfractionated NGLs $610 million to $810 million 570-plus-mile, 16-inch diameter 193,000 bpd expandable to 250,000 bpd 75% of available initial capacity committed Completion expected in late 2013 Reconfigure Sterling I and II Flexibility to transport purity products and unfractionated NGLs Build MB-2 fractionator at Mont Belvieu $300 million to $390 million Completion expected in mid ,000 bpd capacity 100% of available capacity committed Air-quality permit approved by Texas Commission on Environmental Quality NGL Gathering Pipelines NGL Distribution Pipelines New Pipelines NGL Market Hub NGL Fractionator NGL Fractionator MB-2 Page 32

33 NGL Transportation Capacity Four Straws Page 33 Sterling I and II distribution pipelines are at capacity Sterling I expansion complete Arbuckle NGL gathering pipeline can be used to capture market differentials The Four Straws will provide additional operational and commercial flexibility and redundancy to our customers Sterling III pipeline designed to gather NGLs and/or deliver finished NGL products to end users Sterling I and II will be reconfigured to gather NGLs and/or deliver finished NGL products to end users Integrated system is at the bottom of the funnel to gather NGLs from Cana- Woodford, Granite Wash, Mississippian Lime and Bakken in order to deliver to Gulf Coast markets Arbuckle Pipeline Sterling I & II Pipelines Sterling III Pipeline NGL Market Hub NGL Fractionator MB-1 NGL Fractionator MB-2

34 Future Growth Opportunities Natural Gas Liquids Gathering, Fractionation & Storage Increase fractionation capacity Expand existing Mid-Continent facilities Build new fractionator at Mont Belvieu Connect to new supply within footprint North Dakota, Wyoming, Colorado, Texas, Oklahoma, Kansas Increase storage and marketing capabilities Truck terminals Rail/truck racks Increase brine capacity Product treating NGL Pipelines Overland Pass and Arbuckle Expansions and laterals to new NGL supply New regions Niobrara West Texas Utica/Marcellus Crude oil and refined products Capacity expansions, debottlenecking, upgrades and conversions North System Transport diluent to Canada s oil sands and denaturant to ethanol-blending terminals Increase shipments of iso-butane and refinery-grade butane to Midwest refineries Page 34

35 Conclusions Key Points ONEOK Partners holds a significant asset position in the NGL business NGLs expected to maintain price advantage over oil-based feedstock Long-term NGL demand remains strong Abundant growth opportunities around existing operating footprint Attractive returns NGL-rich shale development Page 35

36 Questions

37 Field Trip Andrew Ziola Page 37

38 Field Trip Agenda Tuesday, June 12, :00 am to 7:45 am Breakfast buffet in hotel restaurant 7:45 am Bus departs hotel 7:45 am to 9:45 am Enroute to Bushton, Kansas 9:45 am to 11:30 am Tour of Bushton fractionator facility 11:30 am to 11:45 am Enroute to downtown Bushton, Kansas 11:45 am to 12:30 pm Lunch at Bushton Community Center - Hog Wild Pit BBQ 12:30 pm to 1:45 pm Enroute to Hutchinson, Kansas 1:45 pm to 2:30 pm Tour Hutchinson fractionator and rail facility 2:30 pm to 3:30 pm Enroute to Wichita Mid-Continent Airport 3:30 pm to 3:45 pm Drop off passengers 3:45 pm to 4:00 pm Enroute to hotel 4:00 pm Field trip ends Page 38

39 Safety Training Required for Facility Tour Safety videos on bus 2012 contractor orientation test Page 39

40 Appendix Page 40

41 Asset Overview Natural Gas Liquids Provides non-discretionary and fee-based services to processors and customers Gathering, fractionation, transportation, marketing and storage Page 41 Extensive NGL gathering system Connected to approximately 100 natural gas processing plants in the Mid-Continent, Barnett Shale and Rocky Mountain regions Represents 90% of pipelineconnected processing plants located in Mid-Continent Links key NGL market centers at Conway and Mont Belvieu North System supplies Midwest refineries and propane markets Fractionation Isomerization Storage Distribution Gathering Raw Feed Equity Investment 549,000 bpd net capacity 9,000 bpd capacity 23.2 MMBbl capacity 3,660 miles of pipe with 774,000 bpd capacity 3,280 miles of pipe with 842,000 bpd capacity 50% Overland Pass Pipeline NGL Gathering Pipelines NGL Distribution Pipelines NGL Market Hub NGL Fractionator Overland Pass Pipeline (50% interest) NGL Storage

42 Fractionation Capacity Natural Gas Liquids 549,000 bpd, net ownership* Increasing our fractionation capacity 60,000 bpd of fractionation services from Targa began in second quarter 2011 Expanding Bushton by 60,000 bpd in 2012 Building new MB-2 fractionator at Mont Belvieu 75,000 bpd in 2013 *As of February 2012 **Includes Targa capacity, Bushton expansion and MB-2 Conway Bushton 28% Hutchinson 2% 7% 28% Mont Belvieu Medford 35% Page 42 Fractionation Capacity**

43 U.S. NGL Supply Sources and End Uses 2011 Averages NGL Supply Sources Gas Processing 80% of U.S Supply Crude Oil Refining 15% of U.S. Supply Overland & Waterborne Imports 5% of U.S. Supply NGL products 1 Ethane - 42% Propane - 28% Normal Butane - 7% Iso-butane - 9% Natural Gasoline - 14% Ethane - 12% Propane - 71% Mixed Butanes - 17% Propane - 77% Mixed Butanes - 15% Pentane Plus - 8% NGL End Uses Primary Petrochemicals 54% of NGLs Supplied Space Heating & Other Fuel Uses 19% of NGLs Supplied Motor Gasoline & Blend Stocks 20% of NGLs Supplied Ethanol Denaturing <1% of NGLs Supplied Fuel Exports 6% of NGLs Supplied Page 43 1 Percentage represents the composition of NGL mix from primary sources Source: EIA, En*Vantage

44 NGL Supply Decline Rates Substantial new supply needed to just offset U.S. base decline Correlation of U.S. natural gas production to NGL production Industry studies indicate U.S. natural gas production base decline rate could average in excess of 20% per year Declines much steeper in shale plays compared with conventional areas Gulf Coast and offshore production declining significantly Mmcf/d 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 U.S. Natural Gas Production by Year Drilled Prior to Source: LCI Energy Insight/Lippman Consulting Page 44

45 Optimization Opportunities Natural Gas Liquids Provides earnings upside to fee-based business How it works: Ability to deliver NGL products at either Conway or Mont Belvieu Utilize assets, contract portfolio and market knowledge to capture additional margin from location and product-price differentials Optionality and flexibility by using: Sterling NGL purity products distribution pipelines (Sterling I and II) Building new Sterling III pipeline from Mid- Continent to Gulf Coast Arbuckle NGL pipeline Expect Conway-to-Mont Belvieu NGL differentials to narrow substantially after new capacity is developed Upon completion of Arbuckle expansion, Sterling III construction, Sterling I and II reconfiguration and third-party pipeline development NGL Gathering Pipelines NGL Distribution Pipelines Overland Pass Pipeline (50% interest) Sterling III Pipeline (late 2013) NGL Fractionator NGL Fractionator MB-2 (mid-2013) NGL Market Hub NGL Storage Page 45

46 Page 46 Margin Profile Natural Gas Liquids Exchange & Storage Services Gather, fractionate, transport and store NGLs and deliver to market hubs; primarily fee based Transportation Transporting raw NGL feed from supply basins and NGL products to market centers; fee based Marketing Purchase for resale approximately 60% of system supply in the Mid-Continent on an index-related basis; differential based Optimization Obtain highest product price by directing product movement between market hubs; differential based Isomerization Convert normal butane to iso-butane to be used in refining to increase octane in motor gasoline; differential based 68% 62% 59% 56% 50% 2% 7% 9% 12% 6% 6% 5% 10% 9% 37% 25% 7% 26% 17% 13% 4% 3% 2% 4% 1% G* *Updated February 2012 Exchange & Storage Services Transportation Marketing Optimization Isomerization

47 Disciplined Growth Continues $9 Billion in Capital Investments Announced approximately $4.7 to $5.6 billion in growth projects in Adjacent to and within our existing operating footprint including: $3.2 to $3.7 billion related to the Bakken Shale in the Williston Basin $940 million to $1.2 billion in NGL infrastructure in the Mid-Continent and Gulf Coast $605 to $645 million in the Cana-Woodford and Granite Wash areas $2 billion-plus backlog of unannounced growth projects Natural gas-, NGL- and crude-oil-related infrastructure projects Completed more than $2 billion in growth projects ( ) Exploration & Production Midstream Natural Gas Midstream NGLs Distribution Marketing Markets Page 47

48 Bakken-related Project Status Major Project Contracting Status % Committed Contract Type In-service Date Garden Creek plant and related infrastructure Backed by volume commitments and acreage dedications 100% committed POP with fee component Dec Stateline I plant and related infrastructure Backed by volume commitments and acreage dedications 100% committed POP with fee component Third quarter 2012 Stateline II plant and related infrastructure Backed by volume commitments and acreage dedications 100% committed POP with fee component First half 2013 Bakken NGL pipeline Dedicated supply from OKS plants 100% committed Fee based First half 2013 Overland Pass expansion Dedicated supply from OKS plants 100% committed Fee based First half 2013 Bushton fractionator expansion Dedicated supply from OKS plants 100% committed Fee based Fourth quarter 2012 Divide County Natural Gas Gathering System Backed by volume commitments and acreage dedications 100% committed POP with fee component Second half 2013 Bakken Crude Express pipeline Various stages Various stages Fee based Early 2015 Page 48

49 Mid-Continent-Gulf Coast Related Project Status Major Project Contracting Status % Committed Contract Type In-service Date Sterling I expansion Capacity available for optimization 100% committed Differential or fee based November 2011 Cana-Woodford/Granite Wash NGL plant connections Arbuckle NGL gathering pipeline expansion Sterling III pipeline and reconfiguration of Sterling I and II MB-2 fractionator Backed by volume commitments Backed by volume commitments Backed by volume commitments Backed by volume commitments 100% committed Fee based Early second quarter % committed Fee based Early second quarter % committed Fee based Late % committed Fee based Mid 2013 Canadian Valley Plant Backed by acreage dedications 100% committed POP with fee component First quarter 2014 Page 49

50 Mississippian Lime New Play with Great Potential Existing natural gas gathering and processing and NGL assets are well positioned Exceptional potential Eastern section contains higher amount of NGLs Western section still contains significant NGL content Bakken Crude Express pipeline will be well positioned to transport crude oil Shale Play Natural Gas Processing Plants Natural Gas Gathering Pipelines Overland Pass Pipeline (50% interest) Mississippian Lime NGL Gathering Pipelines NGL Distribution Pipelines Sterling III Pipeline Mid-Continent Expansion NGL Fractionator NGL Storage Page 50

51 Arbuckle Pipeline Delivering Unfractionated NGLs to Gulf Coast Expanded to 240,000 bpd From southern Oklahoma through Barnett Shale to Mont Belvieu Completed in April 2012 Another option to deliver NGLs to Gulf Coast Accommodates NGL supply growth Relieves transportation bottlenecks between Mid- Continent and Gulf Coast Mid-Continent Expansion Arbuckle Pipeline NGL Market Hub NGL Fractionator NGL Gathering and Distribution Pipelines Expanded to Capacity 240 (MBbl/d) Page 51

52 Overland Pass Pipeline 50-Percent Equity Investment Links NGL supply from Rockies to Mid-Continent and Gulf-Coast markets Williams is 50% owner and became operator in April 2011 Williams is anchor shipper Strong partnership and commitment to growth Future supply growth opportunities Bakken Niobrara Piceance Gross Capacity (Mbpd) Niobrara Shale Bakken Shale Expanding to 255 Nov Page 52

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