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ANALYSIS OF CHANGING GAS HUB LIQUIDITY RESULTING FROM SURGE IN
MARCELLUS/UTICA SHALE GAS PRODUCTION
Bradford Leach, Benjamin Schlesinger, Ph.D. and John A. Neri, Ph.D.
IAEE-USAEE North American Conference Pittsburgh – October 28,
2015
Shale gas production has increased quickly in North America, undercutting costlier gas.
Dec-9
9
Dec-0
7
Dec-1
5
Dec-2
3
Dec-3
1
Dec-3
9
Dec-4
7
Dec-5
5
Dec-6
3
Dec-7
1
Dec-7
9
Dec-8
7
Dec-9
5
Dec-0
3
Dec-1
10
10
20
30
40
50
60
70
80
90
Marcellus/Utica (PA, WV, OH)
Haynesville (LA & TX)
Eagle Ford (TX)
Fayetteville (AR)
Barnett (TX)
Other US Shales
Rest of the US
Bcf
/day
2Source: EIA, BSA; state abbreviations indicate primary state(s); shale data re-aggregated in 2015..
Marcellus/Utica shales are now supplying about 1/4 US market.
Natural GasSupplies
(Dry)
Potential Produc-
tion, Bcm
Est. Recover-able, Tcm
Yamal 310-350 16.7
Bovanenkovo (alone)
220 4.9
Marcellus/ Utica
197 (Sept. 2015)
12.8
Qatar 159 (2013)
25.1
3
Source: EIA, Drilling Productivity Report, September 2015; resource data from http://www.eia.gov/analysis/studies/usshalegas/ (Northeast excl. Antrim); Yamal data from Gazprom, http://www.gazprom.com/about/production/projects/mega-yamal/, incl. explored and provisionally estimated; Qatar data from EIA, BP 2015 statistical review.
Jan-0
9
Aug-09
Mar
-10
Oct
-10
May
-11
Dec
-11
Jul-1
2
Feb-
13
Sep-1
3
Apr-1
4
Nov
-14
Jun-1
5 -
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Marcellus
Utica
Bcf/
day
Crude oil to Henry Hub gas price margins have tightened, but remain significant.
4Source: BSA 2015, from CME-NYMEX settlements at Closing 11 Sept. 2015.
Jan-
01
Jun-
02
Nov
-03
Apr-0
5
Sep-0
6
Feb-0
8
Jul-0
9
Dec-1
0
May
-12
Oct
-13
Mar
-15
Aug-1
6
Jan-
18
Jun-
19
Nov
-20
Apr-2
2$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
Henry HubWTIBrent ActualsHenry Hub FuturesWTI FuturesBrent Futures
$/M
MB
tu
5
The US is now building 67 mtpa of LNG export capacity, but how much will actually flow? • US regulators have approved ‘a ton’ of LNG
exports:• DOE – 102.2 mtpa of non-FTA exports approved, plus FTA
• FERC – 77.5 mtpa of export plant approved
• At this point, the market, not regulators, will decide, based on global forces, price, diversity.
Source: BSA 2015, from BP 2014 Statistical Review.
75.5
24.8
23.1 18.5
15.8
14.1
12.6
10.6
7.8
34.7
2014 LNG Exports, mtpa
Qatar Malaysia Australia
Nigeria Indonesia Trinidad & Tobago
Algeria Russia Oman
All Others
Market expectations of oil price uncertainty have increased in recent months.
6
7
Shale gas production has reduced spot gas prices at most North American hubs.
Alberta, US$2.65
Rockies, $3.12
Southern California Gas,
$3.27
Source: BSA 2015, January 2015 hub prices from Platts Inside FERC’s Gas Market Report; note: Dominion refers to Dominion Appalachia (South Point), New England refers to Tennessee Gas Pipeline, Zone 6..
New England,
$11.67
Henry Hub, $3.19
Dominion Hub, $1.75
So. Texas, $3.08
WINTER 2015
8
Marcellus/Utica hub prices are deeply depressed – starved for demand.
Alberta, US$2.18
Rockies, $2.47
Southern California Gas,
$2.71
Source: BSA 2015, September 2015 hub prices from Platts Inside FERC’s Gas Market Report; note: Dominion refers to Dominion Appalachia (South Point), New England refers to Tennessee Gas Pipeline, Zone 6..
New England,
$2.54
Henry Hub, $2.64
Dominion Hub, $1.16
So. Texas, $2.56
SUMMER 2015
13.06 13.39
12.78
11.17
12.50
11.12 11.08
12.40 12.54 12.70
13.44 12.86 12.72 12.76
13.22 13.09
13.91 14.10 13.80 13.85 13.58 13.85
12.38 12.12
10.95
8.65 8.01
7.71
6.38 6.72
6.17
5.00
4.21 3.64 3.48
Federal GOM Gas Production, Bcf/d
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
23% 23% 24% 23% 24% 25% 26%28% 28% 27% 27% 27%
29%32%
37%
43% 44%47%
52%
65%
80%
86% 86%82% 81%
67%70% 70% 69% 68% 67%
65%62% 63%
65% 66% 66%64% 62%
59%
53% 51%48%
42%
30%
17%
12% 11%15% 17%
10%7% 7% 7% 8% 8% 10% 10% 9% 8% 7% 7% 7% 6% 5% 4% 5% 5% 6% 5%
3% 2% 2% 3% 2%
LA North, South and Offshore Natural Gas Production
NORTH SOUTH OFFSHORE
Source: LA Department of Natural Re-sources
Jan-
05
May
-05
Sep-0
5
Jan-
06
May
-06
Sep-0
6
Jan-
07
May
-07
Sep-0
7
Jan-
08
May
-08
Sep-0
8
Jan-
09
May
-09
Sep-0
9
Jan-
10
May
-10
Sep-1
0
Jan-
11
May
-11
Sep-1
1
Jan-
12
May
-12
Sep-1
2
Jan-
13
May
-13
Sep-1
3
Jan-
14
May
-14
Sep-1
4
Jan-
150
200
400
600
800
1000
1200
314
100
438
1
186170179127112
189239
429459
832
253
538
128123
538
154
466
308291
632
14799
240
336
481
135
336
255206
79
247284
151
528
839
625
538
385
625
1025
251
315
736
432461454
551
274
549
359
274215
279
387
132189
404
217276
504
170
359
504
156159
33
107
25
183
9548
171135
203171
30
378334273
80108150
778
523
52110
523
260240
403
213200
56
152
363
285
160134
285
123104
288
178
270
11589134156
12980
156
246251
151
239
50
203241
20
Platts Henry Hub Monthly Volumes From 2004-2015000's MMMBtu/Day
0
1
2
3
4
11
2
11111
22
1111111111
2
11111
2
1111
2
11
2
11111111111111111111
2
11111111111111
22
3
1
2
3
1111
2
111
22
111
2
3
22
1111
2
11111
222
111
22
111
3
2
1
2
11
3
2
1
3
Platts Henry Hub Monthly Tiers
Changing deal counts – Gulf versus Marcellus/Utica
Jan-06 Jan-150
100200300400500600700800900
1000
391
46
0
163
0150
0
306374
287
Marcellus/Utica
TCO Tennessee Z4/200 LineTransco Leidy Line Tetco M-2Dominion Appalachia
HSC Henry Hub420
440
460
480
500
520
540
560
516
466
20
50
Gulf Coast
Jan-06 Jan-15
Contact Info: [email protected] Schlesinger [email protected] 301-951-7266www.bsaenergy.com
Benjamin Schlesinger and Associates, LLCThe Bethesda Gateway3 Bethesda Metro Center, Suite 700Bethesda, MD 20814Phone: (301) 951-7266 Fax: (301) 951-3381Visit us at www.BSAenergy.com
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