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Pacific Northwest Natural Gas Market and LNG Developments Dan Kirschner, Executive Director, Northwest Gas Association. Pacific Northwest Waterways Association Mid-Year Meeting Salishan Lodge June 22, 2006. 5335 SW Meadows Rd., #220 Lake Oswego, OR 97035 (503) 624-2160 www.nwga.org - PowerPoint PPT Presentation
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Pacific Northwest Natural Gas Market and LNG DevelopmentsDan Kirschner, Executive Director, Northwest Gas Association
Pacific Northwest Waterways Association
Mid-Year Meeting
Salishan Lodge
June 22, 2006
5335 SW Meadows Rd., #220
Lake Oswego, OR 97035(503) 624-2160www.nwga.org
NWGA Members:
Avista Corporation
Cascade Natural Gas Co.
Intermountain Gas Co.
NW Natural
Puget Sound Energy
Duke Energy Gas
Transmission
Terasen Gas
TransCanada’s GTN System
Williams NW Pipeline
3
Gas a Vital Part of NW Energy Scene
NW Consumption by Energy Source(Including BC, ID, OR, WA; Source: USA-EIA, CAN-StatCan)
500
600
700
800
900
1,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Mill
ion
Dth
ElectricGas (including gas for generation)
4
Recent Gas DemandCumulative PNW Gas Deliveries* (source: USA-EIA, CAN-StatCan)
0
100
200
300
400
500
600
700
800
900
1,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Mill
ion
Dth
IndustrialGenerationCommercialResidential
*2005 BC estimated from preliminary StatCan data
5
Proportion of Gas Demand by Sector - 2005
Composition of 2005 PNW Gas Demand
Generation23%
Industrial33%
Commercial17%
Residential27%
Source: EIA, StatCan
6
Gas Demand Forecast(2006-07 through 2010-11)
Low Growth Case Base (expected) Case High Growth Case
Average Annual
Cumulative Average Annual
Cumulative Average Annual
Cumulative
Total 1.0% 4.1% 2.1% 8.1% 2.7% 10.2%
Residential 1.9% 7.3% 3.2% 11.9% 4.2% 15.2%
Commercial 1.3% 4.9% 2.5% 9.3% 3.1% 11.5%
Industrial 0.0% 0.1% 0.5% 2.0% 0.6% 2.4%
Generation 1.1% 4.1% 2.6% 9.7% 3.2% 11.9%
7
Demand ForecastProjected Regional Demand
(Source: 2006 NWGA Outlook)
500
600
700
800
900
1,000
2000
2001
2002
2003
2004
2005
06-0
7
07-0
8
08-0
9
09-1
0
10-1
1
Mil
lio
n D
th
Low Projected DemandBase/Expected DemandHigh Projected DemandActual
Actual Forecast(weather normalized)
8
Demand Forecast by SectorProjected Regional Demand By Sector - Base Case
100
120
140
160
180
200
220
240
260
280
2006-07 2007-08 2008-09 2009-10 2010-11
Mil
lio
n D
th
ResidentialCommercialGenerationIndustrial
9Source: Platts Gas Daily and EIA Natural Gas Weekly Update
The Good News (but for how long?)
Daily Prices
$4
$6
$8
$10
$12
$14
$16
US
$/M
MB
tu
Wyoming AECO-C Henry Hub Sumas Station 2
10
Price Drivers: Production
Source: Baker Hughes, 06/09/2006
U.S. Gas Rigs In Operation
200
400
600
800
1,000
1,200
1,400
1,600
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52Week
Rig
Co
un
t
5yr high-low
5 year minimum
5yr average
2005
2006
1111
Price Drivers: Storage (Supply)
Source: EIA, 06/15/2006
500
1000
1500
2000
2500
3000
3500
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Week
Bcf
5yr high-low
5 year Minimum
5yr average
2005
2006
12
Recent Gas Prices
U.S. Natural Gas Wellhead Price
$0
$2
$4
$6
$8
$10
$12
$/M
cf
(no
min
al)
Source: EIA
13
Crude Oil:Natural Gas Price Correlation = 0.875
$0
$2
$4
$6
$8
$10
$12
$/M
cf
$0
$10
$20
$30
$40
$50
$60
$70
$80
$/B
bl
US Natural Gas US Crude Oil (WTI)
The Price of Oil Has an Impact…
Source: EIA
14Source: Energy Information Administration
As Does the Weather
Weather Affect on Prices
$6
$7
$8
$9
$10
$11
$12
$13
$14
$15
$16
$/M
MB
tu
Sumas (flow date) Henry Hub Spot
Hurricane Katrina landfallAugust 29, 2005
Hurricane Rita landfallSeptember 24, 2005
40
45
50
55
Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
Bcf
d
Gas Production Productive Capacity
Productive CapacitySource: Energy and Environmental Analysis, Inc.
BubbleTight Market
16
Production per Rig
Source: EIA, Baker Hughes Rotary Rig Counts
Production per Rig - mcf/day
0
500
1000
1500
2000
2500
Jul-8
8
Dec
-88
May
-89
Oct
-89
Mar
-90
Aug
-90
Jan-
91
Jun-
91
Nov
-91
Apr
-92
Sep
-92
Feb
-93
Jul-9
3
Dec
-93
May
-94
Oct
-94
Mar
-95
Aug
-95
Jan-
96
Jun-
96
Nov
-96
Apr
-97
Sep
-97
Feb
-98
Jul-9
8
Dec
-98
May
-99
Oct
-99
Mar
-00
Aug
-00
Jan-
01
Jun-
01
Nov
-01
Apr
-02
Sep
-02
Feb
-03
Jul-0
3
mcf
/day
17
Northwest Gas Supply
SumasKingsgate
AECO
Stanfield
Malin
Western Canadian
Sedimentary BasinStation 2
RockiesBasins
Opal
18
WCSB Production
WCSB Production Forecasts
15
16
17
18
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Bc
f/D
ay
Canadian Energy Research Inst. Wood MackenzieNEB (04 Techno Vert) TransCanadaNEB (04 Supply Push) Duke EnergyConsensus Forecast Actual
Actual Forecast
19
Rockies Production
6
7
8
9
10
11
2005 2006 2007 2008 2009 2010 2011
Bcf
/d
EEA EIA Wood MackenzieOther Consultants Avg Consensus Forecast
20
474
1392
461
250716502730
2336
1186
1983
1379
2122
4298
1510
6324
2013
4794
1885
1637
1312
391
1768
669
2576
2396
1721
5083
453
426
1063
124
2165
1889
10821213
180
224
28
Pipeline Flow (MMcfd)2005
1884
3308
54
1598
238
1205
107
747
94401
99
2570912
899
811
6203
3381
1598
570
375
740
565
223
203
2564
5007
51
433
208332
117
512529
81
921
793
Elba Island
Cove Point
Everett
Blue Lines indicate LNGGray Lines indicate an increaseRed Lines indicate a decrease
294
EEA0406Lake Charles
622
3865
4333
840
Supplies Flow to Demand
21
Growing Demand, Slowing Supply
Projected US Supply/Demand Balance(EIA Annual Energy Outlook 2006)
0
5
10
15
20
25
30
Year
Qu
ad
rill
ion
Btu
Other Supplies
Canadian Supply
Domestic Supply
US Demand
LNG imports are the marginal resource
Frontier gas (Mackenzie, Alaska)
22
Why LNG?
Large reserves with little or no local market.Pipelines to markets impractical
(Source: BP Statistical Review of World Energy, 2005)
Country Proved Reserves (Tcf)
Russia 1,694
Qatar 910
U.A.E. 214
Nigeria 176
Algeria 160
Venezuela 149
Indonesia 90
Australia 87
Norway 84
Malaysia 87
Egypt 66
Libya 53
Oman 35
Trinidad/ Tobago 19
23
LNG enables long distance shipping
Liquefying natural gas:
• Super-chilling it to -260°F
• Reduces volume of gas 620 times
• LNG weighs less than one-half that of
water
24
It Must Make Economic Sense
Total = $2.00 - $3.70/MMBtu (Source: Center for Energy Economics)
25
Pacific Basin Sources of LNG
Peru LNGBolivia LNGSunrise
Browse BasinScarborough
Australia NWS 5
Kenai
Sakhalin
Gorgon
Darwin LNG
Australia NWS 1-4
Iran
BintuluArun Brunei
Tangguh
OmanAbu Dhabi
Qatar
Donggi
Bontang
Investment in new LNG liquefaction capacity is growing
Existing/Under Construction Proposed
Yemen
27
PortWestward LNG Skipanon LNG Jordan Cove LNG④ Northern Star LNG ⑤ Tansy Point⑥ Kitimat LNG⑦ WestPac Terminal
Challenges include:• Local acceptance• Regulatory/Permitting• Commercial considerations:
• economics/financing• takeaway infrastructure• worldwide competition • supplier commitment
NorthwestLNG Proposals
A Bit About Process…
FERC is lead agency; consults w/state agencies
USCG serves as subject matter expert for maritime safety and security for EIS USCG validates Waterways Suitability
Analysis (WSA) Provide USCG and Maritime Stakeholder input USCG issues Letter of Recommendation (LOR)
29
Waterways Suitability Analysis
Risk-based analysis: Identify risks that arise from
introduction of LNG operations into port What can go wrong? What is the likelihood? How severe are consequences?
The goals: Understand individual risks in terms of:
probabilities, threats, vulnerabilities, consequences
Use info to develop effective risk management strategies
30
WSA Includes:
Transportation through the vessel’s arrival in US waters to LNG facility
Navigation and environmental safety issues
Safety and security issues that might affect entire port; detailed review of specific points of concern
31
Conclusions
Gas a critical part of NW energy mix NW demand is growing Gas-fired generation continues to be important
Volatile commodity prices: tight supply/demand balance
Production struggling to match growing demand
NW part of integrated N. American marketIncreased LNG imports a vital component of energy portfolio; will help dampen volatility
LNG imports must make economic sense Regulatory processes are comprehensive and rigorous NW projects making progress; still a ways to go
5335 SW Meadows Rd., #220
Lake Oswego, OR 97035(503) 624-2160www.nwga.org
NWGA Members:
Avista Corporation
Cascade Natural Gas Co.
Intermountain Gas Co.
NW Natural
Puget Sound Energy
Duke Energy Gas
Transmission
Terasen Gas
TransCanada’s GTN System
Williams NW Pipeline