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natural gas supply trends: how will regional production shifts impact NGL supply?

natural gas supply trends: how will regional production shifts impact NGL supply?. knowledge to bridge the gap. presented November 2009 Petrochemical Feedstock Association of the Americas. waiver of liability.

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natural gas supply trends: how will regional production shifts impact NGL supply?

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  1. natural gas supply trends:how will regional production shiftsimpact NGL supply? knowledge to bridge the gap presented November 2009Petrochemical Feedstock Association of the Americas

  2. waiver of liability • Petral Worldwide, Inc. (PWI) is not liable for any use or misuse of the contents of this presentation • PWI provides no express or implied warranty regarding the accuracy of the information contained in this segment of the presentation. • PWI does not advocate trading strategies, feedstock acquisition strategies, or NGL marketing strategies. Any actions taken by attendees to the PFAA November 2009 meeting based on this presentation are at your own risk. Petral Worldwide, Inc. knowledge to bridge the gap

  3. sources of information All natural gas reserves & demand statistics in thispresentation were derived from data published by theEnergy Information Administration, the U.S. GeologicalSurvey and Penn State University. Gas productionstatistics for Texas were derived from data published by the Texas Railroad Commission. Petral Consulting Company is the source of all forecasts. Petral Worldwide, Inc. knowledge to bridge the gap

  4. overview of presentation • Historical review • natural gas production from the big 7 • proven producing reserves in the big 7 • production trends in the Barnett Shale • Overview of Emerging Shale Plays • geographic review of shale reservoirs • estimates of producible reserves & production from key shale plays • the big 7 become the big 14 • Impact of Marcellus & Haynesville Shale • potential impact on regional gas production • estimates of potential NGL recovery Petral Worldwide, Inc. knowledge to bridge the gap

  5. current natural gas production7 key states Petral Worldwide, Inc. knowledge to bridge the gap

  6. regional gas productionhistoric trends • 29 states had some measurable volumes of natural gas production in 2008 • since 1985, however, 7 states accounted for 75-85% of wet marketed gas production in the U.S. • More than 80% of U.S. NGL production comes from gas plants located in these 7 states Petral Worldwide, Inc. knowledge to bridge the gap

  7. Petral Worldwide, Inc. knowledge to bridge the gap

  8. Before Mitchell Energy tackled the problems of effective exploration & production in the Barnett Shale, no one ever talked about natural gas from shale reservoirs Production activity is concentrated in Tarrant, Denton, Wise & Parker counties Producible reserves are currently estimated to be 30-35 TCF Barnett Shale is located in north central Texas and the basin is spread over 17 counties Denton -- 958 square miles Tarrant -- 897 square miles Parker -- 910 square miles Wise -- 923 square miles total -- 3668 square miles Barnett Shale:the original game changer Petral Worldwide, Inc. knowledge to bridge the gap

  9. Barnett Shale gas productionhistoric trends • Mitchell Energy began exploration work & technological development in the Barnett Shale in the early 1990’s. • Before 2000, natural gas production in the Barnett Shale was almost non-existent. • In 2008, Barnett Shale production averaged an estimated 4.5 bcfd. Petral Worldwide, Inc. knowledge to bridge the gap

  10. Petral Worldwide, Inc. knowledge to bridge the gap

  11. shale plays are widespread • Pearsall: South TX • Haynesville: NW LA; SW AR; NE TX • Woodford: eastern OK • Fayetteville: AR • Antrim: northern MI & Ontario, Canada • Marcellus, Ohio, Utica: eastern OH, PA, WV, NY Petral Worldwide, Inc. knowledge to bridge the gap

  12. future natural gas production:the big 7 become the big 14 Petral Worldwide, Inc. knowledge to bridge the gap

  13. Marcellus Shalehow big is big? • 7 key states have proven & producing reserves that total 194 TCF • Production from 7 key states averaged about 48 bcfd in 2008; production in TX alone was 19 bcfd Petral Worldwide, Inc. knowledge to bridge the gap

  14. Marcellus & Haynesvillehow big is big? • Exploration companies will apply everything they have learned about drilling in the Barnett Shale. PA is 44,000 square miles. • The most recent estimates of recoverable gas reserves for Haynesville are 30-100 TCF & pushed Marcellus from 50 TCF a few years ago to 363 TCF ! Petral Worldwide, Inc. knowledge to bridge the gap

  15. Marcellus Shale:the real game changer • Marcellus Shale is located in the heart of the largest supply-short regional market in North America. • Total demand was 8-9 bcfd & residential/commercial demand was 4-5 bcfd & accounted for 50% of total • As Marcellus production grows, required transfers from Canada, the Gulf Coast, and Rocky Mountains will decline steadily. Petral Worldwide, Inc. knowledge to bridge the gap

  16. Marcellus & Haynesville Shale:limiting factors on gas production • Natural gas demand in the northeast U.S. averaged 8-9 bcfd during 2000-2007; market demand growth will be a limiting factor for natural gas production in general. • Gas pipelines carry gas supplies from west to east & south to north into the northeast U.S. • Marcellus will eventually require interstate gas pipelines to reverse flow or become bi-directional. Petral Worldwide, Inc. knowledge to bridge the gap

  17. Marcellus & Haynesvillelikely NGL recovery • NGL recovery estimates are based on 1 GPM contained NGL in Marcellus Shale gas for 3 levels of natural gas production • Estimates are based on cryogenic turbo-expander gas plants; ethane recovery at 90% & C3+ recovery at 99% • NGL recovery in PADD 1 from gas flows of 150-160 MMCFD averaged 20 mbpd in 2007 & 18 mbpd in 2008; only 25% of PADD 1 gas production was processed in 2007 & virtually no ethane was recovered. Petral Worldwide, Inc. knowledge to bridge the gap

  18. Marcellus Shale:impact on NGL production • Production in the Marcellus (& other eastern shale plays) will ramp up during the next 5 to 10 years; • Marcellus production has the potential to reach 10 bcfd by 2020; production from other eastern shale play may also reach 10 bcfd by 2020. • Shale production has the potential to eliminate the need for natural gas imports & inter-regional transfers into the eastern markets by 2020. • Natural gas production in the Gulf Coast, NM, Rocky Mountains, & Alberta will be drastically curtailed at least seasonally & thereby reducing gas plant NGL recovery volumes from traditional sources. Petral Worldwide, Inc. knowledge to bridge the gap

  19. C3+ production from Marcellus:northeast markets for new supply • Propane markets use 100-110 mbpd; local refinery & gas plant production averages 40-50 mbpd; imports from Canada average 20-30 mbpd & waterborne imports average 20-30 mbpd; • propane recovery may reach 50-80 mbpd by 2020 • Butane markets use 20 mbpd (5 mbpd NC4 & 15 mbpd IC4); local production averages 5 mbpd; inter-regional transfers & imports of isobutane make up the shortfall • butane recovery may reach 25-40 mbpd by 2020 • Local refineries do not currently use natural gasoline; • natural gasoline recovery may reach 30-40 mbpd by 2020 Petral Worldwide, Inc. knowledge to bridge the gap

  20. ethane production from Marcellus:northeast markets for new supply • There are currently no ethylene plants in the northeast // for 1.0 GPM gas, ethane recovery will not be necessary to meet gas pipeline specifications … however … • Sarnia Ontario is about 250 miles from central PA; Sarnia also has a pipeline connection to Green Springs in central OH (used for purity ethane in the 1970’s and 1980’s). • Ethylene feedstocks markets in Texas & Louisiana are 1,000-1,200 miles from central PA and are no further than from western WY. Petral Worldwide, Inc. knowledge to bridge the gap

  21. mid-stream industry:opportunities arising from shale • During 2015-2020, midstream companies will have unprecedented opportunities to build a new distribution & logistics infrastructure projects in the eastern U.S. • storage • pipelines • rail car & truck terminals • People at today’s midstream companies get a shot at doing what their fathers and grandfathers did in the 1950’s and 1960’s Petral Worldwide, Inc. knowledge to bridge the gap

  22. the positive impact of technologyand natural gas supply forecasts always consider the positive impact of technology when developing long term forecasts for natural gas reserves, production, & demand … Petral Worldwide, Inc. knowledge to bridge the gap

  23. we owe debts of gratitude To all the visionary & optimistic people like George Mitchell & Larry Nichols& all the dedicated, hard working people at: Mitchell Energy Devon Energy Petral Worldwide, Inc. knowledge to bridge the gap

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