Presentation on theme: "Americas Natural Gas Market Challenge 2006-2007 American Gas Association September 2006."— Presentation transcript:
Americas Natural Gas Market Challenge American Gas Association September 2006
Gas Consumption Could Grow By More Than 20% By 2020 Source: Energy Information Administration
For many commodities, price is set by marginal cost of supply. For natural gas today (since 2001), price is being set by marginal cost of consumption. North American Natural Gas Market Demand for gas to power gen. continues to grow. Industrial gas demand levels even as GDP grows.
NYMEX Natural Gas Futures (September 1, 2006) Month-YearSettle ($/MMBtu) Oct Nov Dec Jan Feb Mar Apr May Jun
RECENT WEATHER EVENTS December 2000 Summer 2005 January 2006 July 15-Aug December 2000
Prices versus Weather Winter Summer
Estimated Peak Month Gas Supplies Source Bcf % Domestic Production1, Underground Storage Supplementals Net Canadian Imports LNG Imports Subtotal2, * Mexico Exports 35 Total Gas Supplies 2,766 Peak Gas Consumption2,701 Bcf (January 2003) (*Do not add due to rounding)
Working Gas in Underground Storage Compared With 5-Year Range (EIA)
Domestic Natural Gas Production US natural gas production still accounts for 83 percent of domestic consumption. LNG provides about 3 percent of gas consumed. Canada provides the balance.
Shut-In Federal Offshore Gulf Natural Gas Production (EIA, April 2006) * Trading on Henry Hub suspended from 9/23 – 10/6 Bcf/d = Billion cubic feet per day, $/Mcf = Dollars per thousand cubic feet Henry Hub Price * (right axis) Shut In Production (left axis) Forecast Bcf/d $/Mcf
Lower-48 Dry Gas Production vs. Dry Gas Productive Capacity Source: Energy and Environmental Analysis, Inc.
U.S. Natural Gas-Directed Drilling Activity Short-Term Energy Outlook, Oct. 2005
STATUS OF U.S. UNCONVENTIONAL GAS PRODUCTION Source: Conventional/Offshore – EIA Annual Reserve Reports. Unconventional – Advanced Resources International data base. Total Domestic Production Onshore Conventional Unconventional Gas U.S. Natural Gas Production (Tcf) % of U.S. total JAF XLS Associated Gas Federal Offshore Unconventional gas has helped maintain U.S. production and now accounts for 35% of U.S. natural gas supplies.
Lower-48 Annual Dry Production Source: Lippman Consulting, Inc.
21 TCF 346 TCF 31 TCF 43 TCF 100% 40% 100% 56% Restricted Percentage Major Portions of the Gas Resource Base Are Not Accessible Approximately 29 trillion cubic feet (TCF) of the Rockies gas resources are closed to development and 108 TCF are available with restrictions.
Canada Dry Gas Production and U.S. Pipeline Exports Source: Lippman Consulting, Inc.
Northern Gas Market Options
Mackenzie Gas Project Construction on 1.2 Bcf/d pipeline to begin in late Expected to recover 7 Tcf from three existing fields with future discoveries anticipated after infrastructure is in place. Begin flowing gas in NWT will need to import workers (current pop. 48,000 over area the size of Texas)
Alaska Natural Gas Pipeline Proposed 4.5 Bcf/d pipeline from North Slope to NA grid interconnect in Alberta. Agreement between state of Alaska and ExxonMobil, BP and ConocoPhillips must be approved by Alaska legislature. Adds Tcf of reserves immediately to US total with expectations for more with development of trans infrastructure.
New Supply Must Come From New Areas… …But Will Only Come at a Price that Supports Development. Source: CMS Panhandle Companies
LNG Import Capacity (Bcfd) Total Current Capacity: 5.2 Bcfd Under Construction: 2.3 Bcfd Sources: FERC, US Coast Guard, LNG Express, WGI, LNG Observer (July 2006)
New LNG Import Capacity (Bcfd) Under Construction, July 2006 Total Phase 1 Capacity: 8.6 Planned Phase 2 Capacity: 7.6 Sources: FERC, US Coast Guard, LNG Express, WGI, LNG Observer, Cheniere, State of TX
Jan 2006 Atlantic Basin Natural Gas Prices $/mmbtu Source: Energy Intelligence Unit
National Energy Legislation year depreciation for new natural gas distribution lines placed in service after 4/11/2005 and before 1/1/2011) 2. Numerous provisions to maintain current domestic production and to bring forth new supplies of natural gas, including LNG. 3. A substantial increase in the authorized level for LIHEAP funding to $5.1 Billion. 4. Repeal of the Public Utility Holding Company Act. 5. An energy efficiency title that does not discriminate against natural gas, as well as a National Academy of Sciences study on total energy efficiency.
Natural Gas Henry Hub Spot Prices (EIA, September 2006) *The confidence intervals show +/- 2 standard errors based on the properties of the model.
West Texas Intermediate Crude Oil Price (EIA, September 2006) *The confidence intervals show +/- 2 standard errors based on the properties of the model.
North American supply/demand balance is and will remain tight. Gas consumption has the potential to grow. Supply gains will come. New frontier natural gas is necessary. North American Natural Gas Market Natural gas prices remain strong. High levels of gas price volatility will continue. LNG imports become an important player in natural gas pricing.
Thank You! Christopher B. McGill Managing Director Policy Analysis