2014 F-22 Raptor Fighter Jet

Transcription

1 NOVEMBER 10th, 2014

2 1903-Wright Brothers 1917-First Metal Plane 2014 F-22 Raptor Fighter Jet st Jet Engine st plane nearly undetectable by radar

3 Marcellus Shale/Utica NG production from Pennsylvania to West Virginia exceeded 16 billion cubic feet per day in September 2014 Accounts for approximately 40% of US shale-gas production EIA projects gas is on track to supply entire winter for PA and six other states in next several years Rising production has outpaced growth resulting in many expansion projects If Marcellus were a country it would be ranked in the top 5 in the world in gas and oil production Maykuth, Andrew. Marcellus gas production up tenfold in five years. 7 Aug Online. Internet:

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5 August outlook raises the projection for total marketed production in 2014 by 800 million cubic feet a day to 73.9 EIA production survey indicates strong growth in lower 48 states with continued gains Marcellus Shale/Utica has contributed to lower natural gas prices in the northeast New infrastructure is proposed to take gas to markets in all directions "U.S. Oil & Gas Production Still Rising. The American Oil & Gas Reporter. Sept. 2014: 44-48

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7 This map shows NG flows and production changes along pipeline corridors from 2012 to Green arrows represent an increase from 2012, orange arrows represent a decline from Circles represent increases at shale gas production areas. Gas located in the Northeast corridor is often a cheaper source of NG for major Northeast demand centers.

8 Huge supplies of newly drilled gas are being made available due to technological advances The impact of all this on the price of natural gas is somewhat predictable More supply and relatively flat demand have meant lower prices For historical perspective NYMEX Henry Hub ping-ponged between $2.00 and $6.00 per MMBTU in the shale era ( ) dlord. "What drives natural gas prices." 20 Sept Online. Internet:

9 Example: Dominion South hub is a key transporter in southwest Pennsylvania Average of 1.65BCF/day currently, up from 290,000 in 2009 The switch reflects the boom in shale gas production, and growing recognition that pricing all U.S. gas at a single hub no longer makes sense The industry is struggling to build new pipelines and infrastructure quick enough to even out price differences in regions like the Northeast DiSavino, Scott. "Henry Hub, king of U.S. natural gas trade, losing crown to Marcellus." 25 Sept Online. Internet:

10 MORE PIPES COULD NARROW SPREAD Gas prices in the Northeast are lower than gas from the Gulf Coast, this crossover point has occurred since the fall of 2011, in August of 2013 it really hit home with DTI Basis going negative Next day gas at Dominion South went from 21 cents per MMBtu over Henry Hub during summer of 2009 to $1.90 under Henry Hub in the summer of 2014 Next day Dominion South, hit a 13 year low of $1.72 per MMBtu to average $2.66 this summer (2014), the lowest since 2001 Current winter 2014/2015 basis trading at summer 2015 prices This has not been the historical norm DiSavino, Scott. "Henry Hub, king of U.S. natural gas trade, losing crown to Marcellus." 25 Sept Online. Internet:

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12 Inside FERC, Gas Market Report - Selected Pipelines, History of Index Prices MMBtu (FOM spot prices, delivered to pipeline, dry) Columbia Gas Transmission Corp. (Appalachia) Index/Basis Differential (BD) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg $ 7.42 $ 8.29 $ 9.38 $ $ $ $ $ 9.63 $ 8.59 $ 7.68 $ 6.74 $ 7.13 $ $ 6.44 $ 4.85 $ 4.32 $ 3.87 $ 3.58 $ 3.66 $ 4.10 $ 3.48 $ 2.91 $ 3.77 $ 4.47 $ 4.66 $ $ 6.05 $ 5.53 $ 5.00 $ 3.99 $ 4.40 $ 4.31 $ 4.85 $ 4.91 $ 3.70 $ 3.91 $ 3.36 $ 4.41 $ $ 4.38 $ 4.47 $ 3.90 $ 4.36 $ 4.50 $ 4.46 $ 4.48 $ 4.45 $ 3.90 $ 3.77 $ 3.56 $ 3.41 $ $ 3.11 $ 2.66 $ 2.45 $ 2.19 $ 2.07 $ 2.43 $ 2.75 $ 3.01 $ 2.58 $ 3.01 $ 3.50 $ 3.76 $ BD $ $ (0.018) $ $ (0.001) $ $ $ (0.024) $ 0 $ (0.054) $ (0.013) $ $ $ 3.33 $ 3.23 $ 3.47 $ 4.03 $ 4.19 $ 4.19 $ 3.67 $ 3.44 $ 3.52 $ 3.45 $ 3.51 $ 3.75 $ BD $ (0.024) $ $ $ $ $ $ (0.037) $ (0.019) $ (0.047) $ $ $ (0.068) 2014 $ 4.23 $ 5.61 $ 4.92 $ 4.49 $ 4.72 $ 4.58 $ 4.33 $ 3.76 $ 3.94 $ BD $ (0.177) $ $ $ (0.094) $ (0.075) $ (0.039) $ (0.070) $ (0.048) $ (0.017) Dominion Transmission Inc. (Appalachia) Index/Basis Differential (BD) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg $ 7.73 $ 8.53 $ 9.45 $ $ $ $ $ 9.87 $ 8.67 $ 7.60 $ 6.83 $ 7.45 $ $ 6.61 $ 5.03 $ 4.44 $ 3.94 $ 3.65 $ 3.78 $ 4.18 $ 3.57 $ 2.93 $ 3.78 $ 4.57 $ 4.75 $ $ 6.21 $ 5.57 $ 5.10 $ 4.03 $ 4.46 $ 4.35 $ 4.87 $ 4.94 $ 3.70 $ 3.91 $ 3.42 $ 4.48 $ $ 4.57 $ 4.52 $ 3.93 $ 4.46 $ 4.56 $ 4.48 $ 4.49 $ 4.49 $ 3.90 $ 3.84 $ 3.61 $ 3.53 $ $ 3.16 $ 2.64 $ 2.47 $ 2.20 $ 2.07 $ 2.44 $ 2.74 $ 2.99 $ 2.52 $ 2.96 $ 3.47 $ 3.77 $ BD $ $ (0.038) $ $ $ $ $ (0.034) $ (0.020) $ (0.114) $ (0.063) $ (0.011) $ $ 3.22 $ 3.13 $ $ 3.41 $ 4.03 $ 4.10 $ 3.43 $ 2.95 $ 3.17 $ 3.25 $ 3.24 $ 3.31 $ BD $ (0.134) $ (0.096) $ 0 $ (0.566) $ (0.122) $ (0.048) $ (0.277) $ (0.509) $ (0.397) $ (0.248) $ (0.256) $ (0.508) 2014 $ 3.46 $ 5.36 $ 4.57 $ 4.20 $ 4.01 $ 3.31 $ 2.88 $ 2.40 $ 2.05 $ BD $ (0.947) $ (0.197) $ (0.285) $ (0.384) $ (0.785) $ (1.309) $ (1.520) $ (1.408) $ (1.907) Texas Eastern M2 Receipts / Basis Differential (BD) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg $2.94 $3.48 $ BD $(0.083) $ $ $3.37 $ 3.24 $ 3.44 $ 3.97 $ 4.10 $ 4.05 $ 3.50 $ 3.13 $ 3.22 $ 3.27 $ 3.22 $ 3.43 $ BD $ $ $ $ (0.006) $ (0.052) $ (0.098) $(0.207) $ (0.329) $(0.347) $(0.228) $ (0.276) $(0.388) 2014 $ 3.89 $ 5.56 $ 4.71 $ 4.20 $ 3.87 $ 3.17 $ 2.90 $ 2.42 $ 2.03 $ BD $ (0.517) $ $ (0.145) $ (0.384) $ (0.925) $ (1.449) $(1.500) $ (1.388) $(1.927)

13 ACTUAL BASIS CONTRACT PRICES Effective for Regional Hospitals in Pennsylvania served via National Fuel Gas Distribution Multiple Accounts seasonal Load Factor ~ 3:1 TERM November 2008 April 2009 May 2009 June 2009 July 2009 June 2010 July 2010 October 2010 November 2010 March 2011 April 2011 June 2011 July 2011 June 2012 July 2012 June 2013 July 2013 June 2014 July 2014 June 2017 BASIS $0.816 $0.425 $0.775 $0.290 $0.690 $0.290 $0.456 $0.180 ($0.300) ($1.043)

14 DELIVERED END USER PRICE TO National Fuel Gas Distribution Load Factor (LF) 12 Month Forward NYMEX Daily settlement on 15-Oct-2014 = Current DTI 100% LF =($1.389) NFG Supply Corp. (NFGS) = $2.401 NFGS Fuel & Shrink 1.40% = $0.034 NFGS EFT Unit Transport Rate = NFG Distribution Corp. PA = $2.582

15 DELIVERED END USER PRICE TO National Fuel Gas Distribution Load Factor (LF) 12 Month Forward NYMEX Daily settlement on 15-Oct-2014 = $3.810 Current DTI 50% LF =($1.382) NFG Supply Corp. (NFGS) = $2.428 NFGS Fuel & Shrink 1.40% = $0.034 NFGS EFT Unit Transport Rate = END USER NFG Distribution Corp. PA = $2.609

16 A decade ago The Gulf of Mexico produced about 20 percent of all U.S. natural gas Appalachia accounted for.07 percent of U.S. production Much of which flowed through Henry Hub Five years ago Marcellus/Utica barely produced 2 billion cubic of gas per day U.S. shale gas and a combination of fracing and horizontal drilling technologies has brought massive volumes of gas inexpensively out of once ignored fields Today Marcellus/Utica accounts for approximately 17.1 BCF/day, which equates to about 19 percent of the nations supply The Gulf of Mexico now only produces 4 percent of the nations total The Marcellus/Utica production increased 845percent in 5 years, this is totally unprecedented in any basin in the history of the world DiSavino, Scott. "Henry Hub, king of U.S. natural gas trade, losing crown to Marcellus." 25 Sept Online. Internet:

17 Between now and 2016, more than 20 Bcf/d of new capacity is expected in the Appalachian basin This could potentially double the production flowing out the Northeast shale's

18 New Pipelines Since 2010 As of September 2014 Cost Miles Additional Capacity $3.158 Billion Applied for $1.666 Billion 390 miles 6,584 MMbtu/d 140 miles 2,100 MMbtu/d Filed $908 Million 1,586 miles 8,887 MMbtu/d Announced $1.921 Billion Totals $7.653 Billion 155 miles 3,222 MMbtu/d 2271 miles 20,793 MMBtu/d Completion Presently completed

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20 Storage Because of the uneven demand between winter and summer as mentioned previously Gas goes into storage Then sells at advantageous pricing Distribution Natural gas has to be moved from where it comes out of the ground to where it is going Requires pipes There are over 310,000 miles of pipelines Building and maintaining underground pipelines is expensive and companies that own them charge producers to use them dlord. "What drives natural gas prices." 20 Sept Online. Internet:

21 Production Steeply Inclining Marcellus/Utica production 2216 drilled wells waiting to turn-on, that's the equivalent of about 6.5Bcf/day waiting to go to Appalachian markets Timing Demand is highest in the winter It typically exceeds supply during the heating months in the northeast and Midwest Summer months Demand is lower than supply But changing due to power load demands dlord. "What drives natural gas prices." 20 Sept Online. Internet:

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24 Natural Gas Price. 4 Sept Online. Internet: Sept

25 Texas and Pennsylvania are over a thousand miles apart Both are home to two of the largest natural gas fields Barnett Shale and Marcellus/Utica Shale Gas Extraction for both is the same However both have geologically and economical differences Locations and sizes are different Barnett Shale covers 34 million acres Marcellus Shale is beneath almost 118 million acres 4 times the size of Barnett Shale Include the Utica expected range, and Appalachia it is 8-10 times the size of the Barnett This does not include other known shale plays above/below Marcellus/Utica that are just now being tested and could double or triple that size The Marcellus/Utica could potentially be times the size of the Barnett PPI Energy and chemical team. "The effects of shale gas production on natural gas prices. U.S. Bureau of Labor Statistics May 2013 Online. Internet:

26 PPI Energy and chemical team. "The effects of shale gas production on natural gas prices. U.S. Bureau of Labor Statistics May 2013 Online. Internet:

27 The Producer Price Index (PPI) for natural gas, measured on an annual average basis, fell 56.8 percent between 2007 and 2012 because of shale gas production Improved technological advances contributed to this increase by increasing gas production by 25 percent Shale gas has only been a key player in domestic gas production for a few years It has only been tracked since 2007 Energy Information Administration (EIA) finds it difficult to precisely quantify the effects that shale production has had on natural gas prices, but Appalachian basis has been very negatively affected PPI Energy and chemical team. "The effects of shale gas production on natural gas prices. U.S. Bureau of Labor Statistics May 2013 Online. Internet:

28 Data indicates that increasingly higher gas prices in the first half of 2008 brought additional shale gas to the market When gas prices peaked in 2008 drilling activity hit an all time high Oversupply eventually took place EIA explains the increased natural gas supply tends to dampen prices. In turn, lower prices can erode incentive for drilling, which eventually results in decreased production. This has NOT happened in Appalachia PPI Energy and chemical team. "The effects of shale gas production on natural gas prices. U.S. Bureau of Labor Statistics May 2013 Online. Internet:

29 In September 2008, gas rig count in Appalachia peaked at 115 rigs; by September 2014, the rig count fell to 55 rigs The New York Mercantile (NYMEX) natural gas futures closing price hit $8.39 on August 27, 2008 Then plummeted to $2.07 by May 2012 A decrease of 75.3 percent Current prices are well below their 2008 peak Producers have cut back on new drilling production to avoid over production Despite a drilling slowdown overall production has continued to rise due to technological advances PPI Energy and chemical team. "The effects of shale gas production on natural gas prices. U.S. Bureau of Labor Statistics May 2013 Online. Internet:

30 PPI Energy and chemical team. "The effects of shale gas production on natural gas prices. U.S. Bureau of Labor Statistics May 2013 Online. Internet:

31 Possible Saving Grace Positive Note In terms of Demand, domestic consumption has increased 9.4 percent between 2008 and 2012 due to the increased demand from the electric power sector Electric power rose 37 percent between Majority of electric power is generated from coal and natural gas With the price of natural gas falling to that of coal, the electric power generation increased natural gas consumption and reduced coal consumption PPI Energy and chemical team. "The effects of shale gas production on natural gas prices. U.S. Bureau of Labor Statistics May 2013 Online. Internet:

32 Possible Saving Grace Projected low natural gas prices make it very attractive fuel for generating capacity In some areas, natural gas accounts for 35 percent of total electricity generation, while coal accounts for 32 percent PJM estimates that an additional 6-7 Bcf of gas will be needed by 2020 to replace retired coal facilities PPI Energy and chemical team. "The effects of shale gas production on natural gas prices. U.S. Bureau of Labor Statistics May 2013 Online. Internet:

33 Possible Saving Grace In the AEO2014 Reference case, the United States becomes a net exporter of LNG in 2016, and becomes an overall net exporter of natural gas in 2018, 2 years earlier than is AEO2013 U.S. exports of LNG from new liquefaction capacity are expected to surpass 2 Tcf by 2020 and increase to 3.5 Tcf in 2029 Net pipeline imports from Canada fall steadily until 2033 and increase through 2040 PPI Energy and chemical team. "The effects of shale gas production on natural gas prices. U.S. Bureau of Labor Statistics May 2013 Online. Internet:

34 AEO2014 Early Release Overview. Online Internet:

35 Total electricity consumption in the AEO2014 reference case, including purchase from electric power producers and on-site generation Grows from 3,826 billion kwh in 2012 to 4,954 billion kwh in 2040 An average annual rate of 0.9 percent or 23% increase KWh = Mcf/gas AEO2014 Early Release Overview. Online Internet:

36 The LDC side may be one of the few safe havens conventional producers have Typically the LDC s have accepted local supplies as the backbone of their system supply LDC s have provided a price premium history, this may not totally be true now, but still holds better value LDC s do accept Shale volumes in their system to some degree but conventional producers still have a very positive affect on the system supply Producers typically do not have to pay for Firm Transportation on the LDC s On the Interstate side conventional producers are competing with shale producers for markets, transportation space and pricing AEO2014 Early Release Overview. Online Internet:

37 AEO2014 early release report Stronger near-term price growth will be followed by a lagged increase in supply from producers eventually causing lower settle prices in 2020 After 2020, increases in natural gas spot prices will be determined by continued but slower growth in U.S. demand and net exports Regional spot price projections throughout the U.S. follow the same general pattern at the Henry Hub spot price The average lower 48 spot price will increase at a slower rate than the Henry Hub spot price due to regional production growth outside areas serving the Henry Hub AEO2014 Early Release Overview. Online Internet:

38 $8.00 $6.00 $4.00 $ $ Pricing over the next 26 years U.S. Energy Information Administration/Annual Energy Outlook 2014 Early Release Overview AEO2014 Early Release Overview. Online Internet:

39 *12 trillion cubic feet = 12,100 BCF Natural gas consumption. Online Internet:

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41 Producers need to work together Maximize existing assets Pool gas, pool acreage (deep & shallow) and purchase firm transportation on interstate pipeline as a block Where is traditional Upper Devonian gas needed in the future? CNG for fuel Diversity within Energy business Secure own burner tips