NATURAL GAS MARKET OUTLOOK 2011 · 2017. 3. 8. · 2 Natural Gas Outlook •U.S. shale gas...

© 2005 San Diego Gas and Electric and Southern California Gas Company. All copyright and trademark rights reserved

This information is provided solely for informational purposes. Although Southern California Gas Co. (SoCalGas) has used reasonable

efforts to assure its accuracy, no representation is made that the contents are free from error or suitable for use for any particular purpose.

SoCalGas assumes no responsibility for use of, or reliance on, this information by any party, and specifically advise such parties to discuss

any decisions or actions related hereto with their own advisors and experts.

NATURAL GAS MARKET

OUTLOOK

2011

Marjorie Schmidt-Pines, Principal Regulatory Economic Advisor

Southern California Gas Company and SDG&E

Regulatory Affairs

January, 2011

2

Natural Gas Outlook

•U.S. shale gas resources drive increased U.S. production, lower prices, and lower imports of natural gas

•North America West Coast LNG terminal Operational

•U.S. storage levels this winter higher than five year average

•Industrial and electric power use drives future demand

growth

•Non-hydro renewables and natural gas are the fastest growing electricity generation sources

•Natural gas price projections are significantly lower than past years due to an expanded shale gas resource base

3

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

30% domestic gas production growth outpaces 16% consumption growth, leading to declining imports

Consumption

Domestic supply

Net imports

Projections History

AEO2011 Reference case

AEO2010 Reference case

1%

6%

11%

Source: EIA, Annual Energy Outlook 2011

2009

U.S. dry gas

trillion cubic feet per year

3

4

Shale gas has been the primary source of recent growth in U.S. technically recoverable natural gas resources

0

250

500

750

1000

1250

1500

1750

2000

2250

2500

2750

2000 2005 2006 2007 2008 2009 2010 2011

AEO edition

U.S. dry gas resources

trillion cubic feet

Unproved

shale gas

Unproved

other gas (including

Alaska* and

offshore)

Proved

reserves (all types &

locations)

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


827

1481

2552

245

Richard Newell, December 16, 2010 4

5

Richard Newell, December 16, 2010

0

5

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Shale gas offsets declines in other U.S. supply to meet consumption growth and lower import needs

U.S. dry gas


Alaska

Non-associated offshore

Projections History

Associated with oil

Coalbed methane

Net imports

Non-associated onshore

Shale gas


2009

11%

1%

9% 7%

9% 8%

20%

14%

8%

2%

8%

7%

45%

1%

Tight gas 28% 22%

5

6

U.S. natural gas shale

7

U.S. shale gas production increased 14-fold over the last decade; reserves tripled over the last few years

0.0

1.0

2.0

3.0

4.0

5.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Eagle Ford (TX)

Marcellus (PA and other Eastern states)

Haynesville (LA and TX)

Woodford (OK)

Fayetteville (AR)

Barnett (TX)

Antrim (MI, IN, and OH)

Source: Lippman Consulting (2010 estimated)

annual shale gas production



8

Shale gas production has continued to rise rapidly over the past year

0

2

4

6

8

10

12

14

16

Jan-

09

Mar-

09

May-

09

Jul-

09

Sep-

09

Nov-

09

Jan-

10

Mar-

10

May-

10

Jul-

10

Sep-

10

Barnett Shale Fayetteville Woodford

Haynesville Marcellus Eagleford

billion cubic feet per day

Source: EIA, Lippman Consulting 8 Howard Gruenspecht, U.S. – Canada ECM, Dec 2 ,2010

9

SoCalGas Sources of Natural Gas

Deliveries

(BCF)

2002 1012

2003 958

2004 995

2005 903

2006 95965%

21%

8%

6%

SW

Rockies

Calif

Canada

SoCalGas Total Supply Mix for 2009

Source: California Gas Report,

SoCalGas 2010

10

Status of Costa Azul LNG Terminal

Costa Azul Current Operations • Costa Azul capacity split 500 MMcfd each to Sempra LNG and

Shell – However, Shell completed a “subleasing” deal with Gazprom for a quarter of the capacity

– Sempra’s long-term supplies from Tangguh project in Indonesia

– Shell has available capacity now - long-term supplies from Sakhalin project in Russia – There has been no indication when cargoes from Sakhalin might first arrive at ECA

• Sempra has been receiving regular cargoes from Tangguh approximately every 12 days since the second quarter of 2010

– Additional spot cargoes have been received from time to time

– One spot cargo was received from Peru in July 2010

• SDG&E has received nominations at the Otay Mesa receipt point periodically throughout the second half of 2010

• SoCalGas received nominations at Blythe from North Baja Pipeline- some LNG derived gas arrived, however, mainly domestic gas due to displacement.

11

0

5

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

U.S. dry gas consumption


Commercial

Transportation** Residential

Central electric power

Industrial*

* Includes combined heat-and-power and lease and plant fuel. ** Includes pipeline fuel.


2009

3%

14%

35%

18%

29%

3%

14%

32%

21%

30%

Projections History


Natural gas consumption is quite dispersed; industrial

and electric power use drives future demand growth

11

12

Natural gas, wind and other renewables account for the vast majority of capacity additions from 2009 to 2035

Coal

313 (30%)

Natural gas

351 (34%)

Hydropower*

99 (10%)

Nuclear

101 (10%)

Other

renewables

15 (1%)

Other fossil

118 (11%) * Includes pumped storage

Coal

14 (6%)

Natural gas

135 (62%)

Hydropower*

3 (1%)

Nuclear

6 (3%)

Other

renewables

27 (12%)

Other

fossil

1 (0.4%)

2009 capacity Capacity additions

2009 to 2035

1,033

gigawatts

220 gigawatts

Source: EIA, Annual Energy Outlook 2011 Richard Newell, December 16, 2010

Wind

27 (12%) Wind

32 (3%)

12

End-use coal

4 (0.3%)

End-use coal

7 (3%)

13

0

1

2

3

4

5

6

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

electricity net generation

trillion kilowatthours per year

Natural gas

Renewable

Projections History

Nuclear

Oil and other

Coal

20%

23%

25%

1% 1%

45%

43%

14% 10%

17%

The projected electricity mix gradually shifts to lower-

carbon options, with generation from natural gas rising

37% and renewables rising 73%


2009


14

Southern California Gas Demand

0

200

400

600

800

1000

1200

2009 2010 2015 2020 2025 2030

Bc

f/Y

ea

r

Wholesale

EG

Noncore Non EG

Core Non Residential

Residential

Source: CGR 2010

15

U.S. Storage at High Levels This Winter

16

Weather has the most impact on spot natural gas prices.

Winter 2010/11

17

Natural Gas Price History

CA AZ Border and SoCal Citygate - NGI Monthly IndexData Souce: NGI Bidweek Survey Jan. 3, 2011

1

2

3

4

5

6

7

8

1/9

8

6/9

8

11/9

8

04/9

9

09/9

9

02/0

0

07/0

0

12/0

0

05/0

1

10/0

1

03/0

2

08/0

2

01/0

3

06/0

3

11/0

3

04/0

4

09/0

4

02/0

5

07/0

5

12/0

5

05/0

6

10/0

6

03/0

7

08/0

7

01/0

8

06/0

8

11/0

8

04/0

9

09/0

9

02/1

0

07/1

0

12/1

0

$/m

mb

tu

Southern Border, SoCalNGI Bidweek ($/Dth)

SoCal CitygateNGI Bidweek ($/Dth)

T:\fuelpric.xls

18

Oil vs Natural Gas Prices

Historical Oil Prices vs. Gas Prices

Equivalent Unit Cost ($/MMBtu)1 Barrel = 6.2 MMBtu

Last Updated: 12/8/2010

Source: Source: Oil prices - EIA, CA/AZ Border Gas Price - Ventyx Velocity Suite-Nymex T:\oil vs gas.xls

0

5

10

15

20

25

Jan-0

4

Apr-

04

Jul-04

Oct-

04

Jan-0

5

Apr-

05

Jul-05

Oct-

05

Jan-0

6

Apr-

06

Jul-06

Oct-

06

Jan-0

7

Apr-

07

Jul-07

Oct-

07

Jan-0

8

Apr-

08

Jul-08

Oct-

08

Jan-0

9

Apr-

09

Jul-09

Oct-

09

Jan-1

0

Apr-

10

Jul-10

Oct-

10

CA/AZ Border NG Cash ($/MMBtu)

WTI Crude Equiv ($/MMBtu)

19

While Gas Prices Have Fluctuated: SoCalGas’ Transportation Costs Have Been Flat

$0.00$1.00

$2.00$3.00$4.00

$5.00$6.00$7.00

$8.00$9.00

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

$/m

mb

tu

Core Transport Noncore Transport

Core Gas Cost CA Border Index

`

Transport costs are the Volumetric & Customer Charge.

Core GN10 @ 100,000th/year and Noncore GTF/I3-D @ 1.5MMth/year.

Core Gas Cost is SCG’s core procurement rate and CA Border Index is Natural Gas Intelligence Index

20

Where are Gas Futures Prices Going ?

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Feb 1

1

Mar

11

Apr 1

1

May

11

Jun

11

Jul 1

1

Aug 1

1

Sep 1

1

Oct 1

1

Nov

11

Dec

11

Jan

12

Feb 1

2

Mar

12

2011

2012

2013

2014

2015

$/m

mbtu

NYMEX Futures

price @ Henry Hub ($/mmbtu)

Futures

price @ CA/AZ border ($/mmbtu)

Natural Gas NYMEX & ClearPort Futures

Source: Henry Hub data: PROPHETX|QUOTE!'NG@[DTN:NYMEX] Border data: Ventyx Velocity Suite Updated Jan. 3, 2011

This posted information is provided solely for informational purposes. Although SoCalGas and SDG&E have used reasonable efforts to assure

its accuracy, no representation is made that the contents are free from error, or suitable for use for any particular purpose. SoCalGas and

SDG&E assume no responsibility for use of, or reliance on, this information by any party, and specifically advise such parties to discuss any

decisions or actions related hereto with their own advisors and experts.

21

Natural gas price projections are significantly lower than past years due to an expanded shale gas resource base natural gas spot price (Henry Hub)

2009 dollars per million Btu

Projections History


2009


0

1

2

3

4

5

6

7

8

9

10

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

AEO2010

Updated AEO2009

AEO2011

21

22

• Gas price volatility will likely continue.

• Shale gas drives growth in natural gas production and reduces reliance on imported gas.

• Higher demand expected for U.S. gas fired electric generation and industrial demand.

• Natural gas prices much lower than oil prices.

• Natural Gas basis differences at various hubs diminished, driven by shale production increase in the east and new pipelines added.

• Natural gas price projections are significantly lower than past years due to an expanded shale gas resource base.

North American Natural Gas Market

23

What Can You Do to Manage Energy Costs?

• Take advantage of energy efficiency programs. Call your Account Executive for technical support.

• Go to socalgas.com/business for support tools.

• If you transport your own gas, talk to your gas supplier to discuss supply and pricing strategies.

• Look for ways to conserve and be more energy efficient.

24

Thank you

NATURAL GAS MARKET OUTLOOK 2011 · 2017. 3. 8. · 2 Natural Gas Outlook •U.S. shale gas...

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