Upload
jennis
View
28
Download
0
Tags:
Embed Size (px)
DESCRIPTION
Richard L. Levitan, [email protected] June 15, 2012. The New England Restructuring Roundtable Gas Pricing Dynamics Affecting Power Markets and Resource Adequacy in New England. Primary Issues & Concerns (next 3-5 Years). Supply push in PJM / NYISO demand pull in New England - PowerPoint PPT Presentation
Citation preview
The New England Restructuring Roundtable
Gas Pricing Dynamics Affecting Power Markets and Resource Adequacy
in New England
Richard L. Levitan, [email protected] 15, 2012
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
2
Primary Issues & Concerns (next 3-5 Years)Supply push in PJM / NYISO demand pull in New
England
Slack deliverability during non-heating season insufficient to support new entry
• New flow patterns raise questions about economic obsolescence • Anticipated retirement of many RFO / dual fuel steam units, coal
Basis benefits will be indirect and may not materialize in the peak heating season
Destination-flexible LNG cargoes jeopardize fuel adequacy around Boston
Financial / regulatory support for new gas infrastructure
Who pays?
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
3
Commodity prices remain weak and stable
Source: Bloomberg LP
7/2/2008$13.31
6/1/2012$2.24
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
1/1/2005 1/1/2006 1/1/2007 1/1/2008 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/30/2012
He
nry
Hu
b D
ail
y P
ric
e,
$/M
MB
tu
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
4
Gas Price and New England Energy Price
$0
$20
$40
$60
$80
$100
$120
.2007
.2008
.2009
.2010
.2011
.2012
Month, Year
Ele
ctr
ic E
ne
rgy
Pri
ce
, $/M
Wh
$0
$2
$4
$6
$8
$10
$12
$14
Na
tura
l Ga
s P
ric
e, $
/MM
Btu
MassHub ATC Electric Energy Price
Algonquin City Gates Natural Gas Price
Source: Bloomberg LP, ISO-NE
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
5
Blow out in historical parity relationship
Source: Bloomberg LP
$0
$5
$10
$15
$20
$25
1/1/05 1/1/06 1/1/07 1/1/08 12/31/08 12/31/09 12/31/10 12/31/11 12/30/12
Hen
ry H
ub
or
WT
I D
aily
Pri
ce,
$/M
MB
tu
0
1
2
3
4
5
6
7
8
9
10
WT
I to
HH
Ra
tio
(M
MB
tu G
as
/ M
MB
tu O
il)
Henry Hub
WTI
WTI/HH Ratio
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
6
Marcellus Production Forecast
Source: Penn State University
0
2
4
6
8
10
12
14
16
18
20
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Bill
ion
Cu
bic
Fe
et
of
Ga
s E
qu
iva
len
ts p
er
Da
y
1400
1600
1800
2000
2200
2400
2600
Nu
mb
er
of
We
lls D
rille
d
2011 Production Forecast 2010 Production Forecast 2011 Forecast of Drilling Activity
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
7
Wet and dry shale gas production
Wet
Gas
Dry
Gas
Major Dry Gas Production Area
Major Wet Gas Production Area
Sources: EIA, Pennsylvania State University Marcellus Center, Dominion Resources, Pennsylvania Department of Conservation and Natural Resources
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
8
Gas Basis to New England Reflects Congestion
Source: Bloomberg LP
$0
$5
$10
$15
$20
$25
$30
1/1/2005 1/1/2006 1/1/2007 1/1/2008 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/30/2012
Da
ily
Pri
ce
, $
/MM
Btu
Henry Hub
Algonquin City Gates
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
9
Marcellus-related planned projects
Source: NGA
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
10
Seasonal Basis to New York and New England
Source: Bloomberg LP
$0
$1
$2
$3
$4
$5
$6
$7
. 200
6 . .
. 200
7 . .
. 200
8 . .
. 200
9 . .
. 201
0 . .
. 201
1 . .
. 201
2 . .
Mo
nth
ly A
ve
rag
e B
as
is v
. He
nry
Hu
b, $
/MM
Btu
Transco Z6 NY Algonquin City Gates
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
11
Estimated P/L slack deliverability, except during winter
0
0.5
1
1.5
2
2.5
9/1/
07
11/1
/07
1/1/
08
3/1/
08
5/1/
08
7/1/
08
9/1/
08
11/1
/08
1/1/
09
3/1/
09
5/1/
09
7/1/
09
9/1/
09
11/1
/09
1/1/
10
3/1/
10
5/1/
10
7/1/
10
9/1/
10
11/1
/10
1/1/
11
3/1/
11
5/1/
11
7/1/
11
9/1/
11
11/1
/11
1/1/
12
3/1/
12
Dai
ly D
eliv
erie
s in
NE
(M
illi
on
s o
f D
th/d
) Algonquin Tennessee
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
12
Gas Price Dynamics on DA / RT Prices E&P outlook likely to sustain downward pressure on
prices
Generators bid value AGT Citygates, TN-Z6• Existing paradigm does not capture M-T-M benefits
FCA prices do not support new gas infrastructure ◦ Attrition effects by FCA #8
◦ Deliverability constraints likely to materialize
◦ Prices will reflect seasonal basis, ULSD
Who bears the transportation freight?
Ele
ctri
city
Res
tru
ctu
rin
g R
ou
nd
tab
le –
Ju
ne
15,
2012
13
Gas Price Dynamics on ReliabilityDecline in LNG Imports to Canaport and Distrigas
• Concerns over adequate fuel to serve Mystic 8/9
Gas flow displacement effects from western and Atlantic Cdn
Coal and RFO steam unit retirements • Posturing RFO steam units in the winter appear key to
reliability
• ULSD oil tankage constraints and refill logistics
No step-up to firm transportation
How does the stakeholder process evolve?