U.S Shale Gas Update

Transcription

1 U.S Shale Gas FlexPO Conference Shanghai, China 1560 W. Bay Area Blvd., Suite 195, Friendswood, TX 77546, USA Tel. (281) ,

2 Shale Gas Formations 2 Traditional gas production was based on vertical drilling into formations of gas associated with crude oil or into areas with dry gas, the location of drilling area was critical Tight oil and gas formations associated with sedimentary shale have been known for decades but was thought to be uneconomic to recover Mitchell Energy and Devon pioneered directional drilling and fracking in the early 2000 s and commercialized and improved the technology beginning in the Barnett, TX and Haynesville, LA areas Directional drilling was a key aspect as this allowed feedback to drillers to optimize routing of drill bore. Once the desired shale location was reached, the drill bore is then oriented horizontally to expose more of the formation for access to production.

3 Shale Gas Technology 3 Shale formations that have tight oil or tight gas are dissimilar in nature and the optimum method for extracting hydrocarbons will vary from formation to formation The formation porosity and rock compositions vary greatly. For instance, the Monterey shale in California is relatively dense and geologically complex In general, shale gas formations contain a higher level of NGLs as compared to dry gas formations, and thus give an economic uplift to natural gas production economics For each formation, the optimum use of proppants, frack sands, acidizing, fracking techniques will vary and thus a learning curve will be seen that will improve well productivity over time. Shale gas technology is highly differentiated. Shale gas drilling in inherently more productive that vertical wells as multiple wells can be drilled from the same platform While well depletion can be as much as 30% per year for new wells, producers can re-frack wells multiple times and re-new production rates

4 Basins 4

5 Shale Strata Represents Multiple Opportunities 5 Shale layers deposited at different geologic times and may be found in the same geographic areas The Marcellus and Utica shales are examples of this and are located in the Pennsylvania, West Virginia, and Ohio areas The Marcellus shale is a Middle Devonian formation, rich in organic, low-density deposits In eastern Ohio, the Utica shale is only 2,000 feet below the Marcellus formation, but is 6,000 feet below in southcentral Pennsylvania In West Texas, the newly discovered Wolfcamp shale deposit represents a potential major opportunity that is located in the Permian area Source: Geology.com

6 Shale Gas Fundamentals 6 Conventional gas is either associated with crude oil deposits or found in dry gas formations Tight gas associated with sandstone and shale formations is made accessible through hydro-fracking that breaks up rock Proppants and other completion techniques keep formations open and reduce initial depletion rates Directional drilling optimizes bore location through feedback Drill bit can be re-routed and redirected Horizontal orientation greatly expands production zone Optimum completion technology varies with specific deposit geology and a significant learning curve will often greatly improve productivity One rig can drill a well in 15 days

7 NGL Content of Shale Plays Ave NGL Content of Wet Gas, e GPM Source: EIA and analysis Formation Area GPM (1) Bone Springs and Avalon Shale West Texas Granite Wash North Texas Barnett East Texas Permian West Texas Sand Hills SAOU Versado Wolfberry 6.0 Canyon Sands 7.5 1) gallons per million SCF Source: Targa presentation, Wells Fargo - Dec , 2013 Historically, the average content of US natural gas has been about 1.5 gallons of total NGLs per million SCF of dry gas Recently, average content has moved up as wetter shale gas has begun to displace dry gas GPM is gallons per gallons per million SCF Natural gas prices near $2/MM BTU seen in early 2012 resulted in the shut-in of dry wells in the Rockies; once a well is shut, it may not have sufficient economics to re-start Natural gas prices of $4.50 to $6.00 per million BTU support shale development Shale formations tend to have higher NGL content than US average compositions Some formations have as much as 10 GPM The East Marcellus is typically NGL rich and in the West Marcellus area NGL content falls off significantly Dry gas can have less that 1 GPM The NGL content provides a value uplift that improves gas production economics

8 Shale Gas Reserves 8 Technically Recoverable Reserves Gas Rank Country Shale Gas (TCF) Shale Oil (Bbl) 1 China 1, Argentina Algeria United States Canada Mexico Australia South Africa Russia Brazil Source: EIA Others 1, World Total 7, , Proven Reserves, TCF Formation 2012 Production Reserves Marcellus/Utica Barnette Texas Louisiana Salt Western Gulf Anadarko Arkoma Sub-total Other shale gas plays All U.S. Shale Plays Source: EIA

9 Why did the US take the lead? 9 In the mid-2000 s the US chemical industry was hit with shortages of natural gas and high-priced imported oil. Natural gas hit $12 per million BTUs and crude oil hit $150/bbl. There was certainly the economic incentive for innovation Historically, 70% of US ethylene crackers were based on NGLs. The US gas industry has developed an extensive infrastructure on collection systems, pipelines, gas treatment, and fractionation facilities that remained in-place during the downturn. In the US, land owners have mineral rights to the soil beneath their property, not the government. Thus, property owners can collect significant royalties by leasing out their rights. The geographic footprint of the new shale formations that were discovered roughly mirrored the areas that were found to have significant shale gas formations all that was needed was additional infrastructure, including pipelines, gathering systems, fractionation facilities. The US equity structure with MLPs (master limited partnerships) provided a ready vehicle for the rapid capital generation and efficient allocation

10 Shale Gas Infrastructure 10

11 Shale Gas Production by Formation MM SCF/d E Bakken ,171 Eagle Ford 1,646 1,662 1,616 1,863 2,713 3,955 5,235 6,197 Haynesville 3,781 4,254 5,044 7,207 9,840 9,776 7,675 6,839 Marcellus 1,222 1,390 1,600 2,531 4,793 7,693 11,514 14, Niobrara 3,691 4,414 4,710 4,856 4,762 4,661 4,375 4,316 Permian 4,766 4,758 4,631 4,404 4,244 4,430 4,864 5,431 Utica ,043 Total (wet production) 15,459 16,859 17,999 21,322 26,944 31,412 35,055 39,316 Dry production from Shale 12,653 13,799 14,731 17,452 22,052 25,710 28,691 32,179 US dry gas production 54,613 56,258 55,387 60,548 65,548 66,065 67,484 69,733 Percent from Shale 23.2% 24.5% 26.6% 28.8% 33.6% 38.9% 42.5% 46.1% Source: EIA

12 Natural Gas Production from Shale Formations 12 Dry gas from shale formations comprise nearly half of US gas demand Marcellus region has seen strong growth since the start-up of infrastructure projects Over 1,000 wells in Marcellus region yet to be put into production Source: EIA

13 Marcellus Formation 13 This formation is the largest in the 48 state region with proven reserves of 43 TCF, about 1/3 of US total It is located in SW Pennsylvania and in West Virginia, overlaying traditional oil/gas production areas Production in September was 16 Bcfd or about 20% of US total By 2020, the EIA projects that this formation produce half of the natural gas consumed east of the Mississippi river Access to potentially huge markets on the East Coast await infrastructure developments. Heating is currently based on oil. With the start-up of the ATEX ethane pipeline in 2013, the formerly isolated region is now able to supply ethane to the USGC petrochemical industry 1,300 wells are awaiting infrastructure tie-ins Since 2007, growth in natural gas production has been 42%/yr Shell is looking to site a cracker in Monica, PA Ascend polymers recently licensed PE technology

14 Marcellus Productivity 14 Despite a 21% decline from 2012 to 2013 in the total rig count in the Marcellus, natural gas output per rig rose by 47% according to the DPR. Production gains have come largely from northeastern portions of the basin producing drier natural gas, where output has benefitted from gathering line and pipeline capacity expansions. However, infrastructure improvements have also bolstered production in the wetter southwestern portions of the basin, which saw increased drilling in Source: EIA

15 Shale Gas Well Productivity 1,000 SCF/d per well 8,000 7,000 Marcellus 15 6,000 5,000 4,000 3,000 2,000 1,000 Haynesville Total Utica Eagle Ford E Source: EIA Productivity Report

16 Shale Gas Production Footprint is Small Drilling Wellhead 16 Fracking Completed Well Source: University of Pennsylvania study, June 24, 2009

17 Opposition to Fracking 17 There are geographic and organizational pockets of opposition to shale gas development Primary concerns voiced by the opposition are in the areas of potential ground water contamination and geological activity There are bans on fracking in New York State and in some areas of California Fundamentally, the formations being fracked are significantly deeper than ground water deposits. The instances that have seen leaking wells and contamination of groundwater have been traced to poor cementing and well completions The industry generally supports establishing and enforcement of performance standards for fracking Fracking has resulted in low-level seismic events that have been measured; however, their relationship to other events seen in geologically-sensitive areas is being debated.

18 The Elephant and the Blind Men Once upon a time there was a group of blind men who was joined by a newcomer that had heard of, but never seen an elephant. He asked the men if they could describe an elephant, so that he might recognize the animal if he came across one. 18 The first blind man said, an elephant is like four sturdy trees, and is very tall. The second blind man said, no, an elephant is long and flexible like a snake. The third blind man said, no an elephant is long, curved, and is very hard and smooth and has a pointed end. Shale gas benefit depends on one s position in the value chain.

19 Shale Gas Value Chain Land owners Government US Industry Coal Industry Dry Gas Wells C-1 Chemistry (Ammonia/Methanol) Non-integrated C2 Derivatives First Shale Gas Wells Midstream Companies Ethylene Crackers Integrated Ethylene Derivatives 19 Later Gas Producers Material Providers Engineering Companies Shipping Companies PE Converters Local Employment Energy Consumers Equipment Providers Color key: Positive Neutral Negative

20 Shale Gas Risks 20 Company Write-downs The shale gas mania in 2010/2011 resulted in significant investments. Due to financial accounting rules, recent prices have prompted write-downs of assets Valuation of assets is dependent on long-term pricing forecasts for natural gas and natural gas liquids Some land investments were made with minimal test wells and subsequent wells have proven to have lower hydrocarbon deposits or have been more costly to bring into production ExxonMobil bought XTO energy for $31B in 2010 Mineral rights leases often require a specific timetable for drilling or the right to drill lapses Company Amount Date Comments BP $520M May-14 Utica Shale; poor drilling results Sasol $492M Mar-14 Canadian Shale Itochu/Osaka Gas $290M Mar-14 Shell $2.1B Aug-13 Low gas prices and lower productivity; Eagleford assets put up for sale BHP $2.8B Oct-14 Devon Energy $896M Feb-14 Sumitomo $1.55B B Yen Encana $1.7B Jul-12 BG Group $1.4B Aug-12 Long term gas price of $4.50/MM, down from $5.00 Noble Energy $73M 2Q12 Risks are asymmetric Although the high productivity of shale gas production bring value to the production chain, some areas of the shale gas value chain are prone to more risk than others The abundant supply of natural gas relative to demand resulted in low prices in 2010 and the shut-in of dry gas wells At one time, the NGL uplift of shale gas profitability could completely offset costs; however, sagging prices for ethane, propane and others reduced profitability The oil majors got into shale gas later than fleet-footed midsize companies Total $10.9B

21 21 Ethane Price Relative to Crude and Natural Gas Henry Hub Brent Crude Ethane Dollars per MM BTU Jan07 Apr July Oct Jan08 Apr July Oct Jan09 Apr July Oct Jan10 Apr July Oct Jan Apr July Oct Jan12 Apr July Oct Jan13 Apr July Oct Jan14 Apr July Source: EIA

22 Near-term U.S. Ethylene Industry Response In 2008, the US chemical industry is given a huge opportunity 22 In late 2008, the price of ethylene in the US fell from $0.95 per gallon to $0.40 per gallon in the space of three months and further dropped to $0.25 per gallon in late 2012 The root cause was a glut of ethane on the market that could not be shipped and whose only alternative was to reject into natural gas The sudden shift in the industry cost structure provided incentive to maximize rates, shift to lighter feedstock slates and look at debottlenecking options Several feedstock flexibility projects and minor expansion projects were initiated New capacity Flexability Company County Location Type k MTPA M Lbs/yr M Lbs/yr Start-up k bbl/d ethane Cumulative Eastman Chemical US Longview, Tx R ChevronPhillips US Sweeny, Tx E LyondellBasell US Channelview, TX E Dow Chemical US St.Charles, LA R Q BASF (feedstock flexibility) US Port Arthur E Westlake Chemical - Petro #2 US Lake Charles, LA E Q Dow Chemical US Plaquemine E ,000 2Q Nova Chemical Alberta rate recovery US Joffre, Alberta G LyondellBasell US Clinton, Iowa E Williams US Geismar, LA E H Undisclosed Misc Near Term Totals 1,119 2,

23 Longer-term US Ethylene Industry Response Beginning in 2016, as many as 11 new crackers will start up. A wave of new US-based cracker announcements has been seen Several projects are board approved and have received construction permits Construction has started on three ethylene projects Environmental approvals are being granted without extensive delay Additional debottlenecking and feedstock conversions seen in 2014 and 2015 There are 5 additional projects that are being considered 23 New capacity Flexability Company County Location Type k MTPA M Lbs/yr M Lbs/yr Start-up k bbl/d ethane Cumulative Nova Chemical (feedstock flexibility) Canada Corunna, Ontario F 0 0 1,452 1Q LyondellBasell US LaPorte, Tx E Q Ineos US Choc.Bayou, Tx E Westlake Chemical - Petro #1 US Lake Charles, LA E Q Westlake Chemical US Calvert City, KY E Q LyondellBasell US Channelview E Q LyondellBasell US Corpus Christi E Q LyondellBasell US Channelview II E Q ChevronPhillips US Cedar Bayou G 1,500 3,300 2H Exxon US USGC G 1,500 3,300 3Q Dow Chemical US USGC G 1,500 3, Formosa #3 US Pt.Comfort, Tx E 1,600 3, Axiall/Lotte US Louisiana G 1,000 2, Ascent/Odebrecht (Braskem) US Appalachia G 1,000 2, MexiChem/Occidental US Ingleside,Texas G 544 1, Nova Chemical (expansion) US Corunna, Ontario G Shell US Monaca, Penn. G 1,450 3, Sasol US USGC G 1,500 3, Shintec US USGC G 500 1, Longer Term Totals 14,562 32,037 1,893 1,139

24 US Ethane Exports View of US Ethane Export Plans 24 Company Sourcing Port Crackers Country k bbl/d ethane S/U Timing Ineos Mark West Mariner Marcus Hook, PA Rafnes Norway H15 Ineos Mark West Mariner Marcus Hook, PA Grangemouth UK 23.5 Borealis Sunoco Logistics Marcus Hook, PA Stenungsund Sweden Q16 Reliance Enterprise? Houston Hazira India Q17 Nagothane India Baroda India Dahej India Jamnegar India Total Sabic Enterprise? Houston Wilton UK Unknown Enterprise? 37.1 N/A Total 199 Source: Company announcements and estimates Notes: There are two announced US export terminals that will ship ethane. The Sunoco terminal in Marcus Hook, PA will have the capacity of 70,000 barrels per day when it comes on line in early The Enterprise terminal, located in Houston, Texas will have a capacity of 200,000 barrels per day and is scheduled to come on-line in 2016.

25 Will there be enough Ethane in 2020? Base Case Natural Gas Bridge Natural Gas Bscf/d Comments 2013 production 67.4 Gas demand growth 6.2 Includes 3.7Bcfd industrial growth Reduced Canadian imports 3.7 Other production 77.5 Production excluding LNG exports Delta production Ethane Balance 1,000 Bbl/d 2013 consumption 980 Excludes rejection of 220k Bbls/d 2020 consumption 1,919 Additional requirement 939 Sources of Ethane Gas demand growth (1)(2) 394 Compounded growth rate 1.2% Capture rejected ethane 220 Estimated Export of ethane (230) Potential second terminal Pipelines to Canada (150) Total ethane supply growth 234 Ethane deficit (705) LNG equivalent (Bcfd) 7.4 1) Assumes 7.6Bcfd and 4 GPM liquids, 41% ethane 2) EIA growth forecast is for 2.9Bcfd equivalent to 115,000 Bbl/d

26 US LPG Exports 26 Production of propane, butanes, and natural gasoline has dramatically increased with shale gas Until 2013, US exports were constrained due to undersized export facilities The glut in propane resulted in prices at 60% below international values Several mid-stream companies have recently brought on loading capacity that has relieved pressure on domestic market and softened the arbitrage of international pricing LPG Export Terminal Expansions (million barrels/mo.) Company Location Prior to 2013 By 2016 Total Enterprise - ECHO Houston, TX Targa Galena Park,TX ConnocoPhillips Freeport,TX Sunoco Nederland, TX Kinder Morgan Galena Park, TX Total Natural Gasoline Butanes Propane 1,000 barrels/day Source: EIA

27 US Natural Gas 27 While shale gas is rich in natural gas liquids, the primary product that is produced from these wells is methane The growth in US domestic natural gas demand in the last 30 years has been small, averaging about 1% per year Low gas prices will spur additional use in the power sector, in industry, and in transportation, but will this be enough? The possibility of exports of LNG (liquefied natural gas) will directionally help, but will this be enough for the co-production of NGLs to support the surge of US ethylene capacity expected between 2017 and 2020? Will the opposition to US gas exports succeed in stalling export opportunities? Will the long permitting times for US LNG export projects continue to hamper US access to international markets and provide a competitive disadvantage to Canada, Russia and East Africa?

28 Historic US Natural Gas Demand Bcfd % Growth 1998 to 2013 Residential 0.6% Commercial 0.6% Industrial -0.7% Electric Power 3.9% Transportation 1.2% Total 1.0% Residential Commercial Industrial Electric Power Transportation

29 EIA View: U.S. Natural Gas Outlook 29 Long-term US natural gas domestic demand growth is near 1% per year Short-term demand bumps in 2011/2012 associated with fuel switching coal to gas Production growth highly dependent of LNG exports Transportation Forecast US Natural Gas Demand Growth (Bcfd) Residential 5.9 (8%) Electric Power 13.5 (19%) 22.3 (31%) 9.0 (13%) Commercial 20.4 (29%) Area E delta Growth/yr Residential % Commercial % Industrial % Power % Transport & pipeline % Total Consumption % Source: US Energy Information Administration, Annual Energy Outlook 2014 US Natural Gas Demand, 2013 (Bcfd) Source: EIA Industrial

30 U.S. shale gas leads total gas production U.S. dry natural gas production trillion cubic feet History 2012 Projections billion cubic feet per day 30 Non-associated onshore Non-associated offshore Shale gas Tight gas Associated with oil Coalbed methane Alaska Source: EIA, Annual Energy Outlook 2014 Reference case IAEE International Conference June 16,

31 US C1 Chemical Renaissance 31 A new wave of C1 chemistry projects has emerged in the US based on the belief that natural gas prices will have a significant cost structure advantage over the long term Just within the last 12 months, multiple announcements have resulted in major consultants doubling their projections for capacity additions The two major C1 chemistry chemicals are methanol and ammonia Methanol additions of up to 20 million tonnes would provide more than half of global growth requirements by 2020; associated natural gas feed of 1.9Bcfd would result in additional 75,000 barrels per day of ethane Ammonia additions of 6 million metric tonnes per year would consume 0.65 Bcfd natural gas and provide 25,000 barrels per day of ethane

32 US Ammonia Plant Expansions Within the last 12 months, significant ammonia projects. Several re-starts and debottlenecks Three grassroots ammonia plants moving forward Six additional plants possible 8 million tonnes of new capacity possible 32 Capacity Company Location k MTPA k STPA Start-up NG Use (BCF/d) NG Use (BCF/y) OCI Beaumont, TX Potash Corp Geismar, LA CF Industries Donaldsonville, LA Mosaic Faustina, LA likely H OCI Weaver, Iowa 1,900 2, CF Industries Misc. locations Agrium Redwater Area Incitec Pivot, Ltd Waggaman, LA Agrium Borger, OK Dakota Gasification Co. Beulah, ND ND Corn Growers Spiritwood, ND NA Ohio Valley Resources Spencer Co., IN NA Summit Power Penwell, TX NA Agritos Pasadena, TX TBD NA NA NA NA Agrium US corn belt 1,800 1,980 NA CHS Co-op. Spiritwood, ND H Total US 6,068 6,

33 US Methanol Plant Expansions As much as 30 million tonnes of new capacity for US. 33 Similar to US ethylene, some idled plants have been re-started Leading global producer Methanex is re-locating two Chilean plants to US US producer Celanese building new plant at site where old one was torn down Several Chinese companies currently negotiating for site selection; strategy is to export methanol for use in MTO (ethylene/propylene) production Massive plant possible in Texas City, $4.5B and 7.2M tonnes 10% of global capacity Long-term gas prices of $4-5/MM BTU provide significant economics Capacity Company Location k MTPA M gals/yr Startup NG Use (BCF/d) NG Use (BCF/y) Methanex - Restart Medicine Hat, Alberta, Canada OCI - Restart Beaumont, TX 1, LyondellBasell - Restart Channelview, TX Methanex Geismar (moved from Chile) 1, Celanese Clear Lake, TX 1, Lake Charles Clean Energy Lake Charles, LA 1, Methanex Geismar (moved from Chile) 1, S.Louisiana Methanol Port of S.Lousiana 1, G2X Energy Pampa, TX Yuhuang Chemical - I St.James Parrish 1, Valero Norco, LA 1, Chinese company Texas City 7,200 2, OCI - grassroots Beaumont, TX 1, Yuhuang Chemical - II St.James Parrish 1, Total possible 19,309 7, Probable 10,000 5,

34 US LNG Summary 34 US LNG Project Summary The US has plenty of NGL facilities, the problem is that they were built for imports, not exports! Re-purposing facilities saves some capital, but is not cheap! A liquefaction train is typically $4B with capacity of Bcfd 17 terminals have submitted FERC applications with 26.4Bcfd capacity We believe likely capacity of 12.5Bcfd will be seen by 2020 Cheniere Energy is in the lead with the Sabine Pass project starting up in 2016 and a Corpus Christi terminal being planned US LNG Regulatory Environment The approval process in the US has been quite extensive with three review phases The DOE review is followed by a FERC (Federal Energy Regulatory Commission) review Cove Point, MD FERC environmental review was 20 months The Freeport LNG facility in Lake Charles was initiated in 2010, approved in 2013 Canadian approvals much easier New process introduced in May for non-free trade countries There is significant opposition to US exports in preference for lower domestic prices Dow Chemical advises a cautious approach US LNG Facilities (Bcfd) In Operation In Construction In Engineering Liquefaction (export) Gasification (import)

35 U.S. LNG Projects 35 US LNG Projects in the FERC Approval Pipeline Company Name Location Capacity S/U timing Cheniere Sabine Pass Sabine, TX 1.0Bcfd 2016 Cheniere Sabine Pass Sabine, TX 2.0Bcfd 2017 Cheniere Sabine Pass Sabine, TX 3.2Bcfd 3Q18 Freeport LNG Dev'l Freeport Freeport, TX 2.0Bcfd 2018 Cheniere Corpus Christi Corpus Christi, TX 1.8Bscfd 2019 Trunkline/BG Group Lake Charles Liq. Lake Charles, LA 0.8Bcfd 2H19 Sempra-Cameron LNG Hackberry, LA Hackberry, LA 1.7Bcf 2018 Total 12.5Bcfd Southern Union BG LNG Lake Charles, LA 2.4Bscfd Dominion Cove Point Cove Point, MD 0.82Bcfd 2017 Jordan Cove Coos Bay Coos Bay, OR 1.0Bcfd Oregon LNG Astoria Astoria, OR 1.25Bcfd Excelerate Liquefaction Lavaca Bay, TX Port Lavaca, TX 1.38Bcfd Southern LNG Co. Elba Island, GA Elba Island, GA 0.35Bcfd Magnolia LNG Lake Charles, LA Lake Charles, LA 1.2Bcfd 2018 CE FLNG Plaquemine, LA Plaquemine, LA 1.5Bcfd Exxon Mobil Golden Pass Sabine Pass, TX 2.5Bcfd Gulf LNG Liquefaction Pascagoula, MS Pascagoula, MS 1.5Bcfd Total 26.4Bcfd Other Identified Sites Company Name Location Capacity Gulf Coast LNG Export Brownsville, TX Brownsville, TX 2.8Bcfd Waller LNG Services Cameron Parish, LA Cameron Parish, LA 0.16Bcfd Pangea LNG Ingleside, TX Ingleside, TX 1.09Bcfd Gasfin Development Cameron Parish, LA Cameron Parish, LA 0.2Bcfd Venture Global Cameron Parish, LA Cameron Parish, LA 0.67Bcfd Total 4.9Bcfd Above the 7.4Bcfd requirement for ethane production

36 Proposed LNG Export Terminals 36 Source: EIA Proposed Export Terminals 1. Corpus Christi, TX: 2.1 Bcfd (Cheniere Corpus Christi LNG) (CP12-507) 2. Coos Bay, OR: 0.9 Bcfd (Jordan Cove Energy Project) (CP13-483) 3. Lake Charles, LA: 2.2 Bcfd (Southern Union - Trunkline LNG) (CP14-120) 4. Cove Point, MD: 0.82 Bcfd (Dominion Cove Point LNG) (CP13-113) 5. Astoria, OR: 1.25 Bcfd (Oregon LNG) (CP09-6) 6. Lavaca Bay, TX: 1.38 Bcfd (Excelerate Liquefaction) (CP14-71 & 72) 7. Elba Island, GA: 0.35 Bcfd (Southern LNG Company) (CP14-103) 8. Sabine Pass, LA: 1.40 Bcfd (Sabine Pass Liquefaction) (CP13-552) 9. Lake Charles, LA: 1.07 Bcfd (Magnolia LNG) (CP14-347) 10. Plaquemines Parish, LA: 1.07 Bcfd (CE FLNG) (PF13-11) 11. Sabine Pass, TX: 2.1 Bcfd (ExxonMobil Golden Pass) (CP14-517) 12. Pascagoula, MS: 1.5 Bcfd (Gulf LNG Liquefaction) (PF13-4) 13. Plaquemines Parish, LA: 0.30 Bcfd (Louisiana LNG) (PF14-17) 14. Robbinston, ME: 0.45 Bcfd (Kestrel Energy - Downeast LNG) (PF14-19) PROPOSED CANADIAN SITES 15. Kitimat, BC: 1.28 Bcfd (Apache Canada Ltd.) 16. Douglas Island, BC: 0.23 Bcfd (BC LNG Export Cooperative) 17. Kitimat, BC: 3.23 Bcfd (LNG Canada)

37 Global LNG Trends 37 International natural gas prices are 3X to 4X US prices The BP Group forecasts global LNG demand growth at 15Bscfd by 2020 or 5.5% per year LNG trade is increasingly global with 10% growing to about 25% of gas demand supplied by imports in exporting countries and 27 importing countries Buyers no longer want to be linked to oil but to local gas prices Post-Fukishima energy policies in Japan are being reset China National Petroleum signed a 30-year agreement with Gazprom for 3.6Bcfd via pipeline beginning in 2019 BP Group expects LNG trade to grow by 15Bscfd by 2020, at a CAGR of 5.5% Globally, there are LNG projects representing 60Bscfd of potential export capacity being considered

38 Conclusions 38 Low costs and high and improving productivity of natural gas from shale gas in the US have provided a platform for the renaissance of the US petrochemical industry According to IHS, $1.9 trillion of new capital will be spent on chemical projects and NGL infrastructure by 2035 A total of 1.6 million new jobs will be generated Shale gas is rich in NGLs and the current abundance of ethane has led to low prices and a production significant cost advantage for US ethylene producers The prospect of long-term low natural gas prices in the US has resulted in a surge of interest in ammonia and methanol projects With low domestic demand growth of natural gas, it appears that LNG exports will be required to generate sufficient feedstock for the proposed ethylene crackers It appears that sufficient LNG projects will be executed to meet incremental ethane requirements by 2020; however, a tighter supply/demand balance will likely increase ethane prices

39 Discussion 39 Over Two Decades of Business Research Excellence!