Natural Gas 101 & Current Industry Issues Bruce McDowell American Gas Association AGA Financial Forum May 2006
Natural Gas Advantages <ul><li>Domestic resource </li></ul><ul><li>Sufficient supply </li></ul><ul><li>Competitively price...
Natural Gas Accounts for Roughly One-Fourth of U.S. Primary Energy Consumption Source: Dept. of Energy, Energy Informatio...
Producing Wells Gathering Lines Transmission Lines Processing Plant Compressor Stations Underground Storage Large Volume ...
Participants Miles of Pipe Regulatory Regime Producers 6,800 Independents 0 Phased price deregulation 21 Majors begun in 1...
Supply, Exploration & Development
How Oil & Gas Are Created
Locating Natural Gas Reserves – New Technology Vibrator Truck (Energy Source) Recording Truck Geophone (Receivers) America...
Recoverable Gas Resources in the US, 1968-2004 Potential Resources Proved Reserves Cumulative Production Coalbed Methane T...
Well Success Rates Wildcat well: 10%-20% Exploratory well: 25%-50% Developmental well: 70%+
Drilling Rig 24803 T raveling Block Hook Swivel Draw W orks Mud Pump Rotary T able Kelly Mud Hose Crown Block Casing Dril...
Completed Well Christmas Tree Pipeline to Flow Process and Storage Surface Casing Intermediate Casing Production Casing Co...
Horizontal Drilling Avoids Surface Hazards American Petroleum Institute, 1986 Gas Oil Water
Natural Gas Production Is Responsive to Market Price SOURCE: U.S. Dept. of Energy, Energy Information Administration
Tightening Demand And Supply Curves = Price Volatility Source: Energy and Environmental Analysis (EEA) Lower-48 Dry Gas Pr...
Pipeline Transmission System
Pipeline Activities <ul><li>Construction </li></ul><ul><ul><li>FERC or state approval </li></ul></ul><ul><ul><li>Obtain ri...
 
Pipeline Rates <ul><li>Rate of return regulated by FERC </li></ul><ul><ul><li>Traditional contracts with set rates </li></...
Distribution System
Distribution Operations <ul><li>Gas supply management </li></ul><ul><li>Gate station </li></ul><ul><ul><li>Pressure reduct...
Distribution Company Gas Supply Management Annual Profile Peak Day Profile Source: Energy Information Administration, AGA...
Gas Supply Management <ul><li>Gas Supplier Options </li></ul><ul><ul><li>Producer </li></ul></ul><ul><ul><li>Marketer </li...
Distribution Rates <ul><li>Rates regulated by PSC’s </li></ul><ul><ul><li>Costs spread over fixed and commodity </li></ul>...
Customers
Residential <ul><li>90% of total customers </li></ul><ul><li>23% of total consumption </li></ul><ul><li>Weather sensitive ...
Commercial <ul><li>9% of total customers </li></ul><ul><li>14% of total consumption </li></ul><ul><li>Somewhat weather sen...
Industrial <ul><li>Less than 1% of total customers </li></ul><ul><li>38% of total consumption </li></ul><ul><li>Can help m...
Electric Generation <ul><li>Less than 1% of total customers </li></ul><ul><li>25% of total consumption </li></ul><ul><li>D...
Current Gas Industry Issues – Basically, It Comes Down To Supply
<ul><li>North American supply/demand balance is and will remain tight. </li></ul><ul><li>Gas consumption grows. </li></u...
Lower-48 Dry Gas Production vs. Dry Gas Productive Capacity Source: Energy and Environmental Analysis, Inc.
Shut-In Federal Offshore Gulf Natural Gas Production (EIA, April 2006) * Trading on Henry Hub suspended from 9/23 – 10/6 B...
Working Gas in Underground Storage Compared With 5-Year Range (EIA)
Gas Consumption Could Grow By More Than 20% By 2020 Source: Energy Information Administration
 
STATUS OF U.S. UNCONVENTIONAL GAS PRODUCTION <ul><li>Source: </li></ul><ul><li>Conventional/Offshore – EIA Annual Reserve ...
STATUS OF U.S. UNCONVENTIONAL GAS PRODUCTION Gas Shales Coalbed Methane Tight Gas Sands U.S. Natural Gas Production (Tcf) ...
LNG Imports Could Quadruple By 2009
23 25 A 3 4 46 17 8 28 15 30 29 47 48 56 14 54 55 B 37 36 1 19 49 31 12 57 US Jurisdiction FERC US Coast Guard 51 50 * US...
ALASKAN GAS IS READY AND WAITING Source: BP
Alaska Natural Gas Pipeline <ul><li>Proposed 4.5 Bcf/d pipeline </li></ul><ul><li>Agreement between state & oil companies ...
Potential Incremental Gas Supply
SOURCES OF CURRENT U.S. NATURAL GAS SUPPLY ALASKA 2.7 LOWER-48 19.0 Source: Energy Information Administration ALASKA 2.2 2...
Nontraditional Sources Of Natural Gas Will Satisfy Growing Demand ALASKA 2.7 LOWER-48 19.0 LNG 6.8 CANADA 2.3 Source: Ener...
Questions?
Thank You!
of 47

Natural Gas 101 - An Introduction to the Natural Gas Industry

Published on: Mar 3, 2016
Source: www.slideshare.net


Transcripts - Natural Gas 101 - An Introduction to the Natural Gas Industry

  • 1. Natural Gas 101 & Current Industry Issues Bruce McDowell American Gas Association AGA Financial Forum May 2006
  • 2. Natural Gas Advantages <ul><li>Domestic resource </li></ul><ul><li>Sufficient supply </li></ul><ul><li>Competitively priced </li></ul><ul><li>Relatively safe and clean burning </li></ul>
  • 3. Natural Gas Accounts for Roughly One-Fourth of U.S. Primary Energy Consumption Source: Dept. of Energy, Energy Information Administration
  • 4. Producing Wells Gathering Lines Transmission Lines Processing Plant Compressor Stations Underground Storage Large Volume Customer Regulator/Meter City Gate (Regulators/Meters) LNG or Propane/Air Plant Natural Gas Transportation System Residential Customers Commercial Customers Distribution Mains (Lines) Large Volume Customers
  • 5. Participants Miles of Pipe Regulatory Regime Producers 6,800 Independents 0 Phased price deregulation 21 Majors begun in 1979, completed in 1989 Pipelines 160 259,000 Federal Energy Regulatory Commission (FERC) Natural Gas Marketers 250 0 Unregulated Local Gas Utilities 335 840,000 State Utility Commissions End Users Residential 62 million 0 Unregulated Commercial 5 million Industrial 200 thousand Electric Utilities 500 0 Interstate - FERC Intrastate - State Commissions The US Natural Gas Industry At A Glance Source: Dept. of Energy, Energy Information Administration, AGA Investor-Owned Municipal 860 300,000 Local Governments
  • 6. Supply, Exploration & Development
  • 7. How Oil & Gas Are Created
  • 8. Locating Natural Gas Reserves – New Technology Vibrator Truck (Energy Source) Recording Truck Geophone (Receivers) American Petroleum Institute, 1986 Returning Sound Waves
  • 9. Recoverable Gas Resources in the US, 1968-2004 Potential Resources Proved Reserves Cumulative Production Coalbed Methane Trillion Cubic Feet Source: Potential Gas Committee
  • 10. Well Success Rates Wildcat well: 10%-20% Exploratory well: 25%-50% Developmental well: 70%+
  • 11. Drilling Rig 24803 T raveling Block Hook Swivel Draw W orks Mud Pump Rotary T able Kelly Mud Hose Crown Block Casing Drill Pipe Bit
  • 12. Completed Well Christmas Tree Pipeline to Flow Process and Storage Surface Casing Intermediate Casing Production Casing Completion Fluid Cement Packer Cement Cement Tubing Well Fluids Oil or Gas Zone Perforations
  • 13. Horizontal Drilling Avoids Surface Hazards American Petroleum Institute, 1986 Gas Oil Water
  • 14. Natural Gas Production Is Responsive to Market Price SOURCE: U.S. Dept. of Energy, Energy Information Administration
  • 15. Tightening Demand And Supply Curves = Price Volatility Source: Energy and Environmental Analysis (EEA) Lower-48 Dry Gas Production vs. Dry Gas Productive Capacity
  • 16. Pipeline Transmission System
  • 17. Pipeline Activities <ul><li>Construction </li></ul><ul><ul><li>FERC or state approval </li></ul></ul><ul><ul><li>Obtain right-of-way </li></ul></ul><ul><ul><li>Construction </li></ul></ul><ul><li>Operation </li></ul><ul><ul><li>Compression </li></ul></ul><ul><ul><li>Maintenance </li></ul></ul><ul><ul><li>Underground Storage </li></ul></ul>
  • 19. Pipeline Rates <ul><li>Rate of return regulated by FERC </li></ul><ul><ul><li>Traditional contracts with set rates </li></ul></ul><ul><ul><li>Capacity release market </li></ul></ul><ul><li>Types of contracts/services </li></ul><ul><ul><li>Firm </li></ul></ul><ul><ul><li>Interruptible </li></ul></ul><ul><ul><li>Released capacity </li></ul></ul><ul><ul><li>No-notice </li></ul></ul><ul><li>Factors impacting returns </li></ul><ul><ul><li>Demand - weather </li></ul></ul><ul><ul><li>Competition from other pipelines </li></ul></ul><ul><ul><li>Types of contracts </li></ul></ul>
  • 20. Distribution System
  • 21. Distribution Operations <ul><li>Gas supply management </li></ul><ul><li>Gate station </li></ul><ul><ul><li>Pressure reduction </li></ul></ul><ul><ul><li>Odorant </li></ul></ul><ul><li>System construction & operation </li></ul><ul><li>Metering & customer service </li></ul>
  • 22. Distribution Company Gas Supply Management Annual Profile Peak Day Profile Source: Energy Information Administration, AGA Survey
  • 23. Gas Supply Management <ul><li>Gas Supplier Options </li></ul><ul><ul><li>Producer </li></ul></ul><ul><ul><li>Marketer </li></ul></ul><ul><ul><li>Intrastate pipeline </li></ul></ul><ul><ul><li>Company-owned production </li></ul></ul><ul><li>Gas Contract Options </li></ul><ul><ul><li>Contract length </li></ul></ul><ul><ul><li>Contract pricing </li></ul></ul><ul><ul><ul><li>Indexed (monthly, weekly) </li></ul></ul></ul><ul><ul><ul><li>Fixed </li></ul></ul></ul><ul><ul><ul><li>Spot </li></ul></ul></ul><ul><ul><ul><li>Hedged (NYMEX) </li></ul></ul></ul>
  • 24. Distribution Rates <ul><li>Rates regulated by PSC’s </li></ul><ul><ul><li>Costs spread over fixed and commodity </li></ul></ul><ul><ul><li>Purchased gas costs recovery </li></ul></ul><ul><li>Rate schedules based on demand </li></ul><ul><ul><li>Firm </li></ul></ul><ul><ul><li>Interruptible/special contracts </li></ul></ul><ul><ul><li>Transportation </li></ul></ul><ul><li>Factors impacting returns </li></ul><ul><ul><li>Weather </li></ul></ul><ul><ul><li>Competition </li></ul></ul><ul><ul><li>New construction/marketing </li></ul></ul><ul><ul><li>Conservation </li></ul></ul>
  • 25. Customers
  • 26. Residential <ul><li>90% of total customers </li></ul><ul><li>23% of total consumption </li></ul><ul><li>Weather sensitive </li></ul><ul><li>Conservation impact </li></ul><ul><li>Bad debt </li></ul>
  • 27. Commercial <ul><li>9% of total customers </li></ul><ul><li>14% of total consumption </li></ul><ul><li>Somewhat weather sensitive </li></ul><ul><li>Conservation impact </li></ul><ul><li>Market opportunities </li></ul>
  • 28. Industrial <ul><li>Less than 1% of total customers </li></ul><ul><li>38% of total consumption </li></ul><ul><li>Can help manage sendout </li></ul><ul><li>Price causing demand destruction </li></ul><ul><li>Primarily transportation customer </li></ul>
  • 29. Electric Generation <ul><li>Less than 1% of total customers </li></ul><ul><li>25% of total consumption </li></ul><ul><li>Demand growing </li></ul><ul><li>Difficult delivery requirements </li></ul><ul><li>Primarily transportation customer </li></ul>
  • 30. Current Gas Industry Issues – Basically, It Comes Down To Supply
  • 31. <ul><li>North American supply/demand balance is and will remain tight. </li></ul><ul><li>Gas consumption grows. </li></ul><ul><li>“ New frontier” gas supplies are necessary and take time. </li></ul>North American Gas Market <ul><li>Gas prices remain relatively high. </li></ul><ul><li>High levels of gas price volatility continue. </li></ul><ul><li>LNG imports become an important player in natural gas pricing. </li></ul>
  • 32. Lower-48 Dry Gas Production vs. Dry Gas Productive Capacity Source: Energy and Environmental Analysis, Inc.
  • 33. 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
  • 34. Working Gas in Underground Storage Compared With 5-Year Range (EIA)
  • 35. Gas Consumption Could Grow By More Than 20% By 2020 Source: Energy Information Administration
  • 37. STATUS OF U.S. UNCONVENTIONAL GAS PRODUCTION <ul><li>Source: </li></ul><ul><li>Conventional/Offshore – EIA Annual Reserve Reports. </li></ul><ul><li>Unconventional – Advanced Resources International data base. </li></ul>Total Domestic Production Onshore Conventional Unconventional Gas U.S. Natural Gas Production (Tcf) 0.0 5.0 10.0 15.0 20.0 2000 2003 35% of U.S. total JAF2004074.XLS 19.2 19.4 5.5 5.4 Associated Gas 3.1 2.8 5.8 6.8 In the past three years, unconventional gas has helped maintain U.S. production and now accounts for 35% of U.S. natural gas supplies. Federal Offshore 4.8 4.4
  • 38. STATUS OF U.S. UNCONVENTIONAL GAS PRODUCTION Gas Shales Coalbed Methane Tight Gas Sands U.S. Natural Gas Production (Tcf) Source: Advanced Resources International data base. 0.0 1.0 2.0 3.0 4.0 5.0 2000 2003 4.0 4.6 1.4 1.6 0.4 0.6 All three of these unconventional gas resources - - tight gas sands, coalbed methane and gas shales – have experienced increased production.
  • 39. LNG Imports Could Quadruple By 2009
  • 40. 23 25 A 3 4 46 17 8 28 15 30 29 47 48 56 14 54 55 B 37 36 1 19 49 31 12 57 US Jurisdiction FERC US Coast Guard 51 50 * US pipeline approved; LNG terminal pending in Bahamas ** These projects have been approved by the Mexican and Canadian authorities 52 21 10 20 41 16 42 7 C 2 D 18 11 32 33 13 5,26 9 6,27 40 34 35 22 39 E CONSTRUCTED A. Everettt, MA : 1.035 Bcfd (Tractebel - DOMAC) B. Cove Point, MD : 1.0 Bcfd (Dominion - Cove Point LNG) C. Elba Island, GA : 0.68 Bcfd (El Paso - Southern LNG) D. Lake Charles, LA : 1.2 Bcfd (Southern Union - Trunkline LNG) E. Gulf of Mexico: 0.5 Bcfd (Gulf Gateway Energy Bridge - Excelerate Energy) APPROVED BY FERC 1. Lake Charles, LA: 0.6 Bcfd (Southern Union - Trunkline LNG) 2. Hackberry, LA : 1.5 Bcfd (Sempra Energy) 3. Bahamas : 0.84 Bcfd (AES Ocean Express)* 4. Bahamas : 0.83 Bcfd (Calypso Tractebel)* 5. Freeport, TX : 1.5 Bcfd (Cheniere/Freeport LNG Dev.) 6. Sabine, LA : 2.6 Bcfd (Cheniere LNG) 7. Elba Island, GA: 0.54 Bcfd (El Paso - Southern LNG) 8. Corpus Christi, TX: 2.6 Bcfd (Cheniere LNG) 9. Corpus Christi, TX : 1.0 Bcfd (Vista Del Sol – ExxonMobil) 10. Fall River, MA : 0.8 Bcfd (Weaver's Cove Energy/Hess LNG) 11. Sabine, TX : 1.0 Bcfd (Golden Pass - ExxonMobil) 12. Corpus Christi, TX: 1.0 Bcfd (Ingleside Energy - Occidental Energy Ventures) APPROVED BY MARAD/COAST GUARD 13. Port Pelican: 1.6 Bcfd (Chevron Texaco) 14. Louisiana Offshore : 1.0 Bcfd (Gulf Landing - Shell) PROPOSED TO FERC 15. Long Beach, CA : 0.7 Bcfd (Mitsubishi/ConocoPhillips - Sound Energy Solutions) 16. Logan Township, NJ : 1.2 Bcfd (Crown Landing LNG - BP) 17. Bahamas : 0.5 Bcfd, (Seafarer - El Paso/FPL ) 18. Port Arthur, TX: 1.5 Bcfd (Sempra) 19. Cove Point, MD : 0.8 Bcfd (Dominion) 20. LI Sound, NY: 1.0 Bcfd (Broadwater Energy - TransCanada/Shell) 21. Pascagoula, MS: 1.0 Bcfd (Gulf LNG Energy LLC) 22. Bradwood, OR: 1.0 Bcfd (Northern Star LNG - Northern Star Natural Gas LLC) 23. Pascagoula, MS: 1.3 Bcfd (Casotte Landing - ChevronTexaco) 24. Cameron, LA: 3.3 Bcfd (Creole Trail LNG - Cheniere LNG) 25. Port Lavaca, TX: 1.0 Bcfd (Calhoun LNG - Gulf Coast LNG Partners) 26. Freeport, TX : 2.5 Bcfd (Cheniere/Freeport LNG Dev. - Expansion) 27. Sabine, LA: 1.4 Bcfd (Cheniere LNG - Expansion) PROPOSED TO MARAD/COAST GUARD 28. California Offshore: 1.5 Bcfd (Cabrillo Port - BHP Billiton) 29. So. California Offshore : 0.5 Bcfd (Crystal Energy) 30. Louisiana Offshore : 1.0 Bcfd (Main Pass McMoRan Exp.) 31. Gulf of Mexico: 1.0 Bcfd (Compass Port -ConocoPhillips) 32. Gulf of Mexico: 2.8 Bcfd (Pearl Crossing -ExxonMobil) 33. Gulf of Mexico: 1.5 Bcfd (Beacon Port Clean Energy Terminal - ConocoPhillips) 34. Offshore Boston, MA: 0.4 Bcfd (Neptune LNG - Tractebel) 35. Offshore Boston, MA: 0.8 Bcfd (Northeast Gateway- Excelerate Energy) POTENTIAL SITES IDENTIFIED BY PROJECT SPONSORS 36. Coos Bay, OR: 0.13 Bcfd (Energy Projects Development) 37. California - Offshore: 0.75 Bcfd (Chevron Texaco) 38. Pleasant Point, ME : 0.5 Bcfd (Quoddy Bay, LLC) 39. St. Helens, OR: 0.7 Bcfd (Port Westward LNG LLC) 40. Galveston, TX: 1.2 Bcfd (Pelican Island - BP) 41. Philadelphia, PA: 0.6 Bcfd (Freedom Energy Center - PGW) 42. Astoria, OR: 1.0 Bcfd (Skipanon LNG - Calpine) 43. Robbinston, ME: 0.5 Bcfd (Downeast LNG - Kestrel Energy/Dean Girdis) 44. Boston, MA: 0.8 Bcfd (AES Battery Rock LLC - AES Corp.) 45. Calais, ME: ? Bcfd (BP Consulting LLC) CANADIAN APPROVED AND POTENTIAL TERMINALS 46. St. John, NB : 1.0 Bcfd (Canaport - Irving Oil)** 47. Point Tupper, NS 1.0 Bcf/d (Bear Head LNG - Anadarko)** 48. Quebec City, QC : 0.5 Bcfd (Project Rabaska - Enbridge/Gaz Met/Gaz de France) 49. Rivière-du- Loup, QC: 0.5 Bcfd (Cacouna Energy - TransCanada/PetroCanada) 50. Kitimat, BC: 0.61 Bcfd (Galveston LNG) 51. Prince Rupert, BC: 0.30 Bcfd (WestPac Terminals) 52. Goldboro, NS 1.0 Bcfd (Keltic Petrochemicals) MEXICAN APPROVED AND POTENTIAL TERMINALS 53. Altamira, Tamulipas : 0.7 Bcfd (Shell/Total/Mitsui)** 54. Baja California, MX : 1.0 Bcfd (Sempra)** 55. Baja California - Offshore : 1.4 Bcfd (Chevron Texaco)** 56. Lázaro Cárdenas, MX : 0.5 Bcfd (Tractebel/Repsol) 57. Puerto Libertad, MX: 1.3 Bcfd (Sonora Pacific LNG) 58. Offshore Gulf, MX: 1.0 Bcfd (Dorado - Tidelands) 59. Manzanillo, MX: 0.5 Bcfd 60. Topolobampo, MX: 0.5 Bcfd Existing, Proposed and Potential North American LNG Terminals Office of Energy Projects 58 As of November 30, 2005 53 59 60 38 24 44 43 45
  • 41. ALASKAN GAS IS READY AND WAITING Source: BP
  • 42. Alaska Natural Gas Pipeline <ul><li>Proposed 4.5 Bcf/d pipeline </li></ul><ul><li>Agreement between state & oil companies must be approved by Alaska legislature. </li></ul><ul><li>Adds 35-40 Tcf of reserves immediately to start </li></ul><ul><li>Costs: </li></ul><ul><ul><li>Construction - $20 billion </li></ul></ul><ul><ul><li>Financing - $20 billion </li></ul></ul><ul><ul><li>O&M - $20 billion </li></ul></ul>
  • 43. Potential Incremental Gas Supply
  • 44. SOURCES OF CURRENT U.S. NATURAL GAS SUPPLY ALASKA 2.7 LOWER-48 19.0 Source: Energy Information Administration ALASKA 2.2 2005: 21.8 Quads LNG 0.6 Lower-48 18.0 Canada 3.2
  • 45. Nontraditional Sources Of Natural Gas Will Satisfy Growing Demand ALASKA 2.7 LOWER-48 19.0 LNG 6.8 CANADA 2.3 Source: Energy Information Administration 2020: 24.5 Quads ALASKA 2.2 LNG 3.7 CANADA 1.6 LOWER-48 19.2
  • 46. Questions?
  • 47. Thank You!

Related Documents