Natural Gas OutlookNatural Gas OutlookNorth American

Energy Standards Board(NAESB)

Annual Meeting

September 17, 2003

Barbara Mariner-Volpe,Energy Information Administration (EIA)Barbara.MarinerVolpe@eia.doe.gov

www.eia.doe.gov

Natural Gas Spot Prices ContinueNatural Gas Spot Prices Continueto Be Volatileto Be Volatile(Dollars per MMBtu)(Dollars per MMBtu)

Source: Natural Gas Intelligence, Natural Gas Index

$0

$5

$10

$15

$20

1/2

/19

97

5/2

/19

97

9/2

/19

97

1/2

/19

98

5/2

/19

98

9/2

/19

98

1/2

/19

99

5/2

/19

99

9/2

/19

99

1/2

/20

00

5/2

/20

00

9/2

/20

00

1/2

/20

01

5/2

/20

01

9/2

/20

01

1/2

/20

02

5/2

/20

02

9/2

/20

02

1/2

/20

03

5/2

/20

03

9/2

/20

03

Henry Hub Daily Midpoint Price

$18.85 on 2/25/03

Short-Term Outlook for Natural GasShort-Term Outlook for Natural Gas

• SUPPLY : Cautious Optimism because of the following expectations

– Production increases in ’03 (result of strong drilling)

– Net imports (including LNG) increases in 2004

– Storage adequate at start winter 2003 (3 Tcf)

• CONSUMPTION : Little change in totals for 2003, 2004

• WELLHEAD PRICE: $5 per Mcf in 2003, decreasing $1 in 2004

• CONSUMER PRICES: higher this winter v. last;

expect relief starting in 2Q 2004

• CAVEAT: Extremes in market or weather conditions would change this outlook.

U.S. Gas Production Is Expected to U.S. Gas Production Is Expected to Increase in 2003 and Remain Flat in 2004Increase in 2003 and Remain Flat in 2004

17.8 17.717.8

18.1

18.818.6

18.8 18.819.0

18.8

19.2

19.7

19.1

19.5 19.4

15

16

17

18

19

20

1990 1992 1994 1996 1998 2000 2002 2004

TC

F

Sources: EIA, Short-Term Energy Outlook, September 2003

Notes: Includes LNG. Net Imports equal imports minus exports.

Sources: EIA, Short-Term Energy Outlook, September 2003

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

BC

F

Imports Exports

Both Imports and Exports Are Both Imports and Exports Are Expected To Increase Through 2004Expected To Increase Through 2004

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1997 1998 1999 2000 2001 2002 2003 2004

Bill

ion

Cu

bic

Fee

t

Pipeline LNG

Projections

Sources: History: EIA; Projections: Short-Term Energy Outlook September, 2003.

LNG Imports:2002: 229 Bcf2003: 488 Bcf2004: 584 Bcf

Natural Gas Import SourcesNatural Gas Import Sources

Source: EIA, Short-Term Energy Outlook, September 2003

0

500

1000

1500

2000

2500

3000

3500

Jan

-01

Mar

-01

May

-01

Jul-

01

Sep

-01

No

v-0

1

Jan

-02

Mar

-02

May

-02

Jul-

02

Sep

-02

No

v-0

2

Jan

-03

Mar

-03

May

-03

Jul-

03

Sep

-03

No

v-0

3

Jan

-04

Mar

-04

May

-04

Jul-

04

Sep

-04

No

v-0

4

Monthly

Bil

lio

n C

ub

ic F

eet

5-Yr Min/MaxRange

End-of-Month-Stocks Projection

Working Gas in Underground Storage Working Gas in Underground Storage Compared with 5-Year RangeCompared with 5-Year Range

0

500

1,000

1,500

2,000

2,500

3,000

3,500

3/31/2003 4/30/2003 5/30/2003 6/29/2003 7/29/2003 8/28/2003 9/27/2003 10/27/2003

Billio

n C

ub

ic F

eet

Gas Storage Projections For Winter 2003, Compared to Historical Levels

Note: The blue shaded area represents the range of working gas in storage levels during the years 1998 to 2002. Source: EIA Weekly Natural Gas Storage Survey and EIA estimates. Max refill rate is the max monthly rate observed between 1998 and 2002. EIA estimate is based on EIA’s STEO forecast September, 2003.

Projections

EIA Estimates Working Gas Levels At 3 Tcf by End of October

2,486 Bcf in Underground Storage as of Sept. 5, 2003

~ 3,056 Bcf Assuming 5-Yr. Maximum Refill Rate

~ 2, 917 BcfAssuming 5-Yr. Avg. Refill Rate

Natural Gas Spot Prices Are Expected to Natural Gas Spot Prices Are Expected to Average About $4.50 in 2004Average About $4.50 in 2004

(Base Case and 95% Confidence Interval*)(Base Case and 95% Confidence Interval*)

*The confidence intervals show +/- 2 standard errors based on the properties of the model. The ranges do not include the effects of major supply disruptions.Sources: History: EIA; Projections: Short-Term Energy Outlook, September 2003.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0J

an

-01

Ma

r-0

1

Ma

y-0

1

Ju

l-0

1

Se

p-0

1

No

v-0

1

Ja

n-0

2

Ma

r-0

2

Ma

y-0

2

Ju

l-0

2

Se

p-0

2

No

v-0

2

Ja

n-0

3

Ma

r-0

3

Ma

y-0

3

Ju

l-0

3

Se

p-0

3

No

v-0

3

Ja

n-0

4

Ma

r-0

4

Ma

y-0

4

Ju

l-0

4

Se

p-0

4

No

v-0

4

Monthly

Do

lla

rs p

er

Th

ou

sa

nd

Cu

bic

Fe

et

ProjectionsAverage Spot Price:

about $5.57 /Mcf in 2003

about $4.52 /Mcf in 2004Natural Gas Spot Prices Are Expected to Natural Gas Spot Prices Are Expected to Average About $4.50 in 2004Average About $4.50 in 2004

(Base Case and 95% Confidence Interval*)(Base Case and 95% Confidence Interval*)

Total Natural Gas Demand Is Expected to Total Natural Gas Demand Is Expected to Remain Flat For the Next Two YearsRemain Flat For the Next Two Years

Sources: History: EIA; Projections: Short-Term Energy Outlook, September 2003.

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Per

cen

t C

han

ge

0

10

20

30

40

50

60

70

80

90

Bil

lio

n C

ub

ic F

eet

per

Day

Percent Change (Left Axis) Total (Right Axis)

History Projection

Households Are Expected to Pay More For Households Are Expected to Pay More For Gas Service This WinterGas Service This Winter

Winter 1999-00 2000-01 2001-02 2002-03 2003-04

Midwest Actual Actual Actual Actual Forecast

Consumption (Mcf) 81.7 99.1 81.3 95.2 91.8

Avg. Price ($/Mcf) 6.69 9.53 7.38 8.37 9.41

Expenditures ($) 546 944 600 797 864

Notes: Consumption based on typical per household use for the Midwest, and New England & New York.Sources: History: EIA; Projections: Short-Term Energy Outlook September, 2003.

Wellhead prices remain high and vulnerable to spikes resulting from developments like severe weather or disruptions in supplies.

Storage is expected to be near the 5-year average level by Nov 1.

LNG holds significant potential as a supply source.

Consumers will pay more for gas this winter v. last. Rate reductions expected in 2004.

A substantial boost in supplies from production or imports will take time and may require additional infrastructure.

SummarySummary