January 21, 2013 • Volume 06, No. 01 MIDSTREAMNEWS Serving the marketplace with news, analysis and business opportunities TransCanada tapped for $5.0 billion B.C. gas pipeline Buffett & Icahn arrive at Newly acquired Petronas sub Progress Energy Canada has chosen TransCanada shale boom by rail to design, build, own and operate the proposed $5.0 billion Prince Rupert gas Warren Buffett’s Berkshire transmission project to transport British Columbia shale gas to the West Coast, where Hathaway and Carl Icahn’s Icahn the gas will be exported as LNG to lucrative Asian markets. The proposed Capital LP are cashing in on continued pipeline will transport gas produced primarily from the North Montney tight transportation capacity in the region near Fort St. John, British May spend $1.5 billion on extension of Bakken. The increasing use Columbia to Progress’ recently proposed Nova line to complement Prince Rupert. of rail to move oil cargo has Pacific Northwest LNG export facility in caused a shortage of tanker cars. Buffett’s Port Edward near Prince Rupert, BC. Although the route has yet to be determined, the Berkshire owns 60% of Marmon pipeline is expected to stretch 466 miles and will have an initial capacity of 2.0 Bcfd Holdings, which in turn owns tank car expandable to 3.6 Bcfd. builder Union Tank Car. (Berkshire is Progress and TransCanada are finalizing agreements, and TransCanada has scheduled to acquire the remaining 40% already begun preparing provincial regulatory filings and is gearing up for talks with of Marmon by 2015.) First Nations and other stakeholders. Input from these groups will help TransCanada formulate the proposed pipeline route. Continues On Pg 6 Builders working at full capacity trying to meet oilfield demand for tanker cars. US shale gas ignites downstream renaissance Just three years ago, the future looked grim for the US bulk chemicals business Union is running at full capacity, as as downstreamers were deserting the US for cheaper climes. But times have changed Berkshire-owned rail line Burlington thanks to the shale gas boom. Dow and other companies are revving up idled Gulf Northern Santa Fe is leasing all the Coast facilities (see story on pg 5) and investing in new ones. As of year-end 2012, the tanker cars it can produce. Union’s plants American Chemistry Council counted 17 projects, either firm or under near Houston, Texas and in Alexandria, consideration, to increase Louisiana turn out 6,240 total units a year 17 US projects in the works or under at full capacity. Continues On Pg 8 capacity in just one process─cracking study to produce ethylene. ethane to make ethylene. According to a report by the Federal Reserve Bank of Dallas, if those new projects plus expansions FEATURED DEALS and restarts materialize, ethylene capacity will increase almost 33% by 2017. US companies including Dow, ExxonMobil and the Phillips 66-Chevron JV SOUTH TX PRODUCING PROPERTY 13-Producing Wells. ~2,000-Acres. CPChem are lining up with international firms to invest in US ethane cracking, JACKSON COUNTY, TEXAS and several have already signed on the dotted line. Interested international parties Frio Stacked Production. include Netherlands-based Shell and LyondellBasell, Formosa Plastics of Taiwan Strong Pricing - LLS Crude Pricing PP and South Africa’s Sasol. Continues On Pg 4 Steady Production & Oil Cuts. 25% NonOperated WI; 75% NRI >50 Gross Prod: ~170 BOPD & 740 MCFD BOED Reversed Seaway line doubles capacity to 400,000 bopd Net Cash Flow: $350,000/Month First of many projects planned to ease Midwest oversupply & pricing 3 Low Risk PUDs - PV10: $15,200,000 Updated 3rd Party Reserve Report The Seaway pipeline resumed service January 11 and now carries 400,000 bopd Looking to Sell Down to Drill PUDs vs. its earlier capacity of 150,000 bopd. The 500-mile Seaway, a 50:50 joint venture CALL PLS FOR MORE INFO between Enbridge and Enterprise Products Partners, had shuttled oil from the Gulf PP 1738DV Coast to Oklahoma since 1995, but the direction was reversed in May to NESS CO., KS LEASES relieve a storage bottleneck at Another Seaway pipeline expansion Cushing. Seaway’s owners ~25,000-Net Mineral Acres. to 850,000 bopd planned for 1Q14. HORIZONTAL MISSISSIPPIAN OIL plan to further expand the line’s capacity Chat/Basal Penn Conglomerate Upside L to 850,000 bopd by early next year. Other pipeline projects are on the drawing boards Also Potential In Cherokee & Lansing. to carry oil from Cushing to where it will command a higher price, such as the Gulf Located On Flanks of Central KS Uplift. Coast, home to ~50% of US refiners. Excellent Well Control In County (>4,500). 100% OPERATED WI; 80% NRI MISSISS- Seaway’s latest expansion affected oil markets immediately with the price spread Contiguous Drillable Tracts. IPPIAN between WTI futures delivered at Cushing and London-traded Brent crude futures Pre-Existing Infrastructure In Place. narrowing to under $17/bbl for the first time since September. In November, the CALL PLS FOR MORE INFO spread had increased to $26/bbl as a result of Cushing’s swollen inventories, which L 5015DV reached record levels above 50 MMbbl. Continues On Pg 4 All Standard Disclaimers & Seller Rights Apply. MIDSTREAMNEWS 2 January 21, 2013 Inventories Pipelines EIA reports gas withdrawals above analyst consensus Transco applies to build 262 The EIA reported a 148 Bcf withdrawal from working gas storage in the Lower 48 MMcfd pipeline expansion states for the week ending January 11, healthily above analyst consensus of 137-141 Bcf Transco applied to FERC to build its for the reporting week. Citi Futures Perspectives analyst Tim Evans, whose 124-draw $298 million Virginia Southside expansion prediction was the lowest of the analysts surveyed by Platts, said a withdrawal above project which will add 262 MMcfd of 124 Bcf would indicate "some further tightening in the market's supply/ pipeline capacity in Virginia and North demand balance, with more bullish implications for the week ahead." Carolina for customers Dominion Virginia Storage levels of 3,168 Bcf were 4.4% lower than a year ago but still Power and Piedmont Natural Gas. 11.1% higher than the five-year average. Storage levels of 3.1 Tcf still 11.1% The project will be comprised of ~100 The East region was shivering, but above the five-year average. miles of 24-in. pipe, a new compressor not quite so much as the previous week, station with two 10,915-hp compressors which was reflected in net withdrawals of 86 Bcf vs. 113 Bcf from the last report. and construction or modifications to other The withdrawal left inventories 92 Bcf above the five-year average. Stocks in the producing region were 156 Bcf above the five-year average of 957 Bcf after a To the north, Transco holds open season on New Jersey lateral. drawdown of 39 Bcf while West region inventories stood at 68 Bcf above the five- year average. Total working gas is within the historical five-year range. facilities in Virginia. Transco asked the Crude inventories continue declining— commission to approve the project by US crude inventories outside of the Strategic Petroleum Reserve shrank by 1.0 July 1 in order to allow the company to million bbl from the previous week although they are still well above the high end of flow gas on Sept. 1, 2015. the average range for this time of year. Total motor gasoline inventories grew by 1.9 Meanwhile, Transco undertook a million bbl, again well above the upper limits of the range. Although distillate fuel binding open season for a proposed New stocks increased by 1.7 million barrels last week, they are near the lower limit of the Jersey lateral to directly serve a proposed average range. All told, total crude inventories increased by 3.4 million bbl last week. 700 megawatt gas-fired power plant in Woodbridge. The lateral has planned Current US Petroleum Stocks by Type (MMbbl) capacity of 264 MMcfd and would transport gas from Transco’s mainline in For Weeks Ending Middlesex Co. east to Woodbridge. The 1/11/13 1/4/13 Net Change 1/13/12 project’s in-service date is April 1, 2015 and it is expected to generate enough Crude Oil (Excluding SPR) 360.3 361.3 -1.00 331.2 power to supply 600,000 homes. Motor Gasoline 235.0 233.1 1.90 227.5 Pipeline Briefs Distillate Fuel Oil 132.4 130.7 1.70 148.0 All Other Oils 376.2 375.4 0.80 345.0 • Enbridge filed an application with Canada’s National Energy Board to Crude Oil in SPR 695.3 695.0 0.30 695.0 build a 570,000 bopd pipeline running Total 1,799.2 1,795.5 3.70 1,746.7 286 miles from Edmonton to Hardisty, *Distillate fuel oil stocks located in the "Northeast Heating Oil Reserve" are not included. Alberta. The line will be built Note: Data may not add to total due to independent rounding. along a portion of the 800,000 Source: EIA Weekly Petroleum Status Report bopd Enbridge crude line running from Edmonton to Superior, Current Natural Gas Stocks by Region (Bcf) Wisconsin. The company expects to start 1-Week Implied Estimated Percent construction of the 36-in. pipeline in Current Prior Net Prior 5-Yr Difference 1Q14 and have it in service in mid-2015. Stocks Stocks Chg From (2007-11) From 5-Yr • Enterprise began an open season 1/11/13 1/4/13 Last Wk Average Average on a proposed 15,000 bpd expansion NGL East Region 1,600 1,686 -86 1,508 6.1% pipeline to run 70 miles from Carthage to Lufkin, Texas.