NGL and LPG Supply and Price Outlook - Platts content below the line No content below the line NGL and LPG Supply and Price Outlook Jennifer Van Dinter, PhD, CFA Global Head, NGL and

No content below the line No content below the line

NGL and LPG Supply and Price Outlook

Jennifer Van Dinter, PhD, CFA

Global Head, NGL and Petrochemical Analytics

April 11, 2017


Overview

• Ethane picks up on petrochemicals, exports

• LPG exports drive prices up for propane, butanes

• Butane demand for gasoline blending likely flat

• Balance between petrochemical demand and exports


NGLs proving their worth relative to gas, crude

0

2

4

6

8

10

12

$/M

MB

tu E

qu

ivale

nt

Value Gap

WTI - Oil HH - Nat Gas NGL bbl - MB non-TET

Source: Platts


0

20

40

60

80

100

120

140

160

cen

ts/g

allo

n

NGL Prices at Mont Belvieu

Ethane Propane N Butane Isobutane Natural Gasoline

NGL market experiences dramatic price swings

4

Source: Platts


NGL Supply Forecast 1Q 2017


6

US NGL supply flat in 2017, return to growth in 2018

0

1

2

3

4

5

6

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

MM

b/d

US NGL production at gas plants (before ethane rejection)

Ethane Propane Normal butane Isobutane Natural gasoline

Source: Platts Analytics’ Bentek Energy Market Call: North American NGLs, 1Q2017


Forecasted Long-Term NGL Growth Driven By Marcellus/Utica, Permian, and Eagle Ford

NGL Production from

Gas Plants (Mb/d) Williston

Permian

Eagle Ford/

Texas Gulf Coast

SW

Marcellus/Utica

10.5

7.5

Anadarko

Wet

Marcellus/

Utica

1051

557

700

515

1035

733 805

472 404

Source: Bentek Market Call: North American NGLs 1Q 2017

786

413

920

No pipeline

capacity from

Northeast to Gulf

Coast for LPG,

only for ethane

270 215 248


Private & Confidential 8

Ethane recovery under incremental demand


Increasing premium over natural gas resulted in high ethane recovery in 2016

900

1,000

1,100

1,200

1,300

1,400

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

Mb

/d

$/M

MB

tu

Ethane Price Spread to HH vs. Ethane Recovery

EIA Ethane Production Mt. Belvieu Ethane - Henry Hub

Source: EIA, Platts

Record EIA Recovery

Source: EIA, Platts Analytics

Enterprise equity

volumes


0

10

20

30

40

50

60

J F M A M J J A S O N D

MM

bb

ls

Stock volumes to maintain 30 days forward cover

2016 Act. 2016 Est. 2017 2019

Source: Platts Analytics

Higher stock levels make sense to cover growing demand

0

10

20

30

40

50

60

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

MM

Bb

l

Ethane/Ethylene Storage

2016 2015 5 Year Average

0

10

20

30

40

50

60


MM

bb

ls

Ethane Stocks

2015 Stocks 2016 Stocks

2017 Stocks

Source: EIA


10

15

20

25

30

35

Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19

Cen

ts/g

al

Platts M2M-NGL Forward Curves Mont Belvieu Ethane (non-LST)

Feb-16 Apr-16 Jun-16 Aug-16 Sep-16Oct-16 Dec-16 Jan-17 Feb-17

Ethane recovery driven from back of the curve

Source: Platts


Eight greenfield crackers under construction to add 535 Mb/d to US ethane demand by 2019

12

Total

Petrochemicals, TX Williams

Geismar 2,

LA

Badlands NGL, ND PTT Global Chemical, OH

ChevronPhillips

ExxonMobil

Dow

Braskem, WV

ISD 2017

Westlake &

Lotte

Proposed

Formosa Petrochemical, LA

Shintech

Greenfield Cracker – Under Construction

Owner C2=

Blb/yr C2

MB/d) ISD

ChevronPhillips 3.3 86 1Q2017

ExxonMobil 3.3 86 1Q2017

Oxy & Mexichem 1.2 36 1Q2017

Dow Chemical 3.3 86 2Q2017

Formosa 2.7 70 1Q2018

Sasol 3.3 86 2Q2018

Axiall & Lotte 2.2 57 1Q2019

Shintech 1.1 29 2Q2018

Total 20.3 535 Approved

Source: Platts Analytics’ NGL Facilities Databank

Shell, PA

ISD 2019

Sasol

Formosa

Plastics

ISD 2018

Oxy


Eight greenfield crackers under construction to add 535 Mb/d to US ethane demand by 2019

13

Total

Petrochemicals, TX Williams

Geismar 2,

LA

Badlands NGL, ND PTT Global Chemical, OH

ChevronPhillips

ExxonMobil

Dow

Braskem, WV

ISD 2017

Oxy

Westlake &

Lotte

Proposed

Formosa Petrochemical, LA

Shintech

Greenfield Cracker – Under Construction

Owner C2=

Blb/yr C2

MB/d) ISD

ChevronPhillips 3.3 86 1Q2017

ExxonMobil 3.3 86 1Q2017

Oxy & Mexichem 1.2 36 1Q2017

Dow Chemical 3.3 86 2Q2017

Formosa 2.7 70 1Q2018

Sasol 3.3 86 2Q2018

Axiall & Lotte 2.2 57 1Q2019

Shintech 1.1 29 2Q2018

Total 20.3 535 Approved

Source: Platts Analytics’ NGL Facilities Databank

Shell, PA

ISD 2019

Sasol

Formosa

Plastics

ISD 2018 0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2016 2017 2018 2019

Mb

/d

Ethane Demand from Steam Crackers

Westlake

Sasol

Shintech

Formosa Plastics

CPChem

Dow Chemical

ExxonMobil

OxyChem/Mexichem

Expansions & Restarts

Expected 2016 demand


Enterprise

Morgan’s

Point

Two US ethane terminals are available for waterborne exports

Owner Project Name Location Ethane Capacity

(Mb/d) In-Service

Date Region

Sunoco Logistics Marcus Hook Delaware, PA ~70 March 2016 Northeast

Enterprise Morgan’s Point Houston Ship Channel, TX 200 3Q2016 US Gulf Coast

Sunoco Marcus Hook

Source: Platts cFlow Source: Platts cFlow

Source: Bentek NGL Facilities Databank


US ethane exports to grow from 93 Mb/d in 2016 to ~280 Mb/d in 2019


SABIC

Reliance

Braskem

Enterprise

Morgan’s Point

200 Mb/d

Sunoco

Marcus Hook

40 Mb/d

INEOS

Borealis

PEMEX

ExxonMobil

0

100

200

300

400

2013 2014 2015 2016 2017 2018 2019

Mb

/d

US Ethane Exports

Morgan's Point Marcus Hook

Pipeline Exports (Canada) Export Capacity

Oriental

Energy


Bakken Lateral

ATEX Conway

Mont Belvieu

15 ¢/gal

11 ¢/gal

Williston

SW Marcellus/Utica

Rockies

7 ¢/gal

9 ¢/gal

23 ¢/gal MAPL

Sterling

Overland Pass

Will incremental recovery need to be incentivized by higher prices? Permian will be the key


0

100

200

300

400

500

600

Mb

/d

Ethane Rejection by Region

PADD 1 Williston PADD 4

PADD 2 PADD 3



LPG: choppy seas as exports accelerate


0

20

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60

80

100

120

140

160

cen

ts/g

allo

n

LPG Prices at Mont Belvieu

Propane N Butane Isobutane

LPG market experiences dramatic price swings

18

Source: Platts

EPD isomerization

unit goes down

Gasoline blending

season begins

US exports record

levels of LPG

above 1.1 MMb/d

LPG exports stay

above 1MMb/d;

propane forward

cover as low as

Feb. 2014

Gasoline blending

season ends; will

butane prices finally

stabilize?


19

Propane and butane exports averaged 886 Mb/d in 2016, supported by high propane stocks

Record high: 1,158 Mb/d

Source: EIA

0

20

40

60

80

100

120

J F M A M J J A S O N DM

Mb

bls

Weekly Propane Stocks

2015 2016 2017 2016 build rate

0

20

40

60

80

100

120


MM

bb

ls

Weekly Propane Stocks

2015 20162017 2017 proj2017 proj.

0

200

400

600

800

1,000

1,200

1,400

Mb

/d

Propane and Butane Exports

Normal Butane Isobutane Propane


0

15

30

45

60

75

90

105

120

135

150

2013 2014 2015 2016 2017

Da

ys

Su

pp

ly o

r F

orw

ard

Co

ve

r

Propane Days Supply

Domestic Days Supply Total Days Supply

C3 days forward cover approaching Jan 2014 levels

Source: EIA, Platts Analytics’ Bentek Energy Market Call: North American NGLs 1Q2017


US LPG export grows 700 Mb/d in four years; emerges as global supplier

21

0

100

200

300

400

500

600

700

800

900

1000

2011 2012 2013 2014 2015 2016

Mb

/d

US LPG Exports by Region

North America South America Central America Caribbean Europe Africa Asia

Source: EIA

15% 11%

4%

7% 18%

44%

1%

Exports by destination 2016


US spot price roughly 20 cents below Saudi

22 Source: Platts

-20

0

20

40

60

80

100

120

Jan-15 Jul-15 Jan-16 Jul-16 Jan-17

cen

ts/g

allo

n

Spot propane prices

Saudi-Houston FOBSaudi Propane FOBHouston Propane FOB

0

50

100

150

200

250

300

2014 2015 2016 2017

Cen

ts/g

allo

n

Global propane prices

USGC Saudi CP

Northwest Europe Japan


VLGC spot rates on the decline as more ships enter the market

23 Source: Platts

0

10

20

30

40

50

60

70

80

Cen

ts/g

al

VLGC Spot Freight Rates

VLGC Freight Houston-Northwest Europe

VLGC Freight Houston-Japan

VLGC Freight Persian Gulf-Japan


US PDH oriented for export, domestic margins have been challenged, causing delays, cancellations


Current and Announced US PDH Projects

Company Location Start-up Date

(ISD)

Flint Hills Harris, TX Completed

Dow Chemical Freeport, TX Completed

Enterprise Mont Belvieu, TX 1Q2017

Formosa Plastics Point Comfort, TX TBD

Ascend/C3

Petrochemicals Brazoria, TX TBD

REXtac Odessa, TX TBD

Sunoco Logistics Marcus Hook, PA TBD

Total Current and Announced US PDHs

Company Capacity

(MMlbs/yr)

C3

Demand

(Mb/d)

ISD

Flint Hills 1,450 26 Completed

Dow

Chemical 1,650 29 Completed

Enterprise 1,650 35 2Q2017

Total 4,750 90

Cancelled/On-hold

US PDHs

Company

C3

Demand

(Mb/d)

Formosa 23

REXTac 12

Ascend/C3

Petrochemicals 39

Total 74

0

10

20

30

40

50

60

70

80

cen

ts/lb

US Propane - Propylene Margin

Margin

Platts Propane non-LST Mt Belvieu pipe

Platts Propylene Poly Grade FD USGC


Development of additional Chinese PDH challenged by lower margins

Source: Platts, Platts Analytics

0

200

400

600

800

1000

1200

1400

1600

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

$/m

t

China Propane-Propylene Spread

Propane-Propylene Spread Propane CFR China Propylene CFR China

Low margins decrease utilization of existing

units

0

200

400

600

800

1000

1200

1400

1600

1800

$/M

T

China Propane - Propylene Margin

Margin Propane CFR North Asia Propylene CFR China


Asian PDH projects

Country Producer Location Capacity (000 mt)

Start Up

India ONGC Mangalore Mangalore 500 Q4 2020?

South Korea SK Gas/ Saudi APC Ulsan 600 Q2 2016

China Fujian Meide Petrochemical - Phase I Fuzhou 660 H1 2017

China Fujian Meide Petrochemical - Phase II Fuzhou 660 Q3 2019?

China Haiwei Group Hengshui PDH I Hengshui 500 Q1 2016

China Haiwei Group Hengshui PDH II Hengshui 500 2020

China Haiwei Group Huanghua PDH I Huanghua 500 2020

China Haiwei Group Huanghua PDH II Huanghua 500 2021

China Oriental Energy Caofedian 660 2019

China Ningbo Fortune - Phase I Ningbo 660 Q4 2016

China Dongguan Juzhengyuan Zhanjiang 900 Q3 2018

Poland Grupa Azoty Police II Police 400 2019



Isobutane supply disruption crashes iso/normalspread; market playing catch up

6

7

8

9

10

11

12

200

220

240

260

280

300

320

340

Sto

cks (

MM

bb

ls)

Mb

/d

US Isobutane Stocks and Production

Isobutane Production Isobutane Stocks

-30

-20

-10

0

10

20

30

cen

ts/g

al

Isobutane – Normal butane spread at Mont Belvieu

Source: EIA through November 2016, Platts


Natural gasoline constrained between Chicago-Edmonton, not to Chicago

MPLX RIO, Utopia West

0

200

400

600

800

2015 2017 2019 2021

Mb

/d

Canadian Diluent Demand

US Natural Gasoline ExportsCanadian Diluent SupplyCanadian Diluent Demand


What will save the US: new crackers or exports?



New Crackers Are Largest Source Of Incremental Demand

0

500

1,000

1,500

2,000

2,500

3,000

2012 2017 2022

Mb

/d

Ethane Supply - Demand

Stock change RejectionExports Petchem (Steam Cracker)Supply

Demand Share

2016 1.7 MMb/d

Petchem 57%

Rejection 31%

Demand Share

2022 2.3 MMb/d

Petchem 69%

Exports 12%

Rejection 19%

Source: Bentek Market Call: North American NGLs, 1Q 2017

Stock chg 6%

Exports 5%


Lower exports in 2017 due to lower supply growth, domestic demand

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2014 2016 2018 2020 2022

Mb

/d

Propane Supply/Demand Balance

Exports Res/Comm

Petchem (On-purpose) Petchem (Steam Cracker)

Supply

Source: Platts Analytics’ Bentek Energy Market Call: North American NGLs 1Q2017

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2Q

20

16

2Q

20

15

2Q

20

16

2Q

20

15

2Q

20

16

2Q

20

15

2Q

20

16

2Q

20

15

2Q

20

16

2Q

20

15

2Q

20

16

2Q

20

15

2Q

20

16

2Q

20

15

2015 2016 2017 2018 2019 2020 2021

Mb

/d

LPG Exports Vs. Terminal Capacity

Propane Butane Capacity

0

200

400

600

800

1,000

1,200

1,400

1,600

Mb

/d

LPG Exports vs Terminal capacity

Total LPG Exports Capacity

0

200

400

600

800

1,000

1,200

1,400

1,600

Mb

/d

LPG Exports vs Terminal capacity

4Q2016 1Q2017 Capacity

0

100

200

300

400

500

600

700

800

900

1,000

2014 2016 2018 2020 2022M

b/d

Butanes Supply/Demand Balance

Oct. Enhancement Refinery Net Inputs

Petchem (Cracker) Petchem (On-purpose)

Exports Supply


32

Natural Gasoline: diluent export via rail to Canada

0

100

200

300

400

500

600

700

Mb

/d

Natural Gasoline Supply- Demand

Petchem Refinery Net Inputs

Renewable Fuels Exports

Supply

0

250

500

750

Mb

/d

Western Canadian Diluent Demand

US Natural Gasoline Exports

WC Pentanes Plus

Total Diluent Demand

Chart showing diluent capacity

Source: Platts Analytics’ Bentek Energy Market Call: North American NGLs 1Q2017

0

50

100

150

200

250

300

350

400

450

Mb

/d

Diluent Exports

Diluent Exports

Pipeline Capacity


US ethane demand comes in two waves; petchem only part of the solution to growing supply

33

0%

10%

20%

30%

40%

50%

60%

70%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

MM

b/d

US Petrochemical Demand

Ethane Propane Butane Naphtha GasOil % of Production

First

Wave

Second

Wave

Third

Wave?



US will export over 30% of its NGL production by 2022; three-fold increase over 2011

34

0%

5%

10%

15%

20%

25%

30%

35%

40%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

MM

b/d

US NGL Exports

Ethane Propane Butane Natural Gasoline % of US Production

“First Wave”

“Second Wave”

“Third Wave”??




Thank you Jennifer Van Dinter [email protected] (720)264-6732

Documents

NGL and LPG Supply and Price Outlook - Platts content below the line No content below the line NGL and LPG Supply and Price Outlook Jennifer Van Dinter, PhD, CFA Global Head, NGL and