Fort Nelson Gas Plant, British Columbia The Future and Evolution of LNG Markets Gary Weilinger, Vice President, Strategic Development and External Affairs September 8, 2011
Fort Nelson Gas Plant, British Columbia BC Natural Gas Potential: Why LNG Exports Make Sense
British Columbia Natural Gas Supply That Was Then This is Now Then Supply treadmill to offset declines Now 100+ years supply and growing More gas = more wells More gas = fewer wells Incremental expansion of plants and pipelines to serve traditional markets Step-out growth, new plants and pipelines, pursuing Asian export markets Rising natural gas prices with high volatility Moderate prices for short and mid-term BC oil and gas revenues = 20% of resource sector, 2% of province (1998/99) BC oil and gas revenues = 57% of resource sector, 4% of province (2009/10) Bridge fuel to renewable future Foundation fuel for lower-carbon world
BC Unconventional Natural Gas Potential Altering the Energy Landscape 70 Average Reserves per Square Mile (10 wells per sq. mile) (BCF/Sq. Miles) 60 Montney & HRB 50 40 30 20 00's 90's 80's 70's 60's 50s 10 0 1940 1950 1960 1970 1980 1990 2000 2010 2020
BC s Game Changing Natural Gas Supply In Competition With U.S. Supply Growth HORN RIVER Original Gas in Place (Tcf) 500 Current Production (Bcf/d) 0.4 Producer Peak Forecast (Bcf/d) 2.0 MONTNEY Original Gas in Place (Tcf) 450 Current Production (Bcf/d) 1.0 Producer Peak Forecast (Bcf/d) 4.0 WOODFORD Original Gas in Place (Tcf) 23 Current Production (Bcf/d) 1.2 Producer Peak Forecast (Bcf/d) 1.7 BARNETT Original Gas in Place (Tcf) 327 Current Production (Bcf/d) 5.2 Producer Peak Forecast (Bcf/d) 6.0 EAGLE FORD* Original Gas in Place (Tcf) 95 Current Production (Bcf/d) 0.7 Producer Peak Forecast (Bcf/d) 3.0 *Playin early stages of development and highly variable MARCELLUS Original Gas in Place (Tcf) 1,500 Current Production (Bcf/d) 2.0+ Producer Peak Forecast (Bcf/d) 10.0 FAYETTEVILLE Original Gas in Place (Tcf) 52 Current Production (Bcf/d) 2.5 Producer Peak Forecast (Bcf/d) 3.0 HAYNESVILLE Original Gas in Place (Tcf) 717 Current Production (Bcf/d) 5.5 Producer Peak Forecast (Bcf/d) 10.0
British Columbia Natural Gas Supply What Sets BC Shale Gas Supplies Apart? Size of unconventional resource area Horn River and Montneyregions, & emerging Liard and Cordova Embayment plays Volumes of gas delivered per well Infrastructure at the ready and expanding to connect supplies to market Established assets, high reliability and utilization, smaller footprint Well-established industry with knowledgeable operators focused on safety and reliability Proven regulatory framework Distance to markets and growing market competition 7 6 5 4 3 2 1 0 Forecast BC Gas Production (BCF/d - Sales Gas; Forecast period assumes $4.00/GJ) BC Shale BC Tight BC Non Associated BC Solution 2000 2005 2010 2015 2020 Source: CAPP, Q1 2011
Natural Gas Prices Competitive Marketplace As Supply Increases, Price Forecasts Drop Henry Hub Now Forecast Under $6.00 to Mid 2020 s Source: Energy Information Administration, Annual Energy Outlook 2011
Today s Market Realities Decreased land sales, falling revenues, lower investment = BC supply exceeding market demand
North American Natural Gas Dynamics U.S. Will Become Increasingly Self-SufficientSufficient Traditional energy flows changing U.S. domestic supplies closer to demand centres U.S. sees natural gas as economic engine and climate change solution Coal phase-out opportunities Will limit Western Canadian supplies BC s traditional U.S. markets growing slowly U.S. Pacific Northwest can easily access U.S. supply basins U.S. Pacific Northwest = 50% of BC gas supply market since 1957 BC domestic market stagnant Canadian Natural Gas Imports: 2010-2030 Source: Energy Information Administration, Annual Energy Outlook 2009-2030 Critical that we support our industry, create our own demand, and build new markets for British Columbia natural gas
Spectra Energy s Strategy Overview Fort Nelson Gas Plant, British Columbia
Spectra Energy s Strategic Focus North America s premier natural gas infrastructure company 1 2 3 Safe & reliable operations Focusing on project execution and operational excellence Customer responsiveness Connecting premier assets with premier markets Profitability & financial flexibility Realizing strong returns and dividend growth potential Achieving long term value creation for our shareholders
Portfolio of Expansion Underpinned by Firm Contracts Ongoing Successful Execution of Growth Plan 1 1 1 Est. Growth CapEx ($MM) In-Service Horn River/Montney $1,500 2009-2013 Partially in service In Execution 2 TEMAX TIME III $ 700 2H10-2H11 3 4 5 Northeastern Tennessee $ 135 Moss Bluff Storage Hot Spring Lateral 2H11 $ 60 In service $ 40 In service 12 10 7 2 11 8 6 7 Gulfstream Phase V $ 25 In service TEAM 2012 $ 200 2H12 3 8 Philadelphia Lateral $ 15 2H12 5 9 10 Bobcat Storage $ 315 2012-2015 Jacob Storage $ 30 2H12 12 4 Gas storage facility Shale gas formations 11 12 New Jersey-New York $ 850 2H13 DCP financed opportunities* 12 9 6 * Not included in SE Consolidated CapEx 12
Continuing Strategic Expansion Growth Opportunities on the Horizon 8 1 1 Opportunities support target of at least $5B expansion CapEx through 2015 Growth Opportunities 1 2 3 4 Horn River/Montney Power generation conversions TEAM opportunities MEPS Ethane Pipeline 9 2 2 6 4 3 7 5 6 Bobcat Storage Additional Ontario Storage 2 7 Algonquin Incremental Market (AIM) 8 9 Infrastructure supporting LNG exports DCP financed opportunities* 9 9 4 5 2 Gas storage facility Shale gas formations * Not included in SE Consolidated CapEx 13
Spectra Energy The Partner of Choice Largest pure-play midstream natural gas company in North America Committed to facilitating Horn River and Montney development through extensive infrastructure investments Unrelenting commitment to safety and reliability Proven success in execution of expansion projects Strong balance sheet and stable cash flows Financial flexibility Connected to diverse supply base
Fort Nelson Gas Plant, British Columbia BC Pipeline The Natural Choice for West Coast LNG Export Projects
Well-Positioned for Continued Growth $1.5 Billion Expansion Program, More in Development British Columbia Pipeline Length of Pipeline: 2,800 kilometers / 1,700 miles Peak Day Capacity: 2.4 Bcf/d Compression horsepower: 685,000 (18 compressor stations) Major Markets: BC, AB, US Pacific Northwest Natural Gas Gathering & Processing Raw Gas Gathering infrastructure: 3,500 kilometers / 2,200 miles 16 Gas processing plants (2 under construction) Processing Capability: 3.3 Bcf/d Major Markets: British Columbia, Alberta
BC Pipeline Value Proposition Local knowledge gained from 54 years of experience owning and operating natural gas infrastructure in BC Infrastructure at the ready and expandable to connect prolific supplies to new and growing markets An extensive, existing transmission pipeline system that is connected to over 3Bcf/d of raw gas gathering and processing capability, and 77 Bcf of underground storage Proven Project Execution Model Current capital expansion program of $1.5 B well underway Experience in constructing & operating pipelines in challenging terrain and the mountainous regions of BC A demonstrated ability to get projects permitted
BC Pipeline Value Proposition Decades of building relationships with landowners, First Nations, NGO s and ENGOs, and all levels of government Stakeholder outreach activities are company-wide Long-standing working relationships with provincial and federal regulators Multiple connections to the North American pipeline grid which provide supply and market security BC is a growing natural gas trading hub where a wide range of gas supplies converge
BC Pipeline Value Proposition Ability to leverage existing facilities to achieve economies of scale that lead to lower tolls, as well as provide supply and market options for LNG exporters An existing base of operations in British Columbia, with operations field offices in Fort Nelson, Fort St. John, Chetwynd, Prince George, and Vancouver s business centre With 850 employees in BC from Fort Nelson to Vancouver, we re part of the social fabric of BC s communities Dedicated technical and non-technical pipeline development team in place In-house pipeline professionals with extensive experience in BC pipeline design, construction, operations, land resource management and environmental protection
BC Pipeline Value Proposition Focus on Community-building; creating socio-economic development opportunities and enhancing local infrastructure for Aboriginal and local communities Commitment to Operational Excellence Excellent track record of system safety and reliability, supported by a world-class pipeline integrity management program
Sustainability Recognition Here s what other s are saying Environmental Social Governance (ESG) Performance Dow Jones Sustainability Index (DJSI) First time on the World Index and 3rd consecutive North America Index Carbon Disclosure Project (CDP) FTSE 4 Good Leadership Index: Sector leader Energy Top 10 in the S&P 500 in both disclosure and performance May 2010 first time listed on Index Series Recognition and Awards Newsweek Green Rankings #280 on the top 500 North American companies Corporate Responsibility Magazine Employer Awards Top 100 corporate citizens: ranked 18th overall Highest ranking energy company Top 100 workplaces in Houston -2010 Top 100 employers in Canada -2011 Top 50 employers in Alberta -2011 Corporate Equality Index Anti Defamation League: Community of Respect
Fort Nelson Gas Plant, British Columbia