CERI 2015

PetChems Challenged by Gulf Feedstock

and Tax Concessions
June 8, 2015
Dow.com

Disclaimer

ETHANE

CERI 2015

The USGC Story

Dow.com

Ethane Supply/Low Frac Spreads Spur Investment

USGC Frac Spreads
18.000
16.000
14.000

Driving USGC investment

10.000
8.000
6.000
4.000
2.000
0.000

Mont Belvieu Purity Ethane (US$/mmbtu)

Henry Hub (US$/mmbtu)

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

-2.000
Jan-07

US$/mmbtu

12.000

Frac Spread (US$/mmbtu)

Source: OPIS, NGL Brokers

Massive Tax Concessions Influence Siting Decisions

Timing is Key for Cracker Growth

Ethane supply supports Tier 1 Projects, but tight for Tier 2
Does not make sense for all announced projects to go ahead in the 2019-2021 time frame

89%

CERI 2015

So what about Canada?

Dow.com

Natural Gas From Export-Driven to Internal Growth

Natural Gas Production by Type

Head-winds:
U.S. production growth
Trans-Canada Mainline tolls
LNG (?)

Natural Gas Available for Export

Source: NEB, 2013

Tail-winds:
Oil sands growth
New gas-fired power generation
Residential/Commercial growth
LNG (?)
Source: NEB, 2013

Ethane - Plenty of Ethane in Canadian Shale Plays

WCSB Ethane Available in Raw Gas
Based on Historical/Forecast Production:
Ethane recovery 2014: ~60%
Ethane recovery 2035: ~35%

At 60% recovery:
Ethane production 2035 ~ 340 kbd

Conventional only
Without oilsands off-gas or imports

Canadian Ethane Supply/Demand

Source: NEB, 2013

Canadian Supply Increase:

Imports into Eastern Canada
Imports into Western Canada (Bakken)
Oilsands Off-gas

Canadian Demand Increase:

Ethane flexibility for Coruna Cracker (Ontario)
NOVA PE expansion (Alberta)

Source: NEB, 2013

Does Canada have enough ethane for another cracker?

Yes, but..
Currently announced expansions will need to be completed
Frac, off-gas and ethane import

Intra-Alberta demand for gas will need to continue its current

growth trajectory
Additional frac expansions will be required to process NGLs

More ethane will need to be recovered from the gas that is produced
Closer to the source?
Alliance pipeline ethane recovery?

Additional ethane imports will need to be considered

Ethane can not be exported as LNG

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Will PetChems choose to make their next investment

here?
Its a competitive world.
Factor

USGC

Alberta

Advantage

Gas Supply

USGC

Gas Cost

Alberta

Ethane Supply

USGC

Feed Flexibility

USGC

Currency

Alberta

Labour Cost

USGC

Transport Cost

USGC

Scale Economies

USGC

Government Incentives

USGC

TOTAL

USGC
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Moving the Needle

Continued progress must be made on removing transportation

constraints both pipeline and rail
Transportation and fractionation must remain accessible and
competitively priced
Pet Chems need line of sight on future feedstock availability to
consider a multi-billion dollar investment
Business and Government must partner to support local investment in
value add

12

Thank
You

13