Gas/NGL Developments from Western Canada to the US Midwest Purvin & Gertz International LPG Seminar March 7, 2012 Tim Stauft, President Aux Sable Canada
About Alliance/Aux Sable Alliance is a 1.6 bcf/d high pressure, rich gas (1100 btu/cf) gathering and transmission system, transporting gas from AB/BC to the Chicago area Aux Sable holds all NGL extraction rights on Alliance Aux Sable owns and operates a 2.1 bcf/d world scale extraction/frac plant at terminus of Alliance Pipeline (Channahon, IL) Aux Sable Midstream has purchased and operates the Palermo Conditioning Plant and the Prairie Rose Pipeline in North Dakota Aux Sable Canada: o Performs a supply function for the Channahon plant attracting rich gas and NGLs onto Alliance (Eg. Trilogy, Cequence announcements) o Developing a fee-based energy processing business, including: Heartland Offgas Plant Septimus Gas Plant & Pipeline o Owned by Enbridge and Veresen Inc. Slide 2
Alliance-Aux Sable System Map Slide 3
Slide 4 The Push to Develop Rich Gas and NGLs Shale gas plays are driving growth in gas reserves across North America but low gas prices make drilling economics marginal Improvements in drilling technologies and record high frac spread (NGL vs gas prices) have focused producers activities on developing unconventional, rich gas resources For rich gas to be valuable, NGLs must be recovered, processed and transported to market New rich gas resource plays are isolated from existing NGL infrastructure and markets and costly field or processing infrastructure is required Aux Sable is actively working with producers to provide options for rich gas/ngls to reach market
North American Full-cycle Unit Cost of New Supply 2011 Source: IHS CERA, 2012 Without NGL credit, natural gas will be shut-in Slide 5
US$/MMBtu US$/MMBtu Historical Frac Spread Henry Hub and WTI Prices Energy Spread: WTI - Henry Hub 20 18 16 14 12 Henry Hub Cash Price WTI Cash @ Cushing 14 12 10 8 10 8 6 4 2 0 1997 1999 2001 2003 2005 2007 2009 2011 6 4 2 0-2 1997 1999 2001 2003 2005 2007 2009 2011 Crude-to-gas price ratio is a key component in driving frac spreads & development/processing of rich gas plays Slide 6
Slide 7 Growth in Unconventional Gas Production Source: IHS CERA, 2012
Bcf/d Slide 8 US and Canada Shale Gas Production 40.0 35.0 30.0 25.0 20.0 15.0 Western Canada All Other US Eagle Ford Bakken Utica Marcellus Haynesville /1 Fayetteville Barnett Woodford 10.0 5.0-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: ICF International
NGL Markets and Supply Basins 2.1 7.7 Sarnia Conway 2.7 7.1 Mont Belvieu 3.1-8.9 Source: Bentek Slide 9
North American NGL Infrastructure Edm/FSK ALLIANCE Empress PTC ENBRIDGE COCHIN Sarnia ENTERPRISE Conway Chicago ONEOK ENTERPRISE Salt Storage Mont Belvieu Slide 10
Regional Growth in NGL Production Relative to 2010 (millions of gallons/yr) 648 1311 8701 2010 2015 2020 Western Canada 3700 240 708 1483 5294 2010 2015 2020 Rocky Mountain 301 754 1105 2010 2015 2020 North and South Dakota (Bakken) 466 956 9236 2010 2015 2020 Other 9854 2010 2015 2020 West Texas, NM Permian and Oklahoma- Cushing 1784 2010 2015 2020 Northeast/Mid-Atlantic (Marcellus) 3230 369 1623 2878 5732 Source: ICF International 2010 2015 2020 Gulf Coast Texas and Louisiana Slide 11
C2 Price (uscpg) Differential (uscpg) Conway/Mt Belvieu Ethane Prices 100 90 80 MB Purity - E/P MB E/P - Con E/P MB Purity 30 25 70 60 50 MB E/P Conway E/P 20 15 40 30 10 20 5 10-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -
uscpg uscpg Conway/Mt Belvieu Propane Prices 160.00 140.00 120.00 100.00 Mont Belvieu Spot Propane (uscpg) Conway Spot (uscpg) 80.00 60.00 40.00 20.00-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 12.00 10.00 8.00 6.00 4.00 2.00 - (2.00) (4.00) (6.00) Differential 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Slide 13
Natural Gas and NGL Value Chain Natural Gas Production Gathering Processing & Treating Natural Gas Transmission Straddle Plant Natural Gas Transmission NGL Raw Mix Transportation C 2+ Natural Gas Storage C 2+ or C 3+ NGL Fractionation Natural Gas Distribution C 2+ or C 3+ NGL Storage Residential/ Commercial/ Industrial Power Plants NGL Product Transportation Refined Products Petrochem Industry Residential/ Commercial Slide 14
Aux Sable/Alliance Value Chain Natural Gas Production Processing & Treating Natural Gas Storage NGL Product Transportation Natural Gas Distribution Refined Products Petrochem Industry Residential/ Commercial Residential/ Commercial/ Industrial Power Plants Slide 15
Alberta NGL Facilities and Capacity Estimated Capacity Location (MMcf/d) Cochrane 2,500 Empress 9,700 Other 1,182 Total 13,382 Map Source: IHS Purvin & Gertz Slide 16
BBL/day De-Eth Utilization - Alberta Straddle Plants 175,000 170,000 165,000 160,000 155,000 150,000 145,000 140,000 135,000 130,000 125,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: ERCB data Less ethane being processed at straddle plants (Empress and Cochrane) Ethane capacity needed elsewhere Slide 17
Slide 18 Aux Sable Rich Gas Premiums Aux Sable rich gas premiums provide value to gas producers for NGLs, allowing producers to: Avoid costly field plant investments Capture NGL value not available on NGTL system Direct greater resources to gas drilling activities Increase netbacks at plantgate Allows producer to record barrel reserves The Channahan/NGL value proposition gives ASC a competitive advantage Greater connectivity for BC/Alberta NGLs to US markets increases value of NGLs to all producers Recent rich gas premiums: TRILOGY: Eliminates 2011 and 2012 capital expenditures of approximately $55 Million for new deep-cut gas plant CEQUENCE: Increase in realized product price ; Resulting increase to recent netbacks of approximately $3.00 per boe
Slide 19 Summary Opportunities exist for optimizing rich gas value To capture this value, NGLs need to be recovered, processed and transported to market Midstream infrastructure investments are required Aux Sable is well positioned and offers competitive NGL recovery options to producers www.auxsable.com