ngl and lpg supply and price outlook - platts content below the line no content below the line ngl...
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NGL and LPG Supply and Price Outlook
Jennifer Van Dinter, PhD, CFA
Global Head, NGL and Petrochemical Analytics
April 11, 2017
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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
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NGLs proving their worth relative to gas, crude
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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
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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
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NGL Supply Forecast 1Q 2017
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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
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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
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Private & Confidential 8
Ethane recovery under incremental demand
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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
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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
J F M A M J J A S O N D
MM
bb
ls
Ethane Stocks
2015 Stocks 2016 Stocks
2017 Stocks
Source: EIA
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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
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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
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Eight greenfield crackers under construction to add 535 Mb/d to US ethane demand by 2019
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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
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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
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US ethane exports to grow from 93 Mb/d in 2016 to ~280 Mb/d in 2019
Source: Platts Analytics’ Bentek Energy Market Call: North American NGLs, 1Q2017
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
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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
Source: Platts Analytics’ Bentek Energy Market Call: North American NGLs, 1Q2017
0
100
200
300
400
500
600
Mb
/d
Ethane Rejection by Region
PADD 1 Williston PADD 4
PADD 2 PADD 3
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Private & Confidential 17
LPG: choppy seas as exports accelerate
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0
20
40
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
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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?
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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
J F M A M J J A S O N D
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
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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
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US LPG export grows 700 Mb/d in four years; emerges as global supplier
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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
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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
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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
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US PDH oriented for export, domestic margins have been challenged, causing delays, cancellations
Source: Platts Analytics
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
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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
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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
Source: Platts Analytics
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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
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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
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What will save the US: new crackers or exports?
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Source: Platts Analytics
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%
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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
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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
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US ethane demand comes in two waves; petchem only part of the solution to growing supply
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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?
Source: Platts Analytics’ Bentek Energy Market Call: North American NGLs, 1Q2017
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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”??
Source: Platts Analytics’ Bentek Energy Market Call: North American NGLs, 1Q2017
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Private & Confidential 35
Thank you Jennifer Van Dinter [email protected] (720)264-6732