A P I R A I N DUSTRY STU DY

September 2015

A NEW INDUSTRY STUDY FOCUSED ON ONE OF THE FASTEST GROWING SEGMENTS IN THE OIL INDUSTRY

THE GLOBAL IMPACT OF

NGL SUPPLY GROWTH:
PIRA's Comprehensive Outlook to 2035

© 2015 PIRA Energy Group

INDUSTRY STUDY NGL AND LPG SUPPLY, DEMAND, TRADE AND PRICE

The Global Impact of NGL Supply Growth:

PIRA’s Comprehensive Outlook to 2035

The next 20 years will witness radical shifts in the supply, demand and trade balances for NGLs — ethane, propane,
butane, and pentanes plus. These shifts will have profound impacts, reaching beyond LPG and ethane markets
and trade. They will affect upstream oil and gas economics, as well as downstream pricing for naphtha and other
oil products, in turn impacting petrochemical feed choices and investments, refining margins and runs, and even
crude oil production.
U.S. Propane Exports Grow,
On the supply side, the pace of change has accelerated, Competing to Supply Europe and, Increasingly, Asia
and the wave of NGL production growth in North America
continues, even with the recent shock of lower prices in Net U.S. Propane Balance, Million Tons/Year
2014-15. This trend is incentivizing investment in 20
l U.S. propane imports peake d
fractionation, local petrochemical facilities, and export in 2005.
15
infrastructure. The battle to capture global markets will l U.S. became a net exporter
in 2011.
generate both winners and losers everywhere — exporters 10 l Future export grow th reflects
in North America and the Middle East, as well as rising production and ex pansion
of export infrastructure, offset
5
importers in Europe, Asia and Latin America. by rising loc al demand.
l Export destinations initially
0
focused in Atlantic Basin; w ill
On the demand side of the equation, the story is also expand m ore into Asia w ith
-5 widening of Panama Canal.
rapidly changing as growing supply is pricing itself to
create sufficient demand. Will the mix of feeds into -10
2000 2005 2010 2015 2020
petrochemicals be the most affected given its price
sensitivity? What other markets will be impacted?
 
How much and where?

Trade will change dramatically as rapid increases in North American exports force their way into the market.
Although initially focused on Europe and Latin America, destinations will shift more towards Asia with the
widening of the Panama Canal in 2016.

Together, these fundamental forces will impact price spreads for other products as the surge in NGLs ultimately
displaces naphtha from petrochemicals and drives refiners to shift yields more towards middle distillates.
Investment choices in upstream, midstream, tanker fleets, petrochemicals and refining will all be affected.

PIRA assesses the impact of these forces in a new industry study, “The Global Impact of NGL Supply Growth:
PIRA’s Comprehensive Outlook to 2035.” The study, to be released in September 2015, features:

• A
 detailed look by country at upstream production of natural gas liquids and net refinery LPG
production. Surging upstream supply will continue to price itself to find sufficient demand. 

• A
 n in-depth outlook of the factors driving each region’s ethane, propane and butane product usage.
Demand trends by sector by region/country show how rapid increases in some sectors/regions are partly
offset by slow increases/decreases in others.

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Study features (continued):

• A
 nalysis of the trade flows for ethane, propane and butane and how they will evolve, driven by regional
supply and demand changes. For example, U.S. export growth will affect every region of the world both
directly — imports into Europe and Asia — and indirectly by its longer-term impact on petrochemical regional
investments. Meanwhile. infrastructure requirements to accommodate this change will challenge some regions.

• R
 egional price forecasts relative to natural gas, crude and oil products, as well as arbitrage opportunities
and the key factors that will drive these relationships.

• R
 egional reference case supply, demand and trade projections through 2035 by year, as well as a discussion
of how changes in key variables could affect those projections. The rapid volumetric changes and heightened
price volatility seen in recent years are likely to continue, which will create both opportunities and risks.

KEY QUESTIONS TO BE ANSWERED BY THE STUDY

“The Global Impact of NGL Supply Growth” shows how an in-depth look at the underlying trends builds up to
clear and actionable conclusions. The study demystifies NGLs and provides a balanced, long-term, global view
— both in by-country detail and in regional, by-markets aggregate — by answering these important questions:

• What will change with respect to demand and trade in response to growing production in North America and
the Middle East? What’s new in the export and import trade flow story?

• Will there be a lasting impact from recent lower prices on production in the U.S.? Globally?

• What are the marginal demand layers by volume and region? What are the competing energy/oil products and
price thresholds for switching? Export ethane or leave in rich gas? LPG versus naphtha into petrochemicals
and the cascade of implications for gasoline and refining? Transportation uses?

• Will the incremental supply be absorbed by new facilities in North America and the Middle East, by
substitution in Europe, or by growth/substitution in Asia?

• What are the marginal supply layers by volume and region? Oil-gas prices? NGL recovery economics?
LPG from LNG projects?

• What are the broader implications for naphtha balances, refining economics, and crude oil production?

• What are the narrower implications for ethane, propane, butane, naphtha pricing, and gasoline vs. middle
distillates? Value of octane?

• With the growth in trade, there will be winners and losers, as well as companies entering and exiting
the business. What business segments will thrive? And which will not?

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WHY THE TIME IS RIGHT FOR THIS STUDY A Fresh Look at Demand Trends

A New Assessment for NGL Supply Growth
With the North American shale revolution has come
a surge in NGL production. Over the last 10 years,
production has grown by nearly 75%, such that by 2014
the United States production was equivalent to the
next four largest producers combined. This growth
is set to continue, but at a somewhat slower pace,
affecting markets worldwide and capturing demand
locally as well as in Europe and Asia.
The increase in supply will ultimately find a home in
demand — mostly into petrochemicals. But regional
differences will grow and feedstock preferences will
shift. There will be revolutionary changes in trade
patterns as the production growth of all NGLs in the
U.S. leads to a surge in exports.
NGL/LPG Demand Growth:
Strongest of All the Oils – Led by Pet Chem

MMB/D
NGL Field Production: 20
United States as Large as Next Four Combined 18
16
MB/D 2014 Production 14
LPG - Other
3,500 12

3,000 10
LPG - Pet Chem
2,500 8
United Arab Emirates 6
2,000 Ethane
Qatar 4
1,500 Canada
Saudi Arabia 2
1,000
0
500 2010 2015 2020 2025 2030 2035

0
United States Next 4 Largest
A Total View of Changing Price Relationships and
*Canada does not include C5+ Implications for the Rest of the Oil Barrel

With this growth in supply, NGLs must price

However, there is a lot of definitional confusion
between countries/regions/organizations that cloud
casual understanding of the trends. PIRA’s study
provides a clear, consistent framework across all
countries/sectors.
themselves to find sufficient demand. That in turn
displaces naphtha from petrochemical/other demand
and leads to a cascade of changes all along the oil
barrel.

Inconsistent Definitions of Upstream NGLs Impact of NGL Supply Growth Cascades

Along the Oil Barrel

U.S. / Saudi Qatar/ IEA NGL Supply Growth Priced to

“NGL” Canada
Norway Arabia UAE Survey Find Demand
Ethane (C2) √ √ × √ Sometimes
Propane (C3) √ √ √ √ √ Some Left in Competes with Naphtha in Displaces Oil
Gas Petrochemicals Demand in
Butane (C4) √ √ √ √ √ Consumer
Pentanes Plus Segments
√ × √ √ √
(C5+) Displaced Naphtha Goes to
Field Gasoline
× × √ × Sometimes
Condensate

Boosts Weighs on
PIRA has researched the various upstream production of Octane Gasoline Lower Demand for Refinery
Values Relative Price
natural gas liquids and developed a consistent NGL by- Crude runs
type database of history and forecasts
Refiners Shift Yields

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INDUSTRY STUDY | NGL AND LPG SUPPLY, DEMAND, TRADE AND PRICE

WHAT DO STUDY SUBSCRIBERS RECEIVE AND WHEN

Companies purchasing “The Global Impact of NGL Supply Growth: PIRA’s Comprehensive Outlook to 2035”
are entitled to have three users to each of the following deliverables (licensing options are available to add
extra users):

Written Report (September, 2015)

The report spells out the findings of the study and the bases underlying those results, and it provides a discussion
of the key uncertainties that impact the major findings. Approximately 100 pages long, the report includes an
executive summary, as well as detailed discussion and illustrative charts on supply, demand, prices, trade and
sensitivities.

Study Presentation (October 6, 2015)

Clients have the opportunity to see a presentation of the key results, discuss those findings and their implications,
and question the study’s authors via a WebEx workshop. The presentation will be recorded for review via PIRA's
website at any time for study subscribers.

Online Database (September, 2015)

A comprehensive database providing historical data back through 2010 and forecasts through 2035 in Excel
spreadsheets for:
• Country-level upstream supply with key species breakouts
• Country-level demand by sector including the outlook for steam cracker feeds to meet global olefin demand
• Country-level net refinery LPG production
• Inter-regional ethane and LPG trade flows
• Price forecasts, both absolute and relative to crude/products/natural gas

3-Month Free Access to PIRA’s Global NGL Market Service

Buyers of study receive free access to PIRA’s Global NGL service for three months (from the point of their order).
Through its regular deliverables (analytical reports and extensive databases), the NGL service provides timely
insight and forecasts of relevant upstream, refinery, midstream, and petrochemical developments, along with
various macroeconomic issues affecting NGL demand.

FEES AND OPTIONS

“The Global Impact of NGL Supply Growth: PIRA’s Comprehensive Outlook to 2035” can be purchased by both
PIRA retainer clients and non-clients. Existing PIRA clients receive a reduced price; clients to PIRA’s Global
NGL Retainer Service receive a further discount. Companies that order before July 17, 2015, receive an “early-
bird” discount. Subscriptions allow for 3 authorized users (3 user IDs to access online content and attend the
Study Presentation). See the Acceptance Form on page 9. 

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WHO WILL BENEFIT FROM THIS STUDY

The stakes are high when it comes to making decisions regarding future NGL, LPG, ethane product supply,
demand and pricing. “The Global Impact of NGL Supply Growth” study helps market participants keep ahead of
the competition through a keen understanding of the future interplay between regional balances, regional pricing
for different NGL species, inter-regional trade, and the impact of these factors on upstream economics
and refining. The following market participants can all benefit:

• U
 pstream producers of gas, oil and NGLs know the importance of supply/demand balances and marginal
supply/demand economics in setting NGL prices relative to oil and gas. Understanding these fundamentals is a
key driver for informed NGL recovery investments and often affects gas/crude production economics.

•  etrochemical companies are one of the most affected industries as NGL supply growth drives price and shifts
P
feed selection economics. This trend affects both new facilities in the U.S. and Middle East, as well as existing
mostly naphtha-fed capacity in Europe and Asia. Knowing which feeds will be most advantageously priced and
where they will be available will be crucial for informed investment choices.

• R
 efiners need to plan capacity changes based on the outlook for product demand, feedstock supply, and
relative pricing. By providing a firm basis in evaluating future changes in these factors (e.g. naphtha demand),
the study helps refiners evaluate the future profitability for different refinery configurations.

• T
 rading companies want to anticipate regional supply/demand changes and price dynamics. This study’s
analysis will aid in planning terminal and shipping infrastructure needs to best capture future opportunities.

• S
 hipping companies need to plan for growth to capture opportunities from increased seaborne trade,
particularly with the widening of the Panama Canal, which will shift the U.S. exports focus towards Asia.
(Currently only four VLGCs can fit through the canal; soon it will be over 200 vessels.)

• P
 olicy makers need timely insight into how regulatory changes can affect supply, demand, price and industry
profitability. This study enables them to better evaluate the impact of future regulatory changes.

• M
 any other end-users, ranging from motor vehicles to home use to commercial applications, constantly
consider how changing gas/oil price dynamics will influence service choices and future capacity decisions.
The study makes end-users better equipped to adapt to supply and price shifts, and it can help new project
developers make more effective evaluations of fuel supply options and project viability.

• F
 inancial institutions must make sound evaluations of how changing market conditions will affect the
economics and financing of new upstream, midstream and marketing ventures. This study allows for more
informed decision-making on potential projects.

• I ntegrated state and private oil companies need to have a consistent basis for planning and project evaluation,
covering the entire spectrum of the gas/NGLs/oil markets, from wellhead to refined products and including
the impact of alternative fuels, transportation costs and regional differences.

• O
 ther investors in oil infrastructure, such as storage, pipelines or rail facilities, who need to understand the
prospective changes in gas, NGLs, and crude oil and LPG/refined product flows on a regional basis and the
implications for supporting infrastructure.

• I nvestment firms (hedge funds, private equity) looking for future direction in rapidly changing industries —
and potentially profitable opportunities in all aspects of the NGL business fit that description.

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ABOUT PIRA

PIRA Energy Group, founded in 1976, is an international energy research and consulting firm that offers Retainer
Client Services as well as industry studies and customized consulting on a broad range of subjects in markets
for international oil, natural gas (and LNG), NGLs, coal, electricity, biofuels, and freight, as well as related
environmental and policy issues. PIRA provides evaluation of key U.S. and international energy developments that
impact the behavior and performance of the industry and its various markets and sectors. Currently, more than
500 companies spread across some 60 countries retain PIRA, including international and national integrated oil
and gas companies, independent producers, refiners, marketers, oil and gas pipelines, electric and gas utilities,
industrials, trading companies, financial institutions, and government agencies.

THE STUDY TEAM

Richard L. Joswick
Managing Director | Global Oil

Richard L. Joswick develops PIRA’s outlook for crude and product pricing, refinery margins, and inter-regional
supply balances. He is the lead consultant for PIRA’s Oil Producer Marketing Service (OPMS). Rick authors
PIRA's monthly European Oil Market Forecast. He was the study leader for a series of industry studies examining
product markets: Bottom of the Barrel: The Future for Residual Fuel Oil; Heart of the Barrel: The Future of
Middle Distillate Fuels; Top of the Barrel: The Future for Gasoline, Naphtha, and LPG, and the 2012 Updated
Outlook for Residual Fuel Oil. Rick joined PIRA in 2004 after 20 years with ExxonMobil in supply logistics,
planning, refining, and engineering. During his time at ExxonMobil, he had assignments developing near-term oil
market forecasts, designing heavy oil upgrading processes and evaluating refining economics. Rick has M.S. and
B.S. degrees from Rutgers University in chemical engineering.

Alpman Ilker
Senior Director | Global NGLs

Alpman Ilker leads PIRA’s Natural Gas Liquids group. He joined PIRA in 2013 after four years at the global com-
modities firm GlencoreXstrata, where he was a senior oil trader focused on global crude oil arbitrage. Prior to
Glencore, Alpman worked at Chevron, where he held various roles in process design and engineering, refinery
planning and operations, and crude oil marketing and trading. Alpman has a B.S. in chemical engineering from
the University of California, Berkeley and an M.B.A. from the University of Texas, Austin.

Nancy Lin
Senior Director Consulting Senior Advisor | Global NGLs
Nancy Lin joined PIRA in 2013 after almost 36 years with ExxonMobil. For several years, she led the development
of ExxonMobil’s long-term global supply/demand outlook for natural gas liquids and for natural gas/LNG. She has
also held senior positions in oil supply logistics and trading, refining technology planning, chemicals new busi-
ness development, and environmental, health and safety legislative and regulatory affairs. Nancy holds a B.S.E. in
chemical engineering from Princeton University and an M.B.A. in finance from New York University Stern School
of Business.

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INDUSTRY STUDY | NGL AND LPG SUPPLY, DEMAND, TRADE AND PRICE

Ken Otto
Consulting Senior Advisor | Global NGLs
Ken Otto was hired by PIRA in 2015 to assist in the research behind “The Global Impact of NGL Supply Growth.”
He led the NGL consulting practice for Purvin & Gertz for over 13 years and was the director and primary author
of over 20 North American and global NGL studies over his 27-year career with them. Ken has also directed many
different types of single client studies for clients in the NGL, refining and petrochemical industries around the
world during his 38-year career in the energy and chemical industries. He holds a B.S. in chemical engineering
and chemistry and an M.A. in chemistry from the University of Texas.

David A. Zinamon
Managing Director | Global Oil
David A. Zinamon specializes in refined products, refinery operations, NGLs, biofuels and environmental issues.
His work also includes analyzing the inter-relationship between the oil and chemical industries. In addition, he
has authored studies on topics as varied as the U.S. and other national energy and oil requirements; the impact of
the burgeoning U.S. NGL supply on international markets; oxygenates markets and the significance of the Clean
Air Act; the ability of U.S. refiners to comply with both low sulfur diesel and reformulated gasoline requirements;
the market implications of special California diesel and gasoline; the outlook for industrial energy use in the
U.S.; European gasoline markets; and refinery turnaround activity. Dave joined PIRA in 1984 after seven years
of international energy consulting experience with Chem Systems. This followed several years of manufacturing,
marketing and planning positions with Celanese Chemical, GAF Corp., and Airco. He has a BCHE from City
College of New York and an M.B.A. from Rutgers University.

Peter Jaquette
Senior Director | Global Oil
Peter Jaquette is a key contributor to PIRA's Scenario Planning Service, managing PIRA’s World Energy Demand
Forecast Portal and working closely with PIRA’s Global Oil, Refining, Biofuels, and Freight groups. He was the
study leader for the 2013 North American Crude by Rail industry study and is the coordinator of the Planning for
Tomorrow study series. Peter joined PIRA in 2007 with more than 25 years of experience in corporate strategic
planning and economic consulting, including 14 years with ARCO and nine years with Weyerhaeuser. Peter has a
B.A. in economics from Swarthmore College and an M.A. in economics from Stanford University.
Frederick W.A. (Bill) Fuller (Senior Director, International Oil) had over 30 years of energy forecasting and
analytical experience with Exxon International before joining PIRA in 1997. He now oversees PIRA’s analysis
and forecasting of near-term industry oil balances, with particular emphasis on international supplies. He also
develops PIRA's long-term oil supply outlook and monitors events impacting PIRA’s oil market view. Bill has a B.S.
in chemical engineering from Cornell University.

Dr. James Mason

Senior Analyst | Global Oil
Dr. James Mason has over 30 years experience working on energy issues. He is currently assessing U.S. and world
shale oil and gas resources. James has an M.S. in environmental sociology from the University of New Orleans
and a Ph.D. in economic sociology from Cornell University.

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INDUSTRY STUDY | NGL AND LPG SUPPLY, DEMAND, TRADE AND PRICE

Dr. Naing Oo
Associate Director | Global Oil
Dr. Naing Oo joined PIRA’s Global Oil Group in 1995. He focuses on quantitative and econometric analysis for
forecasting oil demand and is responsible for maintaining PIRA’s global short-term oil demand model. Naing
is also involved in both short- and long-term analysis of crude and product supply/demand balances and trade
flows, and he has contributed to numerous PIRA industry studies and consulting projects. Naing holds a Ph.D. in
economics from the City University of New York.

Ethan Groveman
Director | Product Development

Ethan Groveman oversees PIRA’s project consulting practice, where he has headed up studies in crude and prod-
uct trade, refining, and vehicle fuel demand. In addition, he built and currently manages PIRA’s North American
rail and pipeline infrastructure databases and contributes to PIRA’s work on refining, supply/demand balances,
and vehicle technologies. He led the rail cost and capacity modeling for PIRA’s 2013 North American Crude by
Rail study. Previous to PIRA, he served in product strategy and corporate development roles at Better Place, an
electric vehicle infrastructure provider. Ethan has a B.S. in management science and engineering from Stanford
University.

Kenneth M. Bogden
Director | Freight Markets
Kenneth M. Bogden is responsible for PIRA’s monthly Freight Market Outlook and its associated service. Prior
to joining PIRA in 2005, Ken worked for ExxonMobil for 27 years, primarily in its oil supply and trading and
planning functions, and also served as Coordinator of Transportation Planning. Ken has a B.S. in chemical
engineering from Lafayette College and an M.B.A. from Columbia University.

Yolanta K. Zawada
Senior Analyst

Yolanta K. Zawada focuses on the U.S. and West European NGL markets, international fuel quality and ethylene
cracker capacity, and refinery turnarounds. Prior to joining PIRA in 2000, she worked at Poten & Partners on
industry studies Naphtha Prognosis and Condensate in World Commerce. She holds an M.B.A. in international
business and marketing from Pace University.

Cihan Ergül
Senior Analyst

Cihan Ergül is responsible for PIRA’s World Refinery Data Portal, as well as the forecasting of ethylene cracker
capacity and the fundamentals analysis of downstream energy markets. Prior to joining PIRA, Cihan worked as
a quantitative analyst at National Grid, a global utilities firm, and Keyspan Energy Corporation. Cihan holds an
MBA from Hofstra University and a BA in economics from Istanbul Bilgi University/University of Portsmouth.

Evan Pickover
Junior Analyst | Global Oil
Evan Pickover is responsible for gathering and analyzing data on global oil markets. He also maintains databases
on international oil terminals and crude assays. Previously, as an intern in PIRA’s Global Biofuels group, he
maintained databases for international production of bioethanol and biodiesel and assisted in authoring the
Global Biofuels Monthly Forecast. Evan has a B.A. in economics and criminal justice from Indiana University.

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ACCEPTANCE FORM

We wish to subscribe to the industry “The Global Impact of NGL Supply Growth: PIRA’s Comprehensive
Outlook to 2035” for ____ (number of) users. We agree that the fees are as follows:

CATEGORY OF STUDY BUYER STANDARD FEE

Non-Client - 3 Users $23,000

Each Add'l User $2,300

PIRA Client - 3 Users $17,000

PIRA NGL Client - 3 Users $11,000

Each Add'l User $1,100

* New York City-based companies, please add 8.875% sales tax; all other New York State companies, please add the county-appropriate sales tax.

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