natural gas markets: recent changes and key drivers · 2012-09-13 · 1990 1995 2000 2005 2010 2015...

www.eia.gov U.S. Energy Information Administration Independent Statistics & Analysis

Natural Gas Markets: Recent Changes and Key Drivers

for LDC Gas Forum September 11, 2012| Chicago, Il by Howard Gruenspecht, Deputy Administrator

U.S. Natural Gas Injection Season 1999-2012 Billion Cubic Feet

Source: U.S. Energy Information Administration Short Term Energy Outlook

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000 19

99

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

start of injection season

July-October injection

net withdrawals

end of injection season

April-June injection

Note: Net withdrawals occur during the heating season following the prior injection season (for example the 2012 net withdrawals are the 2011 end of the season minus the 2012 start of season

2 Howard Gruenspecht, LDC Forum September 11, 2012

Natural Gas use for electric power Billion cubic feet per day

Source: U.S. Energy Information Administration based on Bentek Energy, LLC

0

5

10

15

20

25

30

35

40

1/1

1/9

1/17

1/

25

2/2

2/10

2/

18

2/26

3/

6 3/

14

3/22

3/

30

4/7

4/15

4/

23

5/1

5/9

5/17

5/

25

6/2

6/10

6/

18

6/26

7/

4 7/

12

7/20

7/

28

8/5

8/13

8/

21

8/29

9/

6 9/

14

9/22

9/

30

10/8

10

/16

10/2

4 11

/1

11/9

11

/17

11/2

5 12

/3

12/1

1 12

/19

12/2

7

2012 Power

2005-2011 Power Burn Range

17 of top 25 highest Power Burn days since 2005 occurred June 28 - August 9, 2012


U.S. Electricity Output from Natural Gas and Coal

0

20

40

60

80

100

120

140

160

180

200 Ja

n-01

Au

g-01

M

ar-0

2 O

ct-0

2 M

ay-0

3 D

ec-0

3 Ju

l-04

Feb-

05

Sep-

05

Apr-

06

Nov

-06

Jun-

07

Jan-

08

Aug-

08

Mar

-09

Oct

-09

May

-10

Dec

-10

Jul-1

1 Fe

b-12

Coal Natural Gas

Gigawatthours

Source: U.S. Energy Information Administration Electric Power Monthly


Electric Power Sector Natural Gas Consumption: Sept thru March

Billion cubic feet


0

100

200

300

400

500

600

700

800

900

Sept Oct Nov Dec Jan Feb March

2009/10 2010/11 2011/12 2012/13 (STEO)


Henry Hub Natural Gas Price

Dollars per million btu

0

1

2

3

4

5

6

7

8

9

Jan 2011 Jul 2011 Jan 2012 Jul 2012 Jan 2013 Jul 2013

Historical spot price STEO forecast price NYMEX futures price 95% NYMEX futures upper confidence interval 95% NYMEX futures lower confidence interval

Note: Confidence interval derived from options market information for the 5 trading days ending August 2, 2012. Intervals not calculated for months with sparse trading in near-the-money options contracts.



Probability of the December 2012 Henry Hub contract expiring above price levels

7

Source: U.S. Energy Information Administration, based on the CME Group

0%

20%

40%

60%

80%

100% 1.

5 1.

75 2

2.25

2.

5 2.

75 3

3.25

3.

5 3.

75 4

4.25

4.

5 4.

75 5

5.25

5.

5 5.

75 6

6.25

6.

5

1-Aug-2012 6-Sep-2012

Average of the 5 trading days ending on

Price (dollars per MMBtu)

Howard Gruenspecht, LDC Forum September 11, 2012

September Probability Distributions of December Future Contracts With Actual Contract Prices Traded in September

Source: U.S. Energy Information Administration based on Bloomberg, LLC

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0.00 5.00 10.00 15.00 20.00 25.00 30.00 Prob

abili

ty o

f Con

trac

t Set

tlem

ents

at

Giv

en P

rice

(%)

Price Range for December Futures at Henry Hub ($/MMBtu)

Dec-12 Dec-02 Dec-04 Dec-05

Price 9/2012 Price 9/2002 Price 9/2004 Price 9/2005


Primary energy use by fuel, 1980-2035

9

0

20

40

60

80

100

120

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

5%

U.S. energy consumption quadrillion Btu

Source: EIA, Annual Energy Outlook 2012

Projections History 2010

Other Renewables

Liquid biofuels

Petroleum and other liquids

Coal

Nuclear

Natural gas

21%

37%

9%

25%

2%

1%

20%

32%

9%

26%

6% 4%

Share of total U.S. energy use


Wind, solar, geothermal and biomass

5%

Technically recoverable dry gas resources

Howard Gruenspecht, LDC Forum September 11, 2012 10

U.S. dry gas resources trillion cubic feet

*Alaska resource estimates prior to AEO2009 reflect resources from the North Slope that were not included in previously published documentation.


0

500

1,000

1,500

2,000

2,500

3,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2,203

273

482

1,449

AEO Edition

Unproved Shale Gas Unproved Other Gas (including Alaska* and offshore) Proved Reserves (all types and locations) Cumulative Production Since 2000

Domestic natural gas production grows faster than consumption

-5

0

5

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

U.S. dry gas trillion cubic feet per year



Consumption

Domestic supply

Net imports


273

482

1,460

Global spot natural gas and crude oil prices vary widely

Source: EIA based on Bloomberg as of 6/25/2012

Global spot natural gas and crude oil prices U.S. dollars per million British thermal unit


0

5

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

2%

Shale gas offsets declines in other U.S. natural gas production sources U.S. dry gas production trillion cubic feet per year


Non-associated offshore

Projections History

Associated with oil Coalbed methane

Non-associated onshore

Shale gas

2010

10%

6%

9%

7%

21%

23%

9%

9%

6%

49%

Alaska 1%

Tight gas 26%

22%


Electric power and industrial use drives much of the future domestic natural gas demand growth in the Reference case

0

5

10

15

20

25

30

2005 2010 2020 2030 2035

U.S. dry gas consumption trillion cubic feet per year

*Includes combined heat-and-power and lease and plant fuel. **Includes pipeline fuel. Source: EIA, Annual Energy Outlook 2012

Projections History

Industrial*

Electric power

Commercial

Residential

Transportation**

34%

17%

14%

32%

3%

31%

21%

13%

33%

3%


U.S. production of shale gas in four cases, 2000-2035

15

dry natural gas production trillion cubic feet


0

4

8

12

16

20

24

2000 2005 2010 2015 2020 2025 2030 2035


High EUR

Reference

Low EUR

High TRR

2010 History Projections

Technically Recoverable Resource (TRR) Estimated Ultimate Recovery (EUR)

16

lower-48 average natural gas wellhead price 2010 dollars per thousand cubic feet


0

2

4

6

8

10

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Natural gas price projections vary based on resource base assumptions

Low EUR

Reference

High EUR


High TRR


Operating costs: existing plants with and without a value on carbon

• The “crossover point” for least-cost dispatch of coal and natural gas capacity depends on both fuel prices and the carbon value. At lower natural gas prices, the “crossover” occurs at a lower carbon value.

• Environmental operating costs and retrofit costs for pollution controls at existing coal-fired plants can “raise the bar” for their continued operation.

– For retrofit decisions, the unit’s perceived “useful life,” which plays a critical role, can be affected by views regarding future climate policies

0

20

40

60

80

100

120

140

160

0 10 20 30 40 50 60 70 80 90 100 110 120

Carbon Dioxide Value (dollars per ton CO2)

Coal at $3

Natural Gas CC at $7



2010 dollars per megawatthour

Fuel Cost for Existing Coal and Combined Cycle Natural Gas Units with a Value Placed on Carbon Dioxide Emissions

Coal at $2


While electricity consumption grows by 21% over the projection, the annual rate of growth slows percent growth (3-year rolling average)

0

2

4

6

8

10

12

14

1950 1960 1970 1980 1990 2000 2010 2020 2030

Projections

History Period Annual Growth 1950s 9.8 1960s 7.3 1970s 4.7 1980s 2.9 1990s 2.4 2000-2010 1.0 2010-2035 0.8

2010



0

1

2

3

4

5

6

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Projections History

18%

15%

Electricity mix gradually shifts to lower-carbon options, led by growth in renewables and natural gas electricity net generation trillion kilowatthours per year


2010

24%

20%

45%

10%

1%

38%

28%

1%

Nuclear

Oil and other liquids

Natural gas

Coal

Renewables


The ratio of oil to natural gas prices remains high through 2035 in EIA’s AEO2012 Reference case projection

0

1

2

3

4

5

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

ratio of oil price to natural gas price


0

5

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Crude oil (foreign low sulfur light) U.S. Natural gas at Henry hub

History Projections 2010

Oil and natural gas prices 2010 dollars per million Btu

History Projections 2010

20


For more information

Howard Gruenspecht August 28, 2012 21

U.S. Energy Information Administration home page | www.eia.gov

Today In Energy | www.eia.gov/todayinenergy

Short-Term Energy Outlook | www.eia.gov/steo

Annual Energy Outlook | www.eia.gov/aeo

Monthly Energy Review | www.eia.gov/mer

EIA Information Center [email protected] Our average response time is within three business days.

(202) 586-8800 24-hour automated information line about EIA and frequently asked questions.

http://www.eia.gov/

http://www.eia.gov/ieo

http://www.eia.gov/steo

http://www.eia.gov/aeo

http://www.eia.gov/mer

mailto:[email protected]

Howard Gruenspecht August 28, 2012

U.S. Energy Breakdown by Fuel and Sector

22

Source: EIA Annual Energy Review 2010

Underground sources of natural gas

Source: modified from U.S. Geological Survey Fact Sheet 0113-01.

23 Howard Gruenspecht Washington, DC - May 16, 2011

http://pubs.usgs.gov/fs/fs-0113-01/fs-0113-01.pdf

http://www.eia.doe.gov/todayinenergy/detail.cfm?id=110

Working Underground Natural Gas Storage Capacity Additions, 2008- 2011

0 20 40 60 80

100 120 140 160 180 200

Demonstrated Peak Working Gas Capacity

Working Gas Design Capacity

2008 2009 2010 2011

Billion cubic feet

Source: U.S. Energy Information Administration Peak Underground Working Natural Gas Storage Capacity Report


natural gas markets: recent changes and key drivers · 2012-09-13 · 1990 1995 2000 2005 2010 2015...

Documents