Natural Gas Markets: Recent Changes and Key Drivers
description
Transcript of Natural Gas Markets: Recent Changes and Key Drivers
![Page 1: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/1.jpg)
www.eia.govU.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
![Page 2: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/2.jpg)
U.S. Natural Gas Injection Season 1999-2012Billion Cubic Feet
Source: U.S. Energy Information Administration Short Term Energy Outlook
2Howard Gruenspecht, LDC Forum September 11, 2012
![Page 3: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/3.jpg)
Natural Gas use for electric powerBillion cubic feet per day
Source: U.S. Energy Information Administration based on Bentek Energy, LLC
3Howard Gruenspecht, LDC Forum September 11, 2012
![Page 4: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/4.jpg)
U.S. Electricity Output from Natural Gas and Coal
Gigawatthours
Source: U.S. Energy Information Administration Electric Power Monthly
4Howard Gruenspecht, LDC Forum September 11, 2012
![Page 5: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/5.jpg)
Electric Power Sector Natural Gas Consumption: Sept thru March
Billion cubic feet
Source: U.S. Energy Information Administration Short Term Energy Outlook
5Howard Gruenspecht, LDC Forum September 11, 2012
![Page 6: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/6.jpg)
Henry Hub Natural Gas Price
Dollars per million btu
Source: U.S. Energy Information Administration Short Term Energy Outlook
6Howard Gruenspecht, LDC Forum September 11, 2012
![Page 7: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/7.jpg)
Probability of the December 2012 Henry Hub contract expiring above price levels
7
Source: U.S. Energy Information Administration, based on the CME Group
Howard Gruenspecht, LDC Forum September 11, 2012
![Page 8: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/8.jpg)
September Probability Distributions of December Future Contracts With Actual Contract Prices Traded in September
Source: U.S. Energy Information Administration based on Bloomberg, LLC
8Howard Gruenspecht, LDC Forum September 11, 2012
![Page 9: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/9.jpg)
Primary energy use by fuel, 1980-2035
9
U.S. energy consumption
quadrillion Btu
Source: EIA, Annual Energy Outlook 2012
ProjectionsHistory 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
Howard Gruenspecht, LDC Forum September 11, 2012
Wind, solar, geothermal and biomass
5%
![Page 10: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/10.jpg)
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.
Source: EIA, Annual Energy Outlook 2012
![Page 11: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/11.jpg)
Domestic natural gas production grows faster than consumption
U.S. dry gas
trillion cubic feet per year
Source: EIA, Annual Energy Outlook 2012
ProjectionsHistory 2010
Consumption
Domestic supply
Net imports
11Howard Gruenspecht, LDC Forum September 11, 2012
![Page 12: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/12.jpg)
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 pricesU.S. dollars per million British thermal unit
12Howard Gruenspecht, LDC Forum September 11, 2012
![Page 13: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/13.jpg)
2%
Shale gas offsets declines in other U.S. natural gas production sourcesU.S. dry gas production
trillion cubic feet per year
Source: EIA, Annual Energy Outlook 2012
Non-associated offshore
ProjectionsHistory
Associated with oilCoalbed methane
Non-associated onshore
Shale gas
2010
10%
6%
9%
7%
21%
23%
9%
9%
6%
49%
Alaska 1%
Tight gas26%
22%
13Howard Gruenspecht, LDC Forum September 11, 2012
![Page 14: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/14.jpg)
Electric power and industrial use drives much of the future domestic natural gas demand growth in the Reference caseU.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
ProjectionsHistory
Industrial*
Electricpower
Commercial
Residential
Transportation**
34%
17%
14%
32%
3%
31%
21%
13%
33%
3%
14Howard Gruenspecht, LDC Forum September 11, 2012
![Page 15: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/15.jpg)
U.S. production of shale gas in four cases, 2000-2035
15
dry natural gas production
trillion cubic feet
Source: EIA, Annual Energy Outlook 2012
Howard Gruenspecht, LDC Forum September 11, 2012
High EUR
Reference
Low EUR
High TRR
2010History Projections
Technically Recoverable Resource (TRR)Estimated Ultimate Recovery (EUR)
![Page 16: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/16.jpg)
16
lower-48 average natural gas wellhead price
2010 dollars per thousand cubic feet
Source: EIA, Annual Energy Outlook 2012
Natural gas price projections vary based on resource base assumptions
Low EUR
Reference
High EUR
ProjectionsHistory 2010
High TRR
Howard Gruenspecht, LDC Forum September 11, 2012
![Page 17: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/17.jpg)
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
Coal at $3
Natural GasCC at $7
Natural Gas CC at $3
Natural GasCC at $4
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
17Howard Gruenspecht, LDC Forum September 11, 2012
![Page 18: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/18.jpg)
While electricity consumption grows by 21% over the projection, the annual rate of growth slowspercent growth (3-year rolling average)
Projections
HistoryPeriod Annual Growth1950s 9.81960s 7.31970s 4.71980s 2.91990s 2.42000-2010 1.02010-2035 0.8
Structural Change in Economy - Higher prices - Standards - Improved efficiency
2010
Source: EIA, Annual Energy Outlook 2012
18Howard Gruenspecht, LDC Forum September 11, 2012
![Page 19: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/19.jpg)
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
Source: EIA, Annual Energy Outlook 2012
2010
24%
20%
45%
10%
1%
38%
28%
1%
Nuclear
Oil and other liquids
Natural gas
Coal
Renewables
19Howard Gruenspecht, LDC Forum September 11, 2012
![Page 20: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/20.jpg)
The ratio of oil to natural gas prices remains high through 2035 in EIA’s AEO2012 Reference case projection
ratio of oil price to natural gas price
Source: EIA, Annual Energy Outlook 2012
History Projections2010
Oil and natural gas prices2010 dollars per million Btu
History Projections2010
20
Howard Gruenspecht, LDC Forum September 11, 2012
![Page 21: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/21.jpg)
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
![Page 22: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/22.jpg)
Howard Gruenspecht August 28, 2012
U.S. Energy Breakdown by Fuel and Sector
22
Source: EIA Annual Energy Review 2010
![Page 23: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/23.jpg)
Underground sources of natural gas
Source: modified from U.S. Geological Survey Fact Sheet 0113-01.
23Howard Gruenspecht Washington, DC - May 16, 2011
![Page 24: Natural Gas Markets: Recent Changes and Key Drivers](https://reader035.fdocuments.us/reader035/viewer/2022062722/56813ae2550346895da334cc/html5/thumbnails/24.jpg)
Working Underground Natural Gas Storage Capacity Additions, 2008- 2011
Billion cubic feet
Source: U.S. Energy Information Administration Peak Underground Working Natural Gas Storage Capacity Report
24Howard Gruenspecht, LDC Forum September 11, 2012