Natural Gas Update:EIA

NARUC Winter Meeting

Barbara Mariner-Volpe, Barbara.MarinerVolpe@eia.doe.govEnergy Information Administration

February 23, 2003

Presentation OutlinePresentation Outline

• Changes in EIA’s electricity data

• Natural Gas Storage

• Current Gas Prices

• Retail Restructuring Update

• Natural Gas Outlook: Short Term, Long Term

• EIA’s 2003 Natural Gas Agenda

Changes in EIA’s Reporting of Changes in EIA’s Reporting of Electricity DataElectricity Data

Electric Power Sector Electric Power Sector Reporting by EIA Reporting by EIA

• Improves data accuracy. • Relies on reports of electric generators

instead of energy transporters.• Reporting based on principle line of

business.• Data displays in all EIA products will be

consistent.• Staged implementation: Annual products

first, then monthly products.

EIA’s reporting of electricity dataEIA’s reporting of electricity data

• Electricity-only and Combined-heat-and-power plants instead of utility/nonutility split

• Consumption by independent power producers reported in electric power sector instead of the industrial sector.

• Lag between AER and other annuals and monthlies

Natural Gas Industrial Sector ExampleNatural Gas Industrial Sector Example(Old)(Old)

• Combined heat and power plants associated with manufacturers--included

• Independent power producers (IPPs)--included

• Source of data on independent power producers differs in natural gas and electric power tabulations

Natural Gas Industrial Sector ExampleNatural Gas Industrial Sector Example(New)(New)

• Combined heat and power plants associated with manufacturers--included and shown separately

• Independent power producers (IPPs)--excluded

• Source of data on independent power producers is the same in natural gas and electric power tabulations

Revisions to 2000 EstimatesRevisions to 2000 Estimates

Item AER 2000 AER 2001

Percent Difference

Electricity Net Generation (Billion Kilowatthours)

3,792 3,801 0.3

Natural Gas Consumption (Trillion Cubic Feet)

22.71 23.46 3.3

Coal Consumption (Million Short Tons)

1,079.7 1,084.1 0.4

Petroleum Consumption (Million Barrels Per Day)

19.48 19.70 1.1

Renewable Energy Consumption (Trillion Btu)

6,823 6.465 -5.2

Impact of Revisions to Nonutility Impact of Revisions to Nonutility Electric DataElectric Data

Total Natural Gas Consumption

0

5

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25

1998 1999 2000

Year

Tril

lion

Cub

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AER 2000 AER 2001

Natural Natural GasGas Storage Storage• Weekly Storage Survey

• Current Stock levels

Weekly NaturalNatural Gas Storage Report

Revisions Have Become Much Less Frequent

00.20.40.60.8

11.21.4

5/9/

2002

5/23

/200

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6/6/

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2 revisions in 30 weeks

Bars denote weeks in which a revision occurred

5 revisions in 10 weeks

0

500

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1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

Heating Season

Wor

king

Gas

(Bill

ion

Cub

ic F

eet)

Estimated Drawdown forFebruary and March 2003

Withdrawn from StorageThrough Jan. 31, 2003

Estimated Gasin Storage as of March 31, 2003End of Season Gas in Storage

Net Withdrawals

Very Low Storage Stocks ExpectedVery Low Storage Stocks Expectedat the End of the 2002/2003 Heating Seasonat the End of the 2002/2003 Heating Season

U.S. stocks as of Nov 1 and Heating Season Withdrawals

Storage Stocks in the East and Producing Storage Stocks in the East and Producing Regions are Expected to be in the low range Regions are Expected to be in the low range

by end of winter 2003by end of winter 2003

0100200

300400500

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Working Gas in the West Compared with 5-Year Range

Bill

ion

Cub

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0200400600800

1,000

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Working Gas in the Producing Areas Compared with 5-Year Range

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Nov

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Working Gas in the East Compared with 5-Year Range

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Working Gas in the Total US Compared with 5-Year Range

NYMEX Natural Gas Futures Near-Month Contract Settlement Price, West Texas Intermediate Crude Oil Spot Price, and

Henry Hub Natural Gas Spot Price

$0

$1

$2

$3

$4

$5

$6

$71/

1/20

02

2/1/

2002

3/1/

2002

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2002

6/1/

2002

7/1/

2002

8/1/

2002

9/1/

2002

10/1

/200

2

11/1

/200

2

12/1

/200

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1/1/

2003

2/1/

2003

Dol

lars

per

Mill

ion

Btu

NYMEX Natural Gas Settlement Price WTI Spot Price Henry Hub Spot Price

Note:The West Texas Intermediate crude oil price, in dollars per barrel, is converted to $/MMBtu using aconversion factor of 5.80 MMBtu per barrel. The dates marked by vertical lines are the NYMEX near-month contractsettlement dates. Source: NGI's Daily Gas Price Index (http://Intelligencepress.com)

WTI

Gas Spot Price,Gas Futures Price

Why Are Natural Gas Prices High?Why Are Natural Gas Prices High?

• Weather: Temps. avg 5% below normal (13% less than year ago)

• Storage: 3,116 bcf at start of winter (4% above 5-yr avg. High demand has led to record drawdown (as of 2/14 stocks 27% below 5-yr avg)

• Production: ’02 production (through Oct.) down about 2.6 percent from ’01 level

• Net imports: (thru Oct ’02) down 4 percent from ’01 level

Status of Residential Choice Status of Residential Choice ProgramsPrograms

As of January 2003, Twenty-One States and the As of January 2003, Twenty-One States and the District of Columbia Have Some Form of District of Columbia Have Some Form of

Residential Choice ProgramResidential Choice Program

Overall nearly 7 percent (4.1 million) of Overall nearly 7 percent (4.1 million) of U.S. residential gas customers (60.2 U.S. residential gas customers (60.2

million) are buying gas from marketersmillion) are buying gas from marketers GA has most extensive program. 1.4 million

residentials, (82 % of state total) must choose.

OH has about 1 million customers participating (33 % of state total)

• MI has 332,000 (11 % of state total)

• NY has 319,000 (7.5 % of state total).

Some states fine-tuned existing programs Some states fine-tuned existing programs in 2002in 2002

• More stringent marketer certification standards – IL, OH, NY

Improved consumer protection measures – GA, NY, OH

Enrollment in existing programs Enrollment in existing programs generally increased in 2002generally increased in 2002

• Number of eligible customers increased

• Programs expanded

• Eligibility numbers doubled in MI, nearly tripled in VA, increased more than five-fold in WY and nearly seven-fold in IL

• Number of competitive suppliers increased

Short-Term Outlook for Short-Term Outlook for Natural GasNatural Gas

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Projections

Under Base Case assumptions, EIA expects prices to Under Base Case assumptions, EIA expects prices to exceed $4 through 2004 exceed $4 through 2004

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

Sources: History: Natural Gas Week; Projections: Short-Term Energy Outlook, February 2003.

Total Natural Gas Demand Growth PatternsTotal Natural Gas Demand Growth Patterns

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

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

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

Per

cent

Cha

nge

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Bill

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ay

Percent Change (Left Axis) Total (Right Axis)

History Proj.

Working Gas in StorageWorking Gas in Storage(Difference from Previous 5-Year Average)(Difference from Previous 5-Year Average)

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

-60%

-50%

-40%

-30%

-20%

-10%

0%

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n-0

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Mar

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History Projections

Long-Term Outlook for Natural Long-Term Outlook for Natural GasGas

Natural Gas Supply, Consumption, and Imports,Natural Gas Supply, Consumption, and Imports,1970-2025 (trillion cubic feet)1970-2025 (trillion cubic feet)

35

1970 1980 1990 2000 2010 20250

5

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History Projections

Production

NetImports

Consumption

Pipeline Liquefied Natural Gas0123456

20012025

Natural Gas Net Imports, 2001, 2025(trillion cubic feet)

Source: AEO 2003

Long-term Outlook Long-term Outlook for the Natural Gas Market for the Natural Gas Market

• U.S. gas demand is projected to grow 54% by 2025, to 35 Tcf

• Prices will increase slowly to about $3.90 (2001 dollars/mcf) in 2025 ($7.06 in nominal dollars)

• Imports increase to about 7.8 Tcf by 2025 (including 2.1 Tcf of LNG imports)

• Rising prices and technology improvements increase reserve additions and production

• Alaskan Pipeline expected to start service in 2021

EIA has Revised the Natural Gas Program to Provide EIA has Revised the Natural Gas Program to Provide Additional, More Useful InformationAdditional, More Useful Information

• Strategic Information Planning

• Short-term market forecast

• Weekly Market Update

• New surveys: Weekly Storage, Marketer

• New recurring reports and special reports

• Revising way EIA presents electricity data

• New query system for annual, non-confidential company data

• Natural gas data quality initiative

EIA’S NATURAL GAS EIA’S NATURAL GAS PRODUCTS and 2003 AGENDAPRODUCTS and 2003 AGENDA

EIA Natural Gas ProductsEIA Natural Gas Products

• Weekly Market Update, Storage Report, ESAR

• New surveys: Weekly Storage, Marketer

• New recurring reports and special reports: productive capacity report (released soon), LNG, derivatives

• Revising presentation of electricity data

• Improved access to non-confidential company data

• Natural gas data quality initiative: ongoing

New Natural Gas Data RequirementsNew Natural Gas Data Requirements

• Marketer sales data in States with active customer choice programs

• More timely data with weekly underground storage estimates

• Bringing EIA sector definitions in line with industry record keeping practices

• More frequent frames updating

• LNG and improved production data