The Ins and Outs of NGLs Kristen Holmq mquist Di Director NGL An - - PowerPoint PPT Presentation

The Ins and Outs of NGLs

Kristen Holmq mquist Di Director NGL An Analytics kholmq mquist@p @ponderosa-advisors.com 303 303-309 309-4097 4097

What Are NGLs?

• Natural Gas Liquids or NGLs are paraffinic hydrocarbons

produced as a by-product of natural gas and oil production.

Ethane (Plastics) Propane (Heating) Normal Butane (Gasoline Blending) Isobutane (Gasoline Blending) Pentanes (Gasoline Blending)

Image Source: Wikipedia

How Are NGLs Produced?

Oil Wet Natural Gas Gas Processing Raw Mix NGLs Fractionation Natural Gas Purity Products Refinery Exports Heating Petrochemicals

Petrochemicals Are Components Of Many Common Consumer Goods

C C H H H H Ethylene Ethylene or ethylene by- products are major components of these products Ethylene Naptha from Crude Heavy oil from refineries Natural Gasoline from N. Gas Ethane from Natural Gas Ethylene can be produced from many sources

U.S. Olefins Are Resurgent As U.S. Ethane Falls Relative To Alternatives

100 200 300 400 500 600 700 800 900 1000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $/ton

Ethane Prices versus the Alternatives’ Prices

Mid East Ethane U.S. Ethane U.S Natural Gasoline Japan Naptha NW Europe Naptha $600 /ton Differential Oil Derived Source: Ponderosa Advisors/Platts

Drilling Today is Focused on Oil Rich Shale Plays

Permian 442 Rigs (22%) Eagle Ford 249 Rigs (13%) Anadarko 230 Rigs (12%) Williston (Bakken) 198 Rigs (10%) Marcellus/Utica 132 Rigs (7%)

Dry Gas Declines Are Offset By Associated Gas Production

10 20 30 40 50 60 70 80 90 100 20 25 30 35 40 45 Assoc Gas Dry Gas Total Prod Total Prod (Bcfd) Gas Prod By Type (Bcfd)

Dry Gas Definition: Production Areas With GPM<1.15

Source: Ponderosa Advisors, HPDI, FERC

When Comparing the Value of the Markets; Natural Gas Liquids Are Still Small

$38 Billion Natural Gas Liquids

Production Volume = 2.4 MMb/d

$223 Billion Crude Oil

Production Volume = 6.5 MMb/d

$75 Billion Natural Gas

Production Volume = 12.2 MM BOE/d

Source: EIA, OPIS

2012 Average

4.0 6.0 8.0 10.0 12.0 14.0 16.0 Crude Oil, MMb/d

Crude Oil Production Forecast

Crude Oil Production 10 11 12 13 14 15 16 Natural Gas Production, MM BOE/d

Natural Gas Production Forecast

Natural Gas Production 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 NGL Production, MMb/d

NGL Production Forecast

U.S. NGL Production

NGL Production Will Continue to Increase with Higher Crude and Gas Production

Conclusions

• NGLs are a by-product of both crude oil and natural gas

production

• The market for NGLs is small compared to the oil and

gas market, but it has huge implications for the competitiveness of U.S. manufacturing

• NGL production is expected to grow by more than 60%

between 2013 and 2020 driven by crude oil production increases

• The major risk factor to this outlook is a slow down in the

development of U.S. crude and natural gas production.