C. John Meeske
Environmental Business Council
Waltham, Massachusetts April 6, 2011
____________________________
C. John Meeske Energy Market Decisions, Inc. 508-435-0400 [email protected]
Rasmussen Reports (Jan 11, 2011) Q. Is Global Warming caused primarily by human activity or by long term planetary trends? 55
% 50 45 40 35 30 25 20
Human activity
Planetary Trends
Discussion Outline How Much Gas do we have? New Supply Sources Marcellus Infrastructure Projects/Costs Natural Gas Market Forces and Competitive Alternatives Observations/Conclusions
Technology Resources - Gas Reserves 3D/4D Seismic Horizontal Drilling Hydraulic Fracturing Examples Southwest Shale Plays Marcellus Shale Rocky Mountain Gas
US Natural Gas Resources Potential Gas Committee Quantity (Tcf)
Traditional Resources Coalbed Methane Total Potential Reserves Proved Reserves (DOE) Total US Future Supply Atlantic Region
2006 1155 166 1321 211 1532 92
2008 1673 163 1836 238 2074 354
(Includes Marcellus) Note: 2010 Assessment - Due ~ June 2011 EIA AEO 2010 Estimate 2587
New England Natural Gas Transmission System
PNGTS 1999
Maritimes & Northeast 1999
Repsol 2009
Iroquois 1991 Tennessee Millennium 2008
DOMAC 1972 Neptune 2010 Excelerate 2008
Algonquin
Prepared by Northeast Gas Association, 1-04
Marcellus Shale
Marcellus Shale
Northeast / Mid-Atlantic - Pipeline Capacity Expansion Projects (MDth/day)
TGP 300 Line Project (EQT) Northeast Upgrade (CPK, Statoil) Northeast Supply Diversification. Proj Millennium Expansion TETCO – TEAM 2012 Subtotal (Mostly Marcellus Shale) TETCO – TEMAX-Time III (Rockies) TETCO – TEAM 2013 TETCO – NY-NJ Expansion AGT – AIM
Quantity
In-Service
350 636 250 350 190 1,776 455 ~500 800 300
Nov 2011 Fall 2012 Nov 2012 2013 ? Nov 2012 Fall 2011 ? 2013 2014 ?
El Paso - Tennessee
Spectra – Algonquin
Spectra – TETCO NY – NJ Expansion
Millennium Expansion
Millennium Pipeline Expansion
NYMEX Natural Gas Futures Prices + Transportation Basis (4/4/11 Closing Prices) $12.00
Nominal Price ($/Dth)
$10.00
$8.00
$6.00
$4.00
$2.00
$-
NYMEX
Basis
Electric Energy Price @7500 Heat Rate (Nom$) $80.00
$70.00
Nominal Price ($/Mwh)
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$-
NYMEX
Basis
Why Infrastructure Matters
Move plentiful North American Supplies to Market Provides Greater Utilization (Value Added) of Natural Gas Storage Increased Supply Points Provide Greater Overall Diversity of Supply Increased Number of Interconnects Provides for Increased Reliability On Balance, LNG Delivered in the Market Area reduces Pipeline Construction Costs, adds to Reliability, and Provides Pressure Support
U.S. Natural Gas Basis (Location) Differentials ($/MMBtu) New England $57 Sumas ($0.96)
Tennessee Z-6 + $0.83
New England + $0.90
NYC $39 Chicago ($0.20)
Kern River-WY ($1.19)
NYC + $0.93 Mid Atlantic + $0.38 SoCal ($0.74)
Panhandle-Oklahoma ($0.83)
Florida Gas $0.55 Waha Hub ($0.81)
= Negative Basis = Positive Basis
Katy ($0.47)
Henry Hub $7.18
Extreme: Jan. 15 ‘04
Source: Natural Gas Intelligence – Average of 2004, 2005 and 2006 spot prices
Courtesy: Weavers Cove Energy
19
Conclusions
Improving Technology is making Natural Gas in North America Plentiful and Economically Very Competitive. Marcellus (and Utica) Shale’s Proximity to Northeast will Change Previous Basis Relationships to Benefit the US Northeast and Eastern Canada. Northeast Gas Markets continue to grow. Electric Markets have been flat but will go back on a growth path as the economy Recovers.
Conclusions (Cont.)
Pipeline Capacity, especially from LNG Receiving Terminals Has Been Economically Expanded to Satisfy Expected Levels of Demand Over the Next 5 - 10 Years. However, Additional De-bottlenecking will be Required. Pipeline Capacity, while sufficient to meet Supply needs, may not meet Electric Reliability Needs with the Increasing Levels of “Intermittent” Electric Resources.
Conclusions (Cont.)
Increasing Numbers of Supply Delivery Points, and Additional Pipeline Interconnection Points Will Improve Both Gas and Electric System Reliability. Generation Will Compete with Traditional LDC Gas Markets for Economic Expansion Capacity. Natural Gas Commodity Prices will Remain Reasonable, but Volatile.
Conclusions (Cont.)
Volatility Will Create Opportunities for Alternate Fuels, Unless Regulated Out of the Market Place. Northeast States Need to Overcome NIMBY/BANANA/NOPE Objections and Construct Sufficient Natural Gas and Electric Infrastructure. The Alternative is Higher Prices making the Region Less Competitive with the Consequent Loss of Jobs and Income.
Thanks! For Your Time and Attention Questions? Energy Market Decisions, Inc.
Waltham, Massachusetts April 6, 2011
____________________________
C. John Meeske Energy Market Decisions, Inc. 508-435-0400 [email protected]
Rasmussen Reports (Jan 11, 2011) Q. Is Global Warming caused primarily by human activity or by long term planetary trends? 55
% 50 45 40 35 30 25 20
Human activity
Planetary Trends
Discussion Outline How Much Gas do we have? New Supply Sources Marcellus Infrastructure Projects/Costs Natural Gas Market Forces and Competitive Alternatives Observations/Conclusions
Technology Resources - Gas Reserves 3D/4D Seismic Horizontal Drilling Hydraulic Fracturing Examples Southwest Shale Plays Marcellus Shale Rocky Mountain Gas
US Natural Gas Resources Potential Gas Committee Quantity (Tcf)
Traditional Resources Coalbed Methane Total Potential Reserves Proved Reserves (DOE) Total US Future Supply Atlantic Region
2006 1155 166 1321 211 1532 92
2008 1673 163 1836 238 2074 354
(Includes Marcellus) Note: 2010 Assessment - Due ~ June 2011 EIA AEO 2010 Estimate 2587
New England Natural Gas Transmission System
PNGTS 1999
Maritimes & Northeast 1999
Repsol 2009
Iroquois 1991 Tennessee Millennium 2008
DOMAC 1972 Neptune 2010 Excelerate 2008
Algonquin
Prepared by Northeast Gas Association, 1-04
Marcellus Shale
Marcellus Shale
Northeast / Mid-Atlantic - Pipeline Capacity Expansion Projects (MDth/day)
TGP 300 Line Project (EQT) Northeast Upgrade (CPK, Statoil) Northeast Supply Diversification. Proj Millennium Expansion TETCO – TEAM 2012 Subtotal (Mostly Marcellus Shale) TETCO – TEMAX-Time III (Rockies) TETCO – TEAM 2013 TETCO – NY-NJ Expansion AGT – AIM
Quantity
In-Service
350 636 250 350 190 1,776 455 ~500 800 300
Nov 2011 Fall 2012 Nov 2012 2013 ? Nov 2012 Fall 2011 ? 2013 2014 ?
El Paso - Tennessee
Spectra – Algonquin
Spectra – TETCO NY – NJ Expansion
Millennium Expansion
Millennium Pipeline Expansion
NYMEX Natural Gas Futures Prices + Transportation Basis (4/4/11 Closing Prices) $12.00
Nominal Price ($/Dth)
$10.00
$8.00
$6.00
$4.00
$2.00
$-
NYMEX
Basis
Electric Energy Price @7500 Heat Rate (Nom$) $80.00
$70.00
Nominal Price ($/Mwh)
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$-
NYMEX
Basis
Why Infrastructure Matters
Move plentiful North American Supplies to Market Provides Greater Utilization (Value Added) of Natural Gas Storage Increased Supply Points Provide Greater Overall Diversity of Supply Increased Number of Interconnects Provides for Increased Reliability On Balance, LNG Delivered in the Market Area reduces Pipeline Construction Costs, adds to Reliability, and Provides Pressure Support
U.S. Natural Gas Basis (Location) Differentials ($/MMBtu) New England $57 Sumas ($0.96)
Tennessee Z-6 + $0.83
New England + $0.90
NYC $39 Chicago ($0.20)
Kern River-WY ($1.19)
NYC + $0.93 Mid Atlantic + $0.38 SoCal ($0.74)
Panhandle-Oklahoma ($0.83)
Florida Gas $0.55 Waha Hub ($0.81)
= Negative Basis = Positive Basis
Katy ($0.47)
Henry Hub $7.18
Extreme: Jan. 15 ‘04
Source: Natural Gas Intelligence – Average of 2004, 2005 and 2006 spot prices
Courtesy: Weavers Cove Energy
19
Conclusions
Improving Technology is making Natural Gas in North America Plentiful and Economically Very Competitive. Marcellus (and Utica) Shale’s Proximity to Northeast will Change Previous Basis Relationships to Benefit the US Northeast and Eastern Canada. Northeast Gas Markets continue to grow. Electric Markets have been flat but will go back on a growth path as the economy Recovers.
Conclusions (Cont.)
Pipeline Capacity, especially from LNG Receiving Terminals Has Been Economically Expanded to Satisfy Expected Levels of Demand Over the Next 5 - 10 Years. However, Additional De-bottlenecking will be Required. Pipeline Capacity, while sufficient to meet Supply needs, may not meet Electric Reliability Needs with the Increasing Levels of “Intermittent” Electric Resources.
Conclusions (Cont.)
Increasing Numbers of Supply Delivery Points, and Additional Pipeline Interconnection Points Will Improve Both Gas and Electric System Reliability. Generation Will Compete with Traditional LDC Gas Markets for Economic Expansion Capacity. Natural Gas Commodity Prices will Remain Reasonable, but Volatile.
Conclusions (Cont.)
Volatility Will Create Opportunities for Alternate Fuels, Unless Regulated Out of the Market Place. Northeast States Need to Overcome NIMBY/BANANA/NOPE Objections and Construct Sufficient Natural Gas and Electric Infrastructure. The Alternative is Higher Prices making the Region Less Competitive with the Consequent Loss of Jobs and Income.
Thanks! For Your Time and Attention Questions? Energy Market Decisions, Inc.
