The Midstream business unit extracts, processes, stores, transports and markets natural gas liquids (NGLs) for Provident and offers these services to third party customers. The Provident Midstream segment contains three business lines:

Empress East

The Empress East business line extracts NGLs from natural gas at the Empress straddle plants and sells finished products into markets in central Canada and the eastern United States. The margin in this business is determined primarily by the “frac spread ratio”, which is the ratio between crude oil prices and natural gas prices. Traditionally, the higher the ratio, the better this business line will perform. There is also a differential between propane, butane and condensate (collectively, these products are referred to as "propane-plus") prices and crude oil prices which can change prices received and margins realized for Midstream products separate from frac spread ratio changes.

Redwater West

The Redwater West business line purchases an NGL mix from various producers and fractionates it into finished products at the Redwater fractionation facility near Edmonton, Alberta. Because the feedstock for this business line is primarily NGL mix rather than natural gas, the frac spread ratio has a smaller impact on margin than in the Empress East business line.

Commercial Services

The Commercial Services business line generates income from relatively stable fee-for-service contracts to provide fractionation, storage, loading, and marketing services to upstream producers. Income from pipeline tariffs from Provident's ownership in NGL pipelines is also included in this business line.

What are NGLs?

Natural gas liquids (NGLs) are the hydrocarbon liquids contained within natural gas. NGLs are extracted from the natural gas stream at extraction plants, such as those at Empress, Alberta and Younger, British Columbia and at fractionation facilities such as those at Redwater, Alberta and Sarnia, Ontario. NGLs have a higher value when they have been separated out from the natural gas stream.

The NGLs that Provident processes include:

• Ethane (C2), which is used by the petrochemical industry to produce ethylene and polyethylene, which are building blocks for plastics and other materials.
• Propane (C3), which is used for residential heating and agricultural crop drying, as well as many other purposes.
• Butane (C4), which is either blended with condensate for use as a diluent in Alberta, or sold into U.S. markets.
• Condensate (C5), which is used by bitumen and heavy oil producers as a diluent (condensate decreases the viscosity of bitumen and heavy oil, enabling these substances to flow easily through pipelines).

Growth Opportunities

Provident's Midstream business offers exciting growth opportunities over the next few years. The biggest energy story in North America currently is the growth of the Alberta oil sands. We are very well positioned, particularly through our assets in Redwater, to provide essential services to oil sands producers. Opportunities include providing condensate to dilute raw oil sands crude for transportation and storing and transporting oil sands-related products. Similarly, our Empress natural gas liquids extraction plant is well positioned for a long future, being the newest, most efficient of the five plants in the Empress complex.