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February 22, 2001 Alaskan Pipeline Meeting Agenda Introduction to Enron & El Paso Assessing the Alaskan Gas Impact Enron & El Paso Value Added.

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Presentation on theme: "February 22, 2001 Alaskan Pipeline Meeting Agenda Introduction to Enron & El Paso Assessing the Alaskan Gas Impact Enron & El Paso Value Added."— Presentation transcript:

1

2 February 22, 2001 Alaskan Pipeline Meeting

3 Agenda Introduction to Enron & El Paso Assessing the Alaskan Gas Impact Enron & El Paso Value Added

4 Enron Overview $74 Billion Corporation headquartered in Houston, Texas Largest Wholesale Marketer of Natural Gas Largest Wholesale Marketer of Electricity Owner/Operator of Major US Natural Gas Pipelines Northern Natural Gas TransWestern Pipeline Northern Border (operator/partial owner) Florida Gas Transmission (operator/partial owner) Bridgeline Holdings (partial owner) Owner/Operator of Electric Generation Worldwide 6000 MW in US 5400 MW internationally

5 Enron Interstate Pipelines Transwestern Northern Natural Northern Border Florida Gas

6 El Paso/Coastal Overview Merger received FTC approval January 29, 2001 $50+ Billion Corporation headquartered in Houston, Texas Largest U.S. Owner/Operator of Major Interstates Tennessee Gas Pipeline ANR El Paso Natural Gas SONAT Colorado Interstate Florida Gas Transmission (partial owner) Portland (partial owner) Great Lakes (partial owner) Alliance (partial owner) Largest US Storage Owner/Operator Second largest US Gas Wholesale Marketer

7 Current El Paso Interstate Pipelines El Paso Coastal

8 Combined Enron and El Paso Interstate Pipelines El Paso Coastal Enron Enron/El Paso

9 Enron & El Paso Combined Presence Over 95,000 miles of pipe in U.S. 27 Bcf/d interstate transport 39 Bcf/d gas marketed in U.S. 10,700 MW of U.S. electric generation 757 MM MWhs marketed 615 Bcf of storage working gas 11 Bcf/d storage deliverability

10 Assessing the Alaskan Gas Impact Current Forecasts Big Bang Growth Case Impact of Alaska Gas Arriving in 2010 Impact of Alaska Gas Arriving in 2007

11 2010 Demand Forecasts

12 Volatility in Forecasts

13 Forecasts for Electric Gen Growing Source: NERC Load & Resource Reports

14 Big Bang Growth Case EEA Model used as Base Structure Engine for GRI and Other Forecasts 1998 Base Data North American Perspective Updated Projections of Canadian Demand Net Mexico Demand Exogenous Modifications LNG, Sable Island Alaskan Supply Unconstrained Supply

15 Big Bang Growth Case

16 U.S. GDP grows at 2.5% per year North American electric demand grows at 1.9% per year Industrial production grows at 3% per year Canadian GDP grows at 3% per year through 2005, then slows to 2% per year thereafter Canadian Tar Sands production’s demand for gas grows to 1 Bcfd by 2010 RACC declines to $22.58/bbl by end of 2002 and grows at 1.5% per year (nominal) thereafter Background Assumptions

17 Major Predictions Coal generation capacity flat Exports to Mexico grow to 1.0 Bcfd by 2005 and remain flat thereafter LNG imports exceed 3.5 Bcfd by 2010 Sable Island production up to 2 Bcfd by 2010

18 Major Projections Gas grows at 3% per year Alaska gas increases demand by 2.6 Bcfd (excluding LP&F impact) Nominal prices at Henry Hub peak at $4.35 during the forecast period

19 Big Bang Demand Case

20 Mexico 2.7% AAGR in demand for natural gas from 1991 to 1997 Total gas demand forecasted to grow 5.3 Bcfd by 2008 Annual growth rate exceeding 9% Electric Sector expected to grow at a rate exceeding 20% – 2.5 Bcfd Source: Natural Gas Market Perspective , Ministry of Energy. Race between gas infrastructure investment and electric generation Production estimated grow at 7% rate 1998 Production = 1.26 Tcf or 3.5 Bcfd Over 78% located in southern regions

21 Mexico Will Continue to Rely on Natural Gas Imports Source: Natural Gas Market Perspective & , Ministry of Energy. Balance (supply less demand) MMCFD Balance with investment Balance without investment Mexico’s demand for U.S. gas modeled to grow to 1 Bcfd by 2005 and remain flat thereafter

22 U.S & Canadian Electric Load Growth 4, / / 10.7 Big Bang Tcf / Bcfd Load Growth per NERC 2000 ES&D; Reliability Assessment Base Projection 1.9% / yr Upper Band 3.4% / yr Lower Band.4% / yr

23 Canadian Natural Gas Demand by 2010 Total Canadian demand in 1999 was 8.0 Bcfd NEB forecasts consumption in 2010 at 4.3 Tcf or 11.8 Bcfd Annual GDP growth of 3% through 2005, decelerating to 2% thereafter 40% of growth occurs in eastern provinces (Ontario, Quebec and Maritimes) Oil Sands production now estimated by NEB to require 1 Bcfd of natural gas by Bcfd included in NEB June ’99 forecast Sources:Statistics Canada website NEB, Canadian Energy, Supply & Demand to 2025; June 1999 NEB, Canada’s Oil Sands; October 2000

24 Demand Response

25 Big Bang Supply in 2010

26 LNG 700 Tcf of Stranded Gas Estimated worldwide LNG export capability in 2010 up to 12 Tcf / yr LNG landed cost in U.S. $3.00 to $3.50 / MMBtu U.S. LNG receiving terminals’ sendout capacity Current/w/ EconomicallyBig ServiceInitialExpandableBang DateCapacityCapacityFlow DistrigasActive Cove PointEarly Elba IslandEarly CMS TrunklineActive Baja California Bahamas, Seattle, N Carolina...??? LNG imports in 2010 will exceed 3.5 Bcfd

27 Sable Island Sable Island production will reach 2.2 Bcfd by 2010

28 Snapshot of 35 Tcf World in 2010

29 Excludes Lease, Plant & Fuel Major Demand Growth ( )

30 Supply Response (1998 – 2010)

31 Bcfd Major Changes in Gas Flows (1998 – 2010)

32 Pipeline Infrastructure Required to Move 35 Tcf Offshore connections.9 * Alliance capacity shown wet * *

33 NoCal 3.35 AECO-C 2.76 Chicago 3.65 Henry 3.65 Opal 3.16 Gas Prices Basis New York 4.57 Gas Prices & Basis (35 Tcf in 2010 – Nominal $)

34 Impact of Alaskan Gas in 2010: 35 Tcf Market 2.9 Bcfd Demand Response $1.00 Temporary Depression in Chicago Price More Infrastructure Needed from Western Canada to California and to Chicago 1.8 Bcf to California 4.2 Bcf to Chicago

35 Impact of Alaskan Gas in 2007: 33 Tcf Market 2.9 Bcfd Demand Response Demand at 35 Tcf by 2010 $1.00 Temporary Depression in Chicago Price Recovers by 2010 More Infrastructure Needed from Western Canada to California and to Chicago 1.3 Bcf to California 4.2 Bcf to Chicago

36 NoCal 3.14 AECO-C 2.73 Chicago 3.26 Henry 3.23 Opal 2.41 New York 5.08 Gas Prices & Basis (33 Tcf in 2007 – Nominal $) Gas Prices Basis

37 Summary Demand Will Follow Supply Adequate Netback to Alaska Significant “B to C” Infrastructure Needed AECO Hub is Gateway to East / West Optionality New York via TransCanada Chicago via Alliance, Northern Border California via PGT Continuous Market Intelligence Critical Given Dynamic Markets

38 El Paso and Enron Value Added

39 Why are we Interested? Strategic Focus on the North Development of New Gas Supply Increase clean BTU supplies to N. America Allow market growth Improve utilization of existing pipeline grid Opportunities for New Investment Significant N. American Pipeline Project A Core Competency – “It’s What We Do For A Living!”

40 How Can We Add Value? U.S. Political/Regulatory Expertise FERC Environmental Agencies Governmental Players Successful Market Players Trading/Marketing/Risk Management Consumers - Power Plants (~13,000 MW/~2.2 Bcfd) Enron currently owns 6000 MW in US Market Access Involved in all major U.S. markets Excellent relationships with consumers Owner of significant import capacity

41 How Can We Add Value? EPC Expertise Physical Operating Capability Recognized “Best in Class” Existing Infrastructure Economies of Scale Widely Respected “Industry Innovators” Source of Equity Management Commitment

42 Conclusions Demand Will Be There IF Confidence in Supply Maintained Pricing Levels in 2007 – 2010 Appear to Support Alaskan Gas El Paso & Enron Can Supply Considerable Pipeline & Market Expertise


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