West Region Gas Pipelines
Privileged and Confidential
Cautionary Language
Regarding Forward-Looking Statements This presentation contains forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results or the ability to generate revenues, income or cash flow or to make distributions or pay dividends are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations of Kinder Morgan Energy Partners, L.P., Kinder Morgan Management, LLC, El Paso Pipeline Partners, L.P., and Kinder Morgan, Inc. may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond Kinder Morgan's ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future, including, among others, the ability to achieve synergies and revenue growth; national, international, regional and local economic, competitive and regulatory conditions and developments; technological developments; capital and credit markets conditions; inflation rates; interest rates; the political and economic stability of oil producing nations; energy markets; weather conditions; environmental conditions; business and regulatory or legal decisions; the pace of deregulation of retail natural gas and electricity and certain agricultural products; the timing and success of business development efforts; terrorism; and other uncertainties. There is no assurance that any of the actions, events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on our results of operations or financial condition. Because of these uncertainties, you are cautioned not to put undue reliance on any forward-looking statement.
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Opening Remarks – Will Brown Macro Presentation – George Wayne Break – 15 Min Business Development Project Update – Greg Ruben Operational/Pipeline Management Update – Mark Westhoff Commercial Update/Customer Meeting Logistics – Tim Dorpinghaus
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West Region Gas Pipelines Tom Martin President KM Gas Pipelines Chris Meyer President West Region Gas Pipelines
Curt Moffat V.P. & Deputy General Counsel
Mark Westhoff VP Pipeline Management Jim Cordaro
Kevin Johnson
Director Pipeline Mgmt Rockies
Director Pipeline Mgmt DSW
Greg Ruben VP Business Development
Ken Ulrich
Laine Lobban
Tony Sanabria
Director Bus Dev
Acct Director Bus Dev
Acct Director Bus Dev
Kim Wetzel Sr Analyst Bus Dev
Allyson Schuur Executive Assistant
Bill Wible VP Regulatory
Will Brown VP Business Management
Tim Dorpinghaus
George Wayne
Ray Jordan
Billy English
Director Marketing
Director Market Services
Director Account Services
Director Asset Optimization
Thania Delgado
Marcus Stewart
Tim Mang
Acct Manager Marketing
Acct Manager Keystone Storage
Acct Director Asset Optimization
Mark Iverson
Dan Tygret
Acct Director Marketing
Acct Manager Asset Optimization
Steve Newell
Robin Janes
Randy Barton
Damon McEnaney
Acct Director Marketing
Acct Director Marketing
Acct Director Marketing
Acct Director Marketing
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Kinder Morgan West Region
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George Wayne Director, Market Services
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Ind +3.1 Bcfd +9.6 Bcfd
U.S. becomes net exporter
-2.0 Bcfd
Less Canadian Exports to U.S. Source: ICF International and Kinder Morgan Analysis
+7.7 Bcfd
Res +1.9 Bcfd
Industrial demand growth
+20.1 Bcfd
Continued supply increases
Gas-fired generation increases
+1.5 Bcfd
More U.S. Exports to Mexico
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Supply (Dry Gas)
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Wellhead Production
Wellhead production has declined 0.7 Bcf/d over last year due to continued low rig count Relative to 2015, declines are projected through 2018, followed by growth as gas prices recover. Only basin with material growth over the next decade is the Denver basin Horizontal drilling = 65% of all rigs Powder River activity increasing – 9 rigs
Rockies Active Rigs
Basin
Current Dry Production MMcf/d
YOY Prod Growth MMcf/d
Current Rigs Gas/Oil
Green River
2,770
(355)
11/0
Piceance
1,387
(104)
6/0
667
(144)
0/7
1,617
17
0/25
Powder River
371
(71)
0/9
Other
106
(13)
0/1
Total
6,918
(669)
17/41
Uinta Denver/Julesburg
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(Volumes are Wellhead – Measured in MMcfd)
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Active Rigs
DJ Basin rigs almost 50% of total Rockies rigs. Transition to horizontal wells over last 6 years. Increased use of XRL drilling. Anticipate additional rigs added in 2017 – Anadarko, Noble, PDC, Extraction, BBG
Oil Production 2016 to 2026 Growth
+1.3 Bcfd
+600 MBo/d
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Drilling activity in the San Juan Basin has been steadily declining. Coal Bed Methane (CBM) is depleting; however, we have started to see some recent horizontal drilling in the CBM. Moreover, since 2012, liquids rich plays are being develop (Gallup) with some optimistic results.
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Coal Bed Methane accounts for approximately 56% of total production. Associated gas from the Gallup is projected to grow.
San Juan Basin Production is expected to decline by approximately 670 MMcf/d over the next decade. Coal Bed Methane depletions are primary driver of production decline.
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2016-2017
PNW Demand
NoCal Demand
+240
-228
A Pembina is acquiring Veresen and
SUPPLY
$2.17
D
C Woodfibre B.C. and Pacific NW LNG have received full Canadian Gov’t D projects approval, but FID still pending. Woodfibre
1,114
GTN
2,135
NWPL
326
Ruby
673 4,247
PNW Demand1
2,490
Malin Deliveries
1,757
TOTAL
4,247
$2.44
B Northwest Innovation Works is developing
300 MDth/d Methanol export facility in Kalama, WA. They recently contracted I/T capacity on NWPL and may contract for additional firm capacity on upstream pipelines as needed. Future expansions in OR could bring total Methanol demand to 1 Bcf/d.
Sumas
TOTAL
will continue developing the Jordan Cove LNG export terminal. Key FERC filing milestones expected in late 2017.
DEMAND
C
Sumas
B $2.66
A
$2.69
Malin
Ruby $2.73
has begun remediation work at its brownfield site in preparation for possible facility construction.
Prices are Prompt Month (Jun, 2017) Forwards, volumes are 2017 YTD average. 1Excludes Vancouver, B.C.
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Active Rigs
Most of the Permian Basin supply growth is coming from the Midland and Delaware Basins based on superior economics. BE $35+/bo
Permian Basin Forecast – 400 Rigs
Oil Production +3.0 MMBo/d
+2.6 Bcfd +6.5 Bcfd
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Delaware
Midland
Midland and Delaware NGL production eclipsed 2 MMBbls. Although NGL prices have improved since 2016, they are still not anticipated by the market to exceed pre-2014 pricing in the next few years. 19
Key
A B C D E
Interstate Pipeline EPNG (San Juan Crossover) EPNG South Mainline (Cornudas West) TW (West Texas Lateral) NGPL (Segment 8 Capacity) NNG (Permian system) Total Interstate Capacity
Key
R
Q
P
F G H I J K L M P Q R
Intrastate Pipeline OneOK WestTex Red River* OneOK WestTex Elcor System* Enbridge Palo Duro Pipeline ATMOS Enterprise Texas KM Texas Pipeline Oasis Pipeline (Energy Transfer Fuels) Enterprise Texas Trans Pecos (early 2017) Comanche Trails (early 2017) OneOK RoadRunner (2016-2018) Total Intrastate Capacity
Design Capacity Bcfd
0.613 2.441 0.748 0.394 0.455 4.651
Estimated Capacity Bcfd
0.400 0.143 0.075 1.000 1.000 0.205 1.200 0.560 1.356 1.135 0.640 7.714
* OneOK WestTex Transmission – includes the Elcor System between the Permian and El Paso, TX (previously owned by EPNG) and the Red River pipeline between the Permian and the Texas Panhandle. - Elcor System – 20” pipeline with maximum capacity of 143 MMcfd - Red River Pipeline – 24” with maximum capacity between 300 and 400 MMcfd
Source: Ventyx data, KM research, CFE
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Western markets and Mexico are the high value markets for Permian gas, but they are demand limited Local demand growth is driven by power generation and processing
LNG and Mexico exports (South TX) are key drivers for Gulfdirected Permian gas
Midwest & North Central TX markets are “overflow” for Permian gas as pipe capacity is filled 21
Cheyenne AECO
Without additional western demand or Permian capacity additions to the east, Permian prices under Rockies and MidCon with continued competition from AECO and the Northeast. MidCon
SoCal Border
Leidy
STX
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Spreads Widen Further Widening of Seasonal Spreads
Permian dry gas production
Out of Capacity
Without additional pipeline capacity to the east, Permian price is lower in 2019 with greater seasonal volatility By 2021 as production continues to grow, eastbound capacity is full; hence, Permian prices lower to compete into the MidCon By 2024, Permian production outstrips all takeaway capacity out of the basin
The forward Permian basis narrows in 2020, suggesting the market is expecting expansion capacity to the east (not “yet” assumed in the fundamental forecast) 23
Source: Existing to planned capacity from Velocity Suite; Gas demand impacts derived from ICF International generation forecast data
CA natural gas intensity is decreasing while overall U.S. is increasing
Given the projections for existing and new renewable power, the West Region may see a maximum demand destruction in power gen of 3.2 Bcfd (1.8 winter to 4.5 summer) by 2025.
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The EIM seeks to optimize generation resources across a broad power market region to reduce costs and emissions: Minimizes sub-hourly dispatch Reduces reserve capacity requirements Reduces renewable generation curtailments Seattle City Light, Portland General Electric, Idaho Power, and Salt River Project will also join the EIM 100-200 MMcfd net impact to WECC region gas demand Since its inception, EIM has saved $146 MM and averaged 5 MMcfd of reduced gas-fired generation demand in 2016
Source: CAISO
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Rising gas production in the Permian begins to decrease Permian gas price after 2020. DSW and Mexico demand increases market price. The net result is an increase in the spread to Arizona and California; especially during summer peaks. 26
Natural gas storage provides value due to daily, monthly, and seasonal volatility. Market changes are increasing volatility.
Keystone Gas Storage
Increasing supply and outflows
Growing renewables Local unforeseen Events
Source: CAISO, ABB, Kinder Morgan Analysis
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SENER Forecasts demand in Mexico to grow by 1.3 Bcfd between 2016 and 2026 24 GW of renewable power generation capacity being installed between 2016 and 2030 Currently, there is no existing natural gas storage in Mexico
Production in Mexico is forecasted to grow 460 MMcfd from 2016 to 2026 Imports are forecasted to grow by 850 MMcfd between 2016 and 2026 28
MX Import Demand vs. Import Pipe Capacity
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Most of the Northwest, West-Central, and some Northeast demand supplied from Rockies and Permian
+380
Much of the Northeast, and much of the Central and WestCentral, demand is supplied by Eagle Ford
+440
-20 +700
-230 30
Pipeline Capacity in Western Mexico EPNG – South Mainline
IEnova - San Isidro to Samalayuca
SoCal Border Carso - Sam to Sasabe
KM/MGI/Mitsui - Sierrita PL
Tucson
Roadrunner - OneOk Fermaca Consortium
ISD – 2017 24-42” – 1,135 mmcf/d
ISD – PH1 Mar, 2016; PH2 Oct, 2016; PH3 2019 30” 170-640 mmcf/d
ISD – 2018 36” – 472 mmcf/d
ISD – Oct. 2014 36” – 201 mmcf/d (431 mmcf/d by 2020
El Paso
Comanche Trails – ET Consortium
Hueco
ISD – Jan, 2017 42” 1,135 mmcf/d
Sasabe
Waha
IENova Puerto Libertad
Samalayuca
ISD – 2014 36” - 770 mmcf/d
Fermaca
Guaymas
ISD – Mar, 2017 42” - 1,356 mmcf/d
Presidio/ Ojinaga
ISD – 2013 36” 850 mmcf/d
ISD – 2015 510 mmcf/d
Transpecos ET Consortium
San Elizario/ San Isidro
IENova El Encino
IENova 30”
ISD – May, 2017 42” - 1,350 mmcf/d
ISD – Jun, 2017 510 mmcf/d
Transcanada 30” ISD – Mid 2017 670 mmcf/d
Topolobampo Transcanada 24” ISD – Jun, 2017 202 mmcf/d
Fermaca ISD – Jan, 2018 42” - 1,500 mmcf/d
La Laguna Fermaca ISD – 2018 42” - 1,150 mmcf/d
Mazatlán Aguascalientes • • •
Information sourced from CFE Requests For Proposals and related press releases ISD – In Service Date (actual or estimated) mmcf/d – million cubic feet per day
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Demand growth continues LNG exports and Power Generation are primary sources of demand growth Low gas prices incentivize Industrial and Residential growth Supply growth continues to outpace domestic demand Supply growth occurs in low-cost, highly productive fields Fewer imports (Canada) and more exports (LNG and Mexico) provide balance between supply and demand The Permian is an area of opportunity and challenges Highly productive with direct access to premium western market and growth in Mexico Growth may begin to test capacity
Increasing price and basis volatility 32
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Greg Ruben V.P. Business Development
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Facilities: 4 Cavern Bedded Salt Storage 4 Bcf Working Capacity 400 MM/D Withdrawal/183 MM/D Injection 15,100 HP compression, 16.6 mile 24” lateral to tie into EPNG (1100 Lines), 12.3 mile 16” lateral to tie into EPNG 2000/1600 Lines
Contract: November 2020 in-service 20 year term from final Cavern InService (2024)
Provides No-Notice Service to AGS Shippers Negotiations ongoing
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Description Expand capacity of Sierrita by 230 MDth/d; total revised capacity of 431 MDth/d Incremental volumes to serve growing demand in Western Mexico
Facilities New compressor station (~16,000 HP) Ehrenberg
Transportation Agreement with CFE
Phoenix
19.5 year term Tucson Sierrita Pipeline Sonora, Mexico
Status CFE awarded capacity in Open Season:
October 2015 Finalizing compressor site acquisition
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SAN JUAN ANADARKO
Ehrenberg
New Compression
PERMIAN
Phoenix
17-mile Pipeline Loop Sierrita Pipeline El Paso Waha
Description Expand west flow capability by 271MDth Incremental volumes to Sierrita and Ehrenberg
Facilities New compression near Deming and Willcox
17-miles of 30” line loop (Hueco towards El Paso)
Transportation Agreement with CFE 15+ Years
Status CFE awarded capacity in Open Season: June 2016 Supplemental Open Season closes May 15 to provide up to 50MDth additional capacity
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EPNG Permian Interconnection Activity Receipt (Mcfd)
Status 2012
610,000
2013
615,000
2014
492,000
2015
1,566,200
2016
1,337,200
2017*
3,827,000
Plains Hobbs
Central Platform
Delaware Basin
Midland Basin
Eunice Carlsbad
New Mexico
Keystone
Texas Guadalupe Black River
Wink Line 3162
Cornudas
Waha Gresham
Puckett
* Includes interconnects currently under construction
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EPNG Permian Expansion Projects Expansion Underway Plains
Potential Expansions
Hobbs
Eunice Carlsbad
New Mexico
Keystone
Texas
Orla
LINE 2000
Guadalupe Black River Cornudas
63 LINE 1600 Gresham
Waha
493 KMTP
Puckett
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CIG line 5A/B expansion project currently underway 190 MDth/d incremental capacity Open season awarded in March 2017 In-service date targeted for September 2017
~1 Bcf/d of DJ north to Cheyenne Hub expansion potential without laying pipe 400 MDth/d on High Plains 300 MDth/d on CIG 5C 300 MDth/d on Front Range Pipeline In-service as early as 3rd QTR 2018 41
CIG DJ Basin Interconnect Activity Volume (Mcf/d)
WYOMING COLORADO Ft. Collins
2013
625,000
2014
604,700
2015
236,630
2016
22,300
2017*
428,000
Denver
Colorado Springs
* Includes interconnects currently under construction
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Mark Westhoff V.P. Pipeline Management
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Wind River Lateral Rawlins Cheyenne Plains Colorado Interstate Gas (CIG) El Paso Natural Gas (EPNG) Mojave Pipeline Ruby Pipeline TransColorado Wyoming Interstate Company (WIC)
North Mainline
West Slope
DJ Basin
San Juan Basin
Ehrenberg
South Mainline
Permian Basin 44
Wind River Lateral
Proximity to demand centers Rapid response to production issues Coordination with receipt/delivery operators
Rawlins Cheyenne DJ Basin Rifle
Denver Colorado Springs
Mainline flow reversals Blending rich supplies on Wind River Utilizing the assets of Western Pipes Blending limits being reached
Decline of CIG west end receipts Trinidad
Challenges for west slope deliveries Pressure maintenance 45
Increasing utilization of south mainline Line 2000 segregation Ehrenberg control valves Higher base linepack More narrow linepack range
North Mainline
Plains south constraint reversed San Juan production decline North mainline utilization decline San Juan Crossover bi-directional Transport capacity usable linepack
San Juan Basin
Ehrenberg
South Mainline
Permian Basin 46
Inconsistent with EPNG current operations Impair effective communications Create false impressions, nuisance notices Maintain existing procedures, eliminate limits 7200 MMcf for high probability draft SOC 7000 and 7900 MMcf for low and high SOC Tariff sections 11.1 (a) (i) (A) and (ii)
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Transport capacity at high utilization Hard lesson: April 20 Safety related testing and maintenance Coordination with stakeholders Focus on those requiring shut in General capacity impacts demanded much better communication
Going forward Regular maintenance coordination Emergent work: detailed analysis and communication
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Tim Dorpinghaus Director, KM West Pipeline Marketing
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Coding and Testing Nominations and Scheduling, Invoicing - 75% Complete Capacity Management – 80% Complete Allocations – 90% Complete Contracts - 100% Complete Regulatory Update Tariff changes approved by FERC – order received in November 2016
Customer Training Update WebEx refresher training sessions planned for – August/September (Dates TBD) Will provide in-house assistance for October business nominations (COS) – September Key Dates Complete all testing by September 1st Compliance filing for the approved Tariff Changes will be filed in September Open to Customers for October Business September 18th Additional Questions Conversion: please email #
[email protected] Training: Patty Beavers at 719-520-4321 or
[email protected] Training: Evelyn Spencer at 719-520-4753 or
[email protected]
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Dinner: Northern Sky Terrace/Rainmakers Ballroom 6pm Breakfast: Deseo Room 6:30am- 8:30 am Archers: Depart from South Terrace at 8:30 am and return at 11:30am Billy English (719) 433 - 1467
Botanical Gardens: Depart from South Terrace at 9:00 am and return 12:30pm Thania Delgado (719) 246 - 2324 South Terrace
Golf: Pro-shop by 7:00am for 7:30 am tee off Pro-shop – go out the back of the hotel and turn left Damon McEnaney (719) 510 - 2219
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