Differences in Differentials Evaluating Natural Gas …...9/22/2014 1 Differences in Differentials...

9/22/2014

1

Differences in DifferentialsEvaluating Natural Gas and Crude Oil Prices

in Wyoming

Wyoming Gas FairSeptember 18, 2014Jackson, WY

Brian Jeffries(307) 237‐5009

[email protected]

0.00

1.00

MM

Btu

Price difference between natural gas in Wyomingand natural gas in Louisiana

(5 00)

(4.00)

(3.00)

(2.00)

(1.00)

min

g pr

ice

diffe

renc

e in

$ p

er

(7.00)

(6.00)

(5.00)

Jan-

93

Jan-

94

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

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Jan-

14

Jan-

15

Wyo

m

9/22/2014

2

Bison 407

WBI 111

WBI 140

Principal Interstate Natural Gas Pipeline Capacity Serving Wyoming

KMIGT 130

KMIGT 123

KMIGT 31

KMIGT 77

CIG 609

CIG 50

CIG 103

WIC 1479

WIC 50

Powder RiverBasin

Ch

Rockies Exp. 1800

Trailblazer 846

Rockies Exp. 2000

Cheyenne Plains 137

Northwest PL South 467

Ruby 1460

Kern 1998

Questar 300

XCEL 225

CIG 750 CIG 523

CheyenneHub

Southern Star 198

WIC 808Opal Hub

10,000,000

12,000,000

2013 Gas Fair Presentation

4,000,000

6,000,000

8,000,000

MMBtu pe

r day

Export Need

Forecasted future differentials based on long

0

2,000,000

Sep‐08

Mar‐09

Sep‐09

Mar‐10

Sep‐10

Mar‐11

Sep‐11

Mar‐12

Sep‐12

Mar‐13

Sep‐13

Mar‐14

Sep‐14

Mar‐15

Sep‐15

Mar‐16

Sep‐16

Mar‐17

Sep‐17

Mar‐18

Sep‐18

Increasing marginal transportation cost

differentials based on long run marginal cost to transport gas out of the Rockies $0.30 ‐

$0.60

9/22/2014

3

10,000,000

12,000,000

2013 Gas Fair Presentation

4,000,000

6,000,000

8,000,000

MMBtu pe

r day

Export Need

Forecasted future differentials based on long

How about doing the same thing for crude

oil for 2014 ?

0

2,000,000

Sep‐08

Mar‐09

Sep‐09

Mar‐10

Sep‐10

Mar‐11

Sep‐11

Mar‐12

Sep‐12

Mar‐13

Sep‐13

Mar‐14

Sep‐14

Mar‐15

Sep‐15

Mar‐16

Sep‐16

Mar‐17

Sep‐17

Mar‐18

Sep‐18

Increasing marginal transportation cost

differentials based on long run marginal cost to transport gas out of the Rockies $0.30 ‐

$0.60

100

105

110

Perception of Crude Differential depends on what proxy price used

75

80

85

90

95

100

$ pe

r ba

rrel

60

65

70

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

9/22/2014

4

100

105

110


75

80

85

90

95

100

$ pe

r ba

rrel

60

65

70

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

100

105

110


75

80

85

90

95

100

$ pe

r ba

rrel

60

65

70

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

9/22/2014

5

100

105

110


75

80

85

90

95

100

$ pe

r ba

rrel

60

65

70

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

100

105

110


75

80

85

90

95

100

$ pe

r ba

rrel

60

65

70

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

9/22/2014

6

100

105

110


75

80

85

90

95

100

$ pe

r ba

rrel

60

65

70

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

100

105

110


75

80

85

90

95

100

$ pe

r ba

rrel

60

65

70

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

9/22/2014

7

100

105

110


75

80

85

90

95

100

$ pe

r ba

rrel

60

65

70

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

16

18

20Spread between highest and lowest

6

8

10

12

14

$ pe

r Ba

rrel

0

2

4

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

9/22/2014

8

100

105

110


EIA First Purchaser Price

75

80

85

90

95

100

$ pe

r ba

rrel

60

65

70

Jan‐12

Apr‐12

Jul‐1

2

Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Oct‐13

Jan‐14

Apr‐14

120

130

Cutting through the clutter

Louisiana Light Sweet

80

90

100

110

$ pe

r ba

rrel

WTI

Wyoming

60

70

Jan‐12

Mar‐12

May‐12

Jul‐1

2

Sep‐12

Nov‐12

Jan‐13

Mar‐13

May‐13

Jul‐1

3

Sep‐13

Nov‐13

Jan‐14

Mar‐14

May‐14

Jul‐1

4

Sweet

Source: EIA First Purchaser Data

9/22/2014

9

Attribute Natural Gas Crude Oil

Price Transparency Hub prices in WY d l h

WTI and a few h l

Some differences between gas and oil

and elsewhere other places

Capacity data 4X per day nope

Shipper data 4X per year nope

Rates data All Some

Rates large factor in Yes NoRates large factor in delivered cost

Yes No

Choice of pipe or ? No Yes (rail)

FERC response Strong Not so strong

Hiland

Building a model for crude in Wyoming

PRB

Platte

Bridger and Belle Fourche

Platte

Guernseyrnsey

CheyenneRefining

Denver Refinin

g

PXPrnsey

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10

HilandBig Horn

Express


PRB

Casper/Rawlins

Platte


Basin

Platte

Guernseyrnsey

Casper

CheyenneRefining

Denver Refinin

g

RefiningPXP

rnsey

HilandBig Horn

Express


PRB

Casper/Rawlins

Platte


Basin

Platte

Guernseyrnsey

Casper

DJ

CheyenneRefining

Denver Refinin

g

RefiningPXP

rnsey

9/22/2014

11

HilandBig Horn

Express


PRB

Casper/Rawlins

Platte


Basin

Platte

Guernseyrnsey

Casper

DJ

CheyenneRefining

Denver Refinin

g

RefiningPXP

rnsey

HilandBig Horn

Express


PRB

Casper/Rawlins

Platte


Basin

Platte

Guernseyrnsey

Casper

DJ

CheyenneRefining

Denver Refinin

g

RefiningPXP

rnsey

Solving this model is difficult and wouldn’t fully answer the question of the differential

9/22/2014

12

Pipeline Rate Components

Range of rates

Comment

Approximate costs to your final destination

Getting off lease $1 ‐ $3 Gathering/trucking

Pipeline tariff Guernsey to Cushing

$4 ‐ $6 Age and distance affect rates

Range for $5 ‐ $9 Using $7 in examplesRange for Pipeline

$5 $9 Using $7 in examplesto follow

Rail Rate Components

Range of rates

Comment


Approximate costs to your final destination


Rail car lease costs

$2 ‐ $4 Lease rates vary with market and turn around time on cars

Rail terminalloading

$1 ‐ $2 Spot/termloading

Rail transportation

$5 ‐ $8 Unit v. Manifest/Distance

Range for Rail $9 ‐ $17 Using $11 ‐ $13 in examples to follow

9/22/2014

13

East PacNW

Preferred destination depends on market and costs

North Dakota

Coast

Utah

Wyoming Pipeline path

Rail path

Cushing

LouisianaCalifornia

Denver

East PacNW


North Dakota

Coast

$13

$7 $11Utah

Wyoming

Cushing

Louisiana

$ $11

California

Denver

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14

East PacNW


North Dakota

Coast

$13

$7 $11Utah

$110Wyoming

$97

Cushing

Louisiana

$ $11

California

Denver$100

$90

East PacNW


North Dakota

Coast

$13

$7 $11Utah

$100Wyoming

$89

Cushing

Louisiana

$ $11

California

Denver$100

$90

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15

East PacNW


North Dakota

Coast

$13

$7 $11Utah

$95Wyoming

$83

Cushing

Louisiana

$ $11

California

Denver$92

$90

Fortunate that:• rail is an option• have both BNSF and UP

So where does that leave Wyoming?

• have both BNSF and UP• pipeline additions do happen

9/22/2014

16

Fortunate that:• rail is an option• have both BNSF and UP

So where does that leave Wyoming?

• have both BNSF and UP• pipeline additions do happen

Expect that:• Prices at market hubs and refining will influence delivery mode and netback

il d i li b il ill l b k d f h• Rail and pipeline built will cycle back and forth as explanation for price at any point in time

• WTI via pipe is the long run floor on price

0%

20%

Differentials Expressed as Percent of Benchmark

-60%

-40%

-20%

0%

Crude

Natural Gas

-100%

-80%

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

Differences in Differentials Evaluating Natural Gas …...9/22/2014 1 Differences in Differentials...

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Transcript of Differences in Differentials Evaluating Natural Gas …...9/22/2014 1 Differences in Differentials...