Vector Pipeline TM. Customer Meeting October 9, 2014

Transcription

1 Customer Meeting October 9, 2014

2 Overview Welcome Pete Cianci Vector Update Amy Bruhn & Matt Malinowski DTE Update David Slater Steve Hohf Enbridge Update Bruce Herdman Discussion

3 Amy Bruhn Manager, Transportation Services

4 Vector Update Web Site Redesign Tariff Changes NAESB Abandonment Cost Recovery Mastio Survey

5 Updated Website

6 Tariff Changes Force Majeure definition changed to be consistent with FERC policy Reservation Charge Credits for Firm Service Procedures for Posting and Awarding Capacity Reservation of Capacity for Potential Expansion Projects

7 NAESB Version 2.1 Standards Published April 30, 2013 but not yet approved by FERC. Possible NOPR in the Spring with Fall implementation, including changes to the gas day Location common codes eliminated and replaced with proprietary codes Some field name changes Behind-the-scenes data set changes

8 Gas-Electric Coordination Gas nomination schedule changing to improve coordination of natural gas and electricity markets. Comments in response to FERC NOPR RM due November 28

9 The Gas Day is Changing Current 9 a.m. Gas Day Start FERC Proposal 4 a.m. Gas Day Start NAESB Proposal Cycle Nomination Gas Flow Nomination Gas Flow Nomination Gas Flow Timely 11:30 a.m. 9:00 a.m. 1:00 p.m. 4:00 a.m. 1:00 p.m. start of gas day Evening 6:00 p.m. 9:00 a.m. 6:00 p.m. 4:00 a.m. 6:00 p.m. start of gas day ID 1 10:00 a.m. 5:00 p.m. 8:00 a.m. 12:00 p.m. 10:00 a.m. 2:00 p.m. ID 2 5:00 p.m. 9:00 p.m. 10:30 a.m. 4:00 p.m. 2:30 p.m. 6:00 p.m. ID 3 4:00 p.m. 7:00 p.m. 7:00 p.m. 10:00 p.m. ID 4 7:00 p.m. 9:00 p.m.

10 Abandonment Cost Recovery The National Energy Board (NEB) issued its Reasons for Decision (RH ) for the Land Matters Consultation Initiative (LMCI) Stream 3 in May 2009, whereby it required regulated Group 1 and Group 2 pipelines to file for future abandonment cost recovery mechanisms. Vector s physical abandonment plan was filed with the NEB, reflecting estimated future abandonment costs of $4.8 million ($CAN). Vector s proposed abandonment cost collection and set aside mechanisms was filed with the NEB on May 31, 2013 and approved on June 5, Future abandonment costs are to be collected from shippers commencing January 1, 2015 over a period of 40 years and placed into a trust for safekeeping. The abandonment surcharge is proposed to be CAN $ per GJ, but is still illustrative. It will be charged similar to the ACA surcharge. Filing of abandonment surcharge to be made with NEB by December 5, 2014.

11 Mastio Customer Survey Baseline Requirements Items a company is expected to be competent in Conscious Differentiators Actively drive supplier selection decisions Latent Differentiators Correlate highly to customer satisfaction Low Impact Parity with competitors is sufficient

12 Baseline Needs Firm gas transportation is highly reliable. Scheduled gas volumes are accurate. Timely transmittal of invoices. Competitive pricing of service Vector 2014 Vector 2012 Vector 2010

13 Conscious Differentiators Integrity of transportation provider. Accuracy of gas metering statements & invoices. Timely notification before initiating restrictions. Contract negotiations are handled efficiently. Historically dependable in meeting commitments Vector 2014 Vector 2012 Vector 2010

14 Latent Differentiators Ease of doing business. Timely resolution of problems. Ease of structuring credit arrangements. Personnel respond quickly to requests. Quality of pipeline initiated communications. Direct access to ample & diverse supply. Ease of use of Vector's website Vector 2014 Vector 2012 Vector 2010

15 Low Impact Operational information is readily available. Ease of pipelines system for nominating & reporting. Expertise of personnel. Ease of use of the QuickNom system. Straightforward capacity release system Easy to contact the right person for help. Representatives who listen well. Contract execution handled efficiently Vector 2014 Vector 2012 Vector 2010

16 Vector vs. The Industry Firm gas transportation is highly reliable. Scheduled gas volumes are accurate. Accuracy of gas metering statements & Competitive pricing of service. Timely notification before initiating Contract negotiations are handled efficiently. Operational information is readily available. Ease of system for nominating & reporting. Expertise of personnel. Straightforward capacity release system Personnel respond quickly to requests. Easy to contact the right person for help. Representatives who listen well. Quality of pipeline initiated communications. Direct access to ample & diverse supply Vector 2014 Industry 2014

17 Survey Action Plan We continue to seek areas where we can improve: Posting monthly calendar of planned maintenance. Additional training for the scheduling staff Adding a back-up for the scheduling hotline

18 Matt Malinowski Manager, Market Development

19 Vector Update Year in Review Operations Expansion / Open Season Near Term Opportunities

20 Scheduled Deliveries (Includes Longhaul, Shorthaul, Backhaul and Segmentation) 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 Average Dth/Day 1,000, , , , ,000 - Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Canada U.S. Long Haul Capacity

21 Winter 2013/14 Winter 2013/14 System Peak 2,340 MDth January 7, 2014 APL/NBPL Rec Storage Wash 10 Bluewater DTE Gas Rec St. Clair Del Guardian Del NIPSCO Del Jackson Del - 80 DTE Gas Del Consumers Del - 107

22 Operations

23 2014 Compressor Work Completed Springville Unit #2 exchanged Spring 2014 Athens engine exchanged Spring 2014 Rebuilt exhaust stacks at Washington Spring 2014 Highland Compressor Assembly September 2014

24 Washington Stacks Old vs New

25 2014 Pipeline Maintenance Pipeline Integrity Work - 42-inch system Competed in Canada in September Currently occurring on U.S. 42-inch Multiple sites for exposure and inspection Verifying data from 2013 smart pigging

26 2014 Pipeline Maintenance

27 2014 Pipeline Maintenance

28 Future Maintenance Pipeline Integrity Work - 36-inch system Scheduled for Nov to 8 sites for exposure and inspection Verifying data from 2013 smart pigging Reduced pressure required Will impact firm!

29 Future Maintenance Springville Unit #1 replace entire control system Scheduled for November 2014 (2-3 weeks) Older equipment no longer OEM supported Eventually impacts all Springville and Highland engines Also replacing engine due to runtime

30 2015 Proposed Work Additional electronic upgrades throughout the system due to older equipment being obsolete New SCADA system Continue engine exchanges and other preventative maintenance No impacts to Firm expected

31 New Facilities

32 Potential Interconnects Greenfield South New delivery in Ontario for a 300MW Power Plant Commercial In-Service 2015 Chicago Markets Provides direct access to large LDC market

33 2017 Expansion

34 Vector Expansion Capabilities WISCONSIN MICHIGAN Short Haul Lake Huron Scalable Incremental Capacity Lease Line Loop Potential Compression Lake Michigan Highland Washington Detroit ONTARIO Dawn (Union) Chicago Joliet Springville Athens Lake Erie

35 2017 Expansion Will physically expand the east side of Vector in a scalable project Up to 54 miles of 42-inch loop between Milford Junction and Belle River Potentially adding compression at Washington and Belle River Other station upgrades as needed Vector has a PA with Nexus and is working with ET Rover to be anchor shippers for a 2017 Expansion

36 2017 Expansion New supply of 1.3 to 2.1 Bcf/d Expiring Capacity on Vector will be reserved for this project: Date Capacity Available (Dth/d) Dec 14 Mar 15 68,885 Apr 15 Oct 15 78,885 Nov 15 75,885 Dec 15 Mar ,885 Apr 16 Oct ,028 Nov ,600 Dec 16 Mar ,600 Apr 17 Oct ,028 Nov ,347 Nov 17 capacity will be reserved for expansion

37 Open Season Currently conducting a Binding Open Season for capacity for November 2017 All conforming bids will be considered including new supply receipts to Dawn, Joliet to Dawn and backhauls Bids are due Tuesday, November 4 th, 2014 by 4 p.m. ECT

38 Timeline Fall 2014 Initiate Engineering and Environmental Field Surveys Winter 2014 Conduct Open Houses, Agency and Stakeholder Outreach Winter 2014 Begin FERC/NEPA Pre-filing process Summer 2015 FERC 7(c) Application Spring 2016 FERC issues EA or EIS Fall 2016 FERC issues certificate Winter 2016 Initiate Construction Clearing Spring 2017 Commence Construction November 2017 Target In-Service Date

39 Available Capacity

40 Capacity 68,885 Dth/d available Dec. 1, ,885 Dth/d available April 1, 2015 Seasonal or annual service on these shorter term volumes Shippers should bid on this during Open Season if considering long term transport

41 Weather Predictions

42 Weather Predictions The Old Farmer s Almanac states Winter will be colder than normal.. and for 2015 Summer will be hotter than normal for the Lower Lakes Region This publication is correct about 2/3rds of the time! Don t get caught out in the cold, get your space reserved on Vector soon!

43 Questions

44 Gas Storage and Pipelines Business Update Vector Shipper Meeting October 9, 2014

45 Gas Storage and Pipelines ( GSP ) is one of DTE Energy s non-utility businesses Strong, Stable and Growing Utilities Complementary Non-Utility Businesses ~80% of DTE Energy s Earnings ~20% of DTE Energy s Earnings DTE Electric 10 th largest U.S. electric utility 2.1 million distribution customers in Southeast Michigan Fully regulated by the Michigan Public Service Commission DTE Gas 11 th largest U.S. gas utility 138 Bcf of working gas storage capacity; purchases Bcf of gas annually 1.2 million distribution customers in Southeast Michigan 900 Bcf annual throughput Fully regulated by the Michigan Public Service Commission Gas Midstream Services Gas Storage & Pipelines Transports and stores natural gas 91 Bcf of gas storage; 535 miles of pipeline Washington 10 Storage Corp. (100%) Vector Pipeline (40%) Millennium Pipeline (26.25%) DTE Michigan Gathering Holding Company (100%) Bluestone Gathering Company (100%) Proposed NEXUS Gas Transmission Power & Industrial Projects Owns and operates energy assets Industrial / utility solid fuels Utility services and renewable energy Energy Trading Transports gas on more than 60 pipelines Asset management and sales to major utilities Producer services, including risk management 2

46 DTE is developing a gas midstream business with multiple growth platforms Michigan Gathering Marcellus Platform Michigan Platform Utica Platform NEXUS Gas Transmission Pipeline Gathering Storage 3

47 A key theme across the platforms is to provide midstream services in growing shale regions Millennium Pipeline & Expansions 182 mile pipeline traversing northern tier of Marcellus Bluestone Gathering and Pipeline Connects Southwestern Energy and Cabot production to Tennessee and Millennium Proposed NEXUS Gas Transmission ~ $1.5 billion investment DTE stake ~ $500 million Strong customer support Target in-service late 2017 Includes Storage, Michigan gathering projects, Vector Pipeline, and DTE Gas Investigating expansions related to shale gas inflows 4

48 Marcellus production growth drives Millennium expansions New Dominion Interconnect Bi-directional flow Hancock Compressor Station (15,000 HP) Millennium providing services East and West (1.2+ Bcf/d) Bluestone deliveries ramping up to 650 MMcf/d Laser ramping up to 400+ MMcf/d Minisink Compressor increases capacity to Ramapo to 675 MMcf/d; 6/1/13 in-service Hancock Compressor increases capacity to Ramapo to 820 MMcf/d; 4/3/14 in-service New interconnect with Dominion (200 MMcf/d) Minisink Compressor Station (15,000 HP) 5

49 Bluestone Lateral and In-field Gathering System (Susquehanna Gathering SGC ) Bluestone lateral SWN Production Area Summary Core Range Area: ~50,000 acres 75 wells flowing spread over 45 well pad locations Connects Southwestern Energy (SWN) and Cabot gas production to the Tennessee and Millennium pipelines 44.5 miles of 16 & 20 pipeline 2 delivery points: Capacity of 278 MMcf/d to Millennium and 300 MMcf/d to TGP 15,260 HP of compression in-service; 8,720 HP planned for June 2015 In-service dates to market pipelines: Tennessee Pipeline: 11/28/2012 Millennium Pipeline: 5/11/2013 In-field gathering - SGC The in-field gathering system connects SWN s wells to the Bluestone lateral ~ 60 miles of 12 high pressure steel + 16 plastic pipeline 3 Compressor Station Locations with total of 38,100 HP in-service; 7,620 HP planned for June

50 NEXUS Gas Transmission Overview New pipeline to connect Appalachian basin supply to upper Midwest markets Strong lead development partners - DTE Energy and Spectra Energy 250 mile, large diameter pipeline delivering at least 1.5 Bcf/d In service date of November 2017 for the greenfield project Increased access to Appalachia production will provide reliable, costeffective supplies of natural gas to local distribution companies, industrial users and natural gas fired electricity generators With commitments from upper Midwest LDCs and Appalachia producers, NEXUS has sufficient market support to advance development of the project NEXUS connects Appalachian Shale to Midwest markets 7

51 NEXUS route is significantly de-risked Approximately 1/3 of route is using existing infrastructure Only one river crossing (Maumee) No new international border crossings or cross border permits Greenfield route is 75% co-located in utility corridors OPEN project in-service November 2015 Kensington TETCO OPEN Clarington Phase I NEXUS capacity in-service November 2015 Significant engineering work completed to date Government relations and stakeholder outreach work well underway 8

52 Overview of existing storage business DTE Energy Gas Asset Map Field / Capacity Washington 10 Bcf Washington Washington Shelby Total 91.2 DTE Gas Bcf Six Lakes 40.0 West Columbus 22.5 Columbus 16.3 Belle River 60.0 Total Less Utility (85.4) Third Party 53.4 Customer Mix LDC s 26% Pipelines 19% Marketers 52% Banks 3% LDC s 21% Pipelines 0% Marketers 72% Banks 7% LEGEND Service Territory Transmission Pipeline Storage Field Compressor Station Vector Pipeline 9

53 Long-term storage outlook: Overcast but pleasant U.S. Supply / Demand Growth Cumulative Five-Year Growth; Bcf/d Supply Growth Outpaces Demand Growth 12.7 Production 10.2 Consumption Exports to Mexico Demand Growth Outpaces Supply Growth 11.5 Production 12.4 Consumption LNG Exports Exports to Mexico Over the past five years, the tremendous growth in U.S. shale production outpaced the corresponding growth in demand Forecasts for the next five years anticipate demand growth exceeding supply, with increased LNG exports and pipeline exports to Mexico These factors will tighten the supply / demand balance and support upward pressure on natural gas prices and volatility both positive signs for the gas storage market Source: Wood Mackenzie 10

54 Questions? 11

55 NORTH AMERICAN GAS FUNDAMENTALS Bruce Herdman ENBRIDGE INC. Vector Pipeline Customer Meeting Charleston, SC October 9, 2014

56 Legal Notice This presentation includes certain forward looking information (FLI) to provide Enbridge shareholders and potential investors with information about Enbridge and management's assessment of its future plans and operations, which may not be appropriate for other purposes. FLI is typically identified by words such as "anticipate", "expect", "project", "estimate", "forecast", "plan", "intend", "target", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Although we believe that our FLI is reasonable based on the information available today and processes used to prepare it, such statements are not guarantees of future performance and you are cautioned against placing undue reliance on FLI. FLI inherently involves a variety of assumptions, risks, uncertainties and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied in our FLI. Material assumptions include: expected supply and demand for crude oil, natural gas and natural gas liquids; prices of crude oil, natural gas and natural gas liquids; expected exchange rates; inflation; interest rates; availability and price of labour and pipeline construction materials; operational reliability; customer project approvals; maintenance of support and regulatory approvals for Enbridge s projects; anticipated in-service dates and weather. Our FLI is subject to risks and uncertainties pertaining to operating performance, regulatory parameters, project approval and support, construction schedules, weather, economic and competitive conditions, exchange rates, interest rates, commodity prices and supply and demand for commodities, including but not limited to those discussed more extensively in our filings with Canadian and US securities regulators. The impact of any one risk, uncertainty or factor on any particular FLI is not determinable with certainty as these are interdependent and our future course of action depends on management's assessment of all information available at the relevant time. Except to the extent required by law, we assume no obligation to publicly update or revise any FLI, whether as a result of new information, future events or otherwise. All FLI in this presentation is expressly qualified in its entirety by these cautionary statements. This presentation may make reference to certain financial measures, such as adjusted net income, which are not recognized under GAAP. Reconciliations to the most closely related GAAP measures are included in the MD&A filings and/or Supplementary Financial Information available on our website or in the slides that accompany this presentation, if applicable. 45

57 2014 started with extreme winter weather that broke physical market records and triggered spikes in gas prices Polar Vortex Record daily gas and power demand Record weekly storage withdrawal Highest NYMEX in 30 mos. Largest 1-day NYMEX move $100 gas in Boston $70 gas in Chicago Propane prices spike near $5/gal at Conway in January 46 46

58 A Polar Vortex safety moment: Don t do this!! 47

59 Lower 48 storage started the injection season at its lowest level since 2003 and will end up below recent norms Expected end of season inventory: Tcf, well below 5-year normal. Extreme cold during Winter 2013/14 polar vortex and resulting record gas demand led to highest winter storage drawdown on record; lowest start to the injection season since 2003 Source: EIA 48

60 Robust production from the Northeast and a cool summer have contributed to strong storage injections this year and Source: NOAA Source: Average of Consultants 49

61 have led to a narrowing of the storage deficit End of Season Deficit: <400 Bcf Beginning of Season Deficit: 865 Bcf Source: EIA 50

62 Gas prices have been highly correlated to the storage deficit; prices have been falling as the deficit narrows Gas prices rose by over $2 as the storage deficit more than quadrupled between November and February As the storage deficit fell off, Nymex price followed suit Source: EIA 51

63 Appalachian gas production should continue its strong growth trajectory for some time 30 Appalachian Production 25 Utica 20 BCF/d 15 Marcellus Source: 2014 Enbridge Fundamentals View 52

64 In particular, the Utica shale is an emerging play where production is set to increase substantially Average Daily Production Rate 600 Permits Issued for Utica Drilling MMcfd Q Q Q Q Q Q2 No. of Permits Average Daily Production By County 2nd Q 2014 County MMcfd CARROLL 404 BELMONT 155 NOBLE 109 MONROE 101 HARRISON 86 Others 119 Source: Ohio DNR 53

65 E&P improvements are providing almost exponential gains in efficiency and productivity Source: EIA Greater horizontal drilling Longer lateral lengths Increased frac stages Fit-for-purpose rigs Quicker spud-to-spud times Faster drilling speed Defined sweet spots Frac technology better matched to geology 54

66 Ongoing improvements in drilling technologies have rapidly increased efficiency and reduced costs Southwestern s Improved Efficiency in the Fayetteville Source: Southwestern Energy 55

67 Shale gas in the Northeast, South and WCSB account for most of North America supply growth The Northeast will provide the most production growth over the next decade WCSB growth driven by NGL-rich plays & supply for LNG projects Source: 2014 Enbridge Fundamentals View 56

68 There are several compelling reasons to support higher future WCSB gas supply Competitive Cost NGL Value Colossal Resources LNG Exports Hedging Foreign investment 57

69 Duvernay & Montney plays will lead supply growth in the WCSB 2013 Resource Assessment of the Montney by NEB/AER/BCOGC: Huge areal extent: 130,000 km 2 Marketable natural gas = 449 Tcf (think Marcellus) Marketable NGL = 14.5 billion barrels Marketable oil = 1.1 billion barrels 2012 Resource Assessment of the Duvernay by AGS and AER: P90 natural gas = 353 Tcf P90 NGL = 7.5 billion barrels P90 Oil = 44.1 billion barrels 58

70 WCSB shale and rich gas plays are very competitive Average Breakeven Cost for Select Plays US$/Mcf Source: Wood Mackenzie 1H2014 Gas Tool 59

71 Exploitation of rich gas and de-risking of LNG supply leading to higher gas rig counts in the WCSB; points to higher gas (and NGL) production ahead 250 Average Monthly WCSB Gas Rig Count Most active winter since Most active summer since Active Gas Rigs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Beaver Drilling, Baker Hughes 60

72 Increased development of the Montney and Duvernay plays, to exploit rich gas and support LNG exports, will drive long-term growth in the WCSB 20 WCSB Gas Productive Capacity History Forecast Bcf/d Horn River Duvernay Montney Conventional Source: 2014 ENB Fundamentals View 61

73 The upside risk to Lower 48 gas demand is growing with recent EPA legislation and additional LNG and industrial project announcements EPA Clean Power Plan Announced EPA Estimates that the plan will create 3.3 Bcf/d of Additional Gas Demand For Power Generation LNG Export Outlook Remains Strong Proposed changes to the US approval process could result in a greater volume of exports, creating upside for US exports Industrial Demand Robust Chemical project announcements swell to 148, worth $110B Sources of Upside Risk to Demand 62

74 Power generation and new industrial gas demand growth will be strongest in the South and Midwest with more growth post , ,161 1, (mmcfd) Coal retirements = 6, Industrial = 2,916 Source: ENB, Average of Consultants 63

75 North American LNG exports to Asia should be competitive and will boost gas demand 14 North American LNG Exports 12 Bcf/d 10 8 BC 6 4 US Source: 2014 ENB Fundamentals View

76 Growing Mexican gas demand and increasing reliance on piped imports will be an important market balancer in the near term Upside Risk Growing Mexican economy 40+ announced gas-fired power projects (25 GW by 2026); strong industrial growth Limited Pemex development of resource reallocation of capital towards oil projects Key basins threaten by water shortages and drug gangs Source: 2014 ENB Fundamentals View Downside Risk 6 th largest shale gas resource in the world Constitutional amendment allowing private investment in oil and gas sector Government desire to be less dependent on piped imports Pipeline bottlenecks within Mexico Mexican Cross Border Capacity by 2015 Current Capacity 2.6 Bcfd Los Ramones 2.1 Bcfd Northwest 0.77 Bcfd Other Laterals/Expansions 0.59 Bcfd Total ~ 6 Bcfd 65

77 Flows on the TCPL mainline have been high as WCSB production is attracted to export and eastern Canadian markets but are expected to decline over time Flows east on TransCanada mainline have remained over 3 Bcf/d so far this summer, largely due to high levels of yearly contracting incentivized by uneconomic IT flows The Alberta storage deficit will only be alleviated by lower exports or higher production Annual Empress Volumes Monthly 4.0 Bcf/d Contracted Flowed Future Contracted Source: TransCanada, Bentek 66

78 Appalachian gas will push into the South while traditional flows from the Gulf will flip to serve LNG exports and Mexico Major change in gas flows between 2014 and 2025 LNG Exports 4.8 WCSB 2.7 (0.6) (0.9) Rockies Mid Continent (0.7) Appalachia LNG Exports Red = Decrease Blue = Increase Only Flows > 0.3 Bcf/d shown Permian Gulf Coast (0.7) Source: ENB Fundamentals View (GPCM 1) - July 2014 MX Exports 2.3 LNG Exports 0.5 GoM Offshore 67

79 Many projects have been proposed to provide market access for strongly growing Appalachian gas supply Spectra/DTE NEXUS Pipeline TETCO Uniontown to Gas City Rockies Express, ET Rover BCFD Source: Range Resources (modified) 68

80 Appalachian infrastructure constraints expected to begin easing in 2015 Midwest is a takeaway capacity focus area Strong production growth in Appalachia gas pushing into other markets Alliance Northern Border Canadian supplies relatively unaffected by REX reversal Vector Rex East West, 1.8 Bcf/d Rockies gas to be increasingly displaced by Utica supplies NGPL, 0.75 Bcf/d ANR, 0.6 Bcf/d Texas Gas 0.58 Bcf/d Texas Eastern, 0.35 Bcf/d Several projects proposed to take gas South First target market has been new infrastructure into the constrained US Northeast Next markets have been Ontario and lower Midwest, displacing some Canadian and Rockies supplies respectively Gas increasingly to flow South from both the Midwest and directly from Appalachia via backhauls REX East West displaces Rockies gas, but Canadian and N.D. supply to Midwest will be relatively unaffected Source: ENB Gas & NGL Fundamentals View (GPCM 1) - July

81 Summary US gas production will be rising seems set to surprise to the upside Upstream technologies still continuing to evolve and improve Associated gas (from oil) and rich gas volumes continue to increase Appalachia will be the epicenter of growth Canadian gas production will increase as producers target NGLs and de-risk acreage for LNG projects Gas demand trying to catch up with production growth Any significant demand growth is still a couple of years away but, then a Super-Cycle?? Industrial projects under construction; LNG projects look to be proceeding; MX exports Gas-fired generation will gain from MATS and EPA Clean Power rule but, renewables are expanding market share (mostly at the expense of gas) Traditional gas flows are becoming history US gas generally wants to flow South (to southern US markets, Mexico or offshore) WCSB gas will increasingly be pulled (by LNG) & pushed (by Appalachia) west Henry Hub prices should increase moderately with support from new demand Northeast basis will fluctuate with growing supply and lumpy capacity additions Generally, basis in supply areas is widening to Henry and some regional basis in market areas is narrowing to Henry 70

82 Discussion

83 Thank You