NewEnglandTakeaway
12
Midstream - Oil & Gas, North America (BI PIPEN) The BLOOMBERG PROFESSIONAL service, BLOOMBERG Data and Bloomberg Intelligence (the "Services") are owned and distributed by Bloomberg Finance L.P. ("BFLP") in all jurisdictions other than Argentina, Bermuda, China, India, Japan and Korea (the "BLP Countries"). BFLP is a wholly owned subsidiary of Bloomberg L.P. ("BLP"). BLP provides BFLP with global marketing and operational support and service for the Services and distributes the Services either directly or through a non-BFLP subsidiary in the BLP Countries. Certain functionalities distributed via the Services are available only to sophisticated institutional investors and only where the necessary legal clearance has been obtained. BFLP, BLP and their affiliates do not guarantee the accuracy of prices or information in the Services. Nothing in the Services shall constitute or be construed as an offering of financial instruments by BFLP, BLP or their affiliates, or as investment advice or recommendations by BFLP, BLP or their affiliates of an investment strategy or whether or not to "buy", "sell" or "hold" an investment. Information available via the Services should not be considered as information sufficient upon which to base an investment decision. BLOOMBERG, BLOOMBERG PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG ANYWHERE, BLOOMBERG TRADEBOOK, BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG PRESS and BLOOMBERG.COM are trademarks and service marks of BFLP, a Delaware limited partnership, or its subsidiaries. © 2015 Bloomberg Finance L.P. All rights reserved. This document and its contents may not be forwarded or redistributed without the prior consent of Bloomberg. Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 1 of 12 New Contract Type May Help New England to Add Pipeline Capacity Analysts: Syarifa Galeb & Vincent G Piazza Jun 11, 2015 Close proximity to the Marcellus and Utica shale plays has barely solved New England's needs for more supply of natural gas during the heating season. In winter, demand for power generation competes with heating, and an inability to move supply where needed may result in expensive gas and power prices. Challenges to build new pipelines to serve power generators include finding shippers that will commit firm capacity. A new type of contract used by Access Northeast pipeline may help fulfill power sector demand. Key Points (5 of 12): * Marcellus, Utica Set to Fulfill Rising Demand in New England * New England Needs New Pipelines, Contracts Need for Approvals * Interruptible Capacity May Not Ensure Gas Supply in New England * Six Pipelines Will Ship More Gas to New England in Three Years * Access Northeast Transports Gas for New England Power Generators Midstream - Oil & Gas Team Bloomberg Intelligence
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Transcript of NewEnglandTakeaway
Midstream - Oil & Gas, North America (BI PIPEN)
The BLOOMBERG PROFESSIONAL service, BLOOMBERG Data and Bloomberg Intelligence (the "Services") are owned and distributed by Bloomberg Finance L.P. ("BFLP") in all jurisdictions other than Argentina, Bermuda, China, India, Japan and Korea (the "BLP Countries"). BFLP is a wholly ownedsubsidiary of Bloomberg L.P. ("BLP"). BLP provides BFLP with global marketing and operational support and service for the Services and distributes the Services either directly or through a non-BFLP subsidiary in the BLP Countries. Certain functionalities distributed via the Services are available only tosophisticated institutional investors and only where the necessary legal clearance has been obtained. BFLP, BLP and their affiliates do not guarantee the accuracy of prices or information in the Services. Nothing in the Services shall constitute or be construed as an offering of financial instruments by BFLP,BLP or their affiliates, or as investment advice or recommendations by BFLP, BLP or their affiliates of an investment strategy or whether or not to "buy", "sell" or "hold" an investment. Information available via the Services should not be considered as information sufficient upon which to base an investmentdecision. BLOOMBERG, BLOOMBERG PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG ANYWHERE, BLOOMBERG TRADEBOOK, BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG PRESS and BLOOMBERG.COM are trademarks and service marksof BFLP, a Delaware limited partnership, or its subsidiaries. © 2015 Bloomberg Finance L.P. All rights reserved. This document and its contents may not be forwarded or redistributed without the prior consent of Bloomberg.
Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 1 of 12
New Contract Type May Help New England to Add Pipeline CapacityAnalysts: Syarifa Galeb & Vincent G PiazzaJun 11, 2015Close proximity to the Marcellusand Utica shale plays has barelysolved New England's needs formore supply of natural gas duringthe heating season. In winter,demand for power generationcompetes with heating, and aninability to move supply whereneeded may result in expensive gasand power prices. Challenges tobuild new pipelines to serve powergenerators include finding shippersthat will commit firm capacity. A newtype of contract used by AccessNortheast pipeline may help fulfillpower sector demand.
Key Points (5 of 12):* Marcellus, Utica Set to Fulfill Rising Demand in New England* New England Needs New Pipelines, Contracts Need forApprovals* Interruptible Capacity May Not Ensure Gas Supply in NewEngland* Six Pipelines Will Ship More Gas to New England in Three Years* Access Northeast Transports Gas for New England PowerGenerators
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Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 2 of 12
Marcellus, Utica Set to Fulfill Rising Demand in New EnglandAnalysts: Syarifa Galeb & Vincent G PiazzaJun 10, 2015Robust natural-gas productionfrom the Marcellus and Utica shaleplays is poised to supply risingdemand in gas-constrained NewEngland. The increasing demandprovides growth opportunities fornatural-gas producers such asRange Resources, Cabot, EQT andAntero, pipeline companies KinderMorgan and Spectra Energy, andthe utility companies. The regionmay need as much as 1.1 billioncubic feet a day of additional supplyto meet projected demand from thepower sector in 2020, according toICF International.
Appalachia Natural Gas Producers
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The BLOOMBERG PROFESSIONAL service, BLOOMBERG Data and Bloomberg Intelligence (the "Services") are owned and distributed by Bloomberg Finance L.P. ("BFLP") in all jurisdictions other than Argentina, Bermuda, China, India, Japan and Korea (the "BLP Countries"). BFLP is a wholly ownedsubsidiary of Bloomberg L.P. ("BLP"). BLP provides BFLP with global marketing and operational support and service for the Services and distributes the Services either directly or through a non-BFLP subsidiary in the BLP Countries. Certain functionalities distributed via the Services are available only tosophisticated institutional investors and only where the necessary legal clearance has been obtained. BFLP, BLP and their affiliates do not guarantee the accuracy of prices or information in the Services. Nothing in the Services shall constitute or be construed as an offering of financial instruments by BFLP,BLP or their affiliates, or as investment advice or recommendations by BFLP, BLP or their affiliates of an investment strategy or whether or not to "buy", "sell" or "hold" an investment. Information available via the Services should not be considered as information sufficient upon which to base an investmentdecision. BLOOMBERG, BLOOMBERG PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG ANYWHERE, BLOOMBERG TRADEBOOK, BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG PRESS and BLOOMBERG.COM are trademarks and service marksof BFLP, a Delaware limited partnership, or its subsidiaries. © 2015 Bloomberg Finance L.P. All rights reserved. This document and its contents may not be forwarded or redistributed without the prior consent of Bloomberg.
Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 3 of 12
Scarce Pipe Capacity Challenges Stout Gas Demand in New EnglandAnalysts: Vincent G Piazza & Syarifa GalebJun 10, 2015Low prices and environmentalconcerns in New England areboosting natural-gas demand forpower generation and conversionsfrom heating oil. Simultaneously,abundant natural gas fromAppalachia has replaced pipelineflows from Canada, the Gulf Coastand the Rockies into the Northeast.The region will be self-sufficient,while also being able to supply gasto other parts of the country. Movingthe robust natural-gas supply intoNew England has been difficult dueto limited pipeline capacity.
Northeast Gas Production and Pipeline Flows (BCFD)
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Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 4 of 12
New England Pipelines Unable to Support Elevated Seasonal DemandAnalysts: Syarifa Galeb & Vincent G PiazzaJun 10, 2015Limited natural-gas pipelinecapacity has prohibited transportingmore supply to satisfy NewEngland's demand during winter,causing electricity and gas prices tospike. Gas demand in the region isat its highest during winter, when theneed to fuel gas-fired power plantsis coupled with heating demand. Inthe past five years, cheap supplyhas boosted the conversions togas from oil for residential spaceheating, while the replacement of oil,coal and nuclear-power plants withgas plants is ongoing.
Winter Gas Demand Trumps Electricity Generation
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Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 5 of 12
New England Needs New Pipelines, Contracts Need for ApprovalsAnalysts: Syarifa Galeb & Vincent G PiazzaJun 10, 2015The construction of a new pipelinecan take place if pipeline companiesare able to provide evidence ofmarket need to regulators, in theform of long-term firm capacitycontracts with shippers. In NewEngland, long-term arrangementsare usually signed by local gasdistribution companies, given thatstate regulations allow the cost tobe spread to customers through gasutility rates. When heating demandis low, interruptible capacity,or capacity without guaranteeddelivery, may be available for powergenerators.
New England Natural Gas Pipelines & Power Plants
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Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 6 of 12
Interruptible Capacity May Not Ensure Gas Supply in New EnglandAnalysts: Syarifa Galeb & Vincent G PiazzaJun 11, 2015In a deregulated power marketsuch as New England, powergenerators supply electricity toelectric distribution companies.Generators are restricted frompassing along the cost of pipelinecapacity to customers. To securenatural gas supply, generators maypurchase interruptible capacitycontracts, a cheaper option, in whichgas delivery is not guaranteed.Some generators may buy firm-capacity contracts, which haveguaranteed delivery. Gas plantcapacity in New England has risenmore than 10 gigawatts in 14 years.
New England Power Generating Capacity
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Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 7 of 12
New Pipe Capacity Needed to Tame New England Gas, Power PricesAnalysts: Vincent G Piazza & Syarifa GalebJun 11, 2015Natural gas and electricity prices inNew England are tightly correlated,with as much as half of the region'selectricity generated by gas. Limitednatural-gas supply may lead to highgas and power prices. Additionally,in a very cold winter, most ofpipeline capacity would be usedby gas distribution companies thathold firm-capacity agreements,leaving little capacity for powergenerators. A lack of gas supply togenerate electricity will prompt aswitch to alternative fuels and leadto expensive power prices.
Natural Gas and Power Prices in New England
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Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 8 of 12
Coal and Oil May Rescue New England on Cold Winter DaysAnalysts: Vincent G Piazza & Syarifa GalebJun 11, 2015Heating oil and coal may remainalternative fuels for powergeneration during extreme coldwinter days in New England, whengas pipeline capacity is constrained.Cheaper oil and ISO New England'ssupply reliability program helpedcontain power prices in the 2014-15winter, yet this is only a temporarysolution. About 3.5 gigawatts will beretired by 2018 and 6 GW will be atrisk of retirement by 2020, accordingto ISO New England. Oil and coalplants make up 10.8 GW of capacityin the region.
New England Power Generation by Fuel (MWh)
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Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 9 of 12
Higher Power, Gas Prices to Follow New England Plant RetirementsAnalysts: Syarifa Galeb & Vincent G PiazzaJun 11, 2015Natural gas demand for powergeneration in New England willcontinue to rise due to the plannedretirement of coal, oil and nucleargenerators in the short-term. Mostof the replacement capacity will usecheaper and cleaner gas as thefuel of choice. Higher gas demandwill exacerbate New England'sscarce pipeline capacity, leadingto even more expensive gas andpower prices. About 4.6 gigawattscapacity of oil, coal and nucleargenerators will be retired in NewEngland by 2018, out of 31 GW oftotal capacity.
New England Power Generation Retirement Plan
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Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 10 of 12
Six Pipelines Will Ship More Gas to New England in Three YearsAnalysts: Syarifa Galeb & Vincent G PiazzaJun 12, 2015Cheaper gas supply from theMarcellus and Utica shale plays isexpected to reach New England asearly as 2016 through ConnecticutExpansion and AlgonquinIncremental Market pipelines.Access Northeast pipeline, plannedto be in service in 2018, will mostlysupply gas to power generatorswith firm capacity agreements heldby electric utilities, as opposed tocontracts with local gas distributioncompanies. The pipeline may saveelectric customers about $1 billionannually, according to an ICFInternational report.
Proposed Natural Gas Pipelines in New England
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The BLOOMBERG PROFESSIONAL service, BLOOMBERG Data and Bloomberg Intelligence (the "Services") are owned and distributed by Bloomberg Finance L.P. ("BFLP") in all jurisdictions other than Argentina, Bermuda, China, India, Japan and Korea (the "BLP Countries"). BFLP is a wholly ownedsubsidiary of Bloomberg L.P. ("BLP"). BLP provides BFLP with global marketing and operational support and service for the Services and distributes the Services either directly or through a non-BFLP subsidiary in the BLP Countries. Certain functionalities distributed via the Services are available only tosophisticated institutional investors and only where the necessary legal clearance has been obtained. BFLP, BLP and their affiliates do not guarantee the accuracy of prices or information in the Services. Nothing in the Services shall constitute or be construed as an offering of financial instruments by BFLP,BLP or their affiliates, or as investment advice or recommendations by BFLP, BLP or their affiliates of an investment strategy or whether or not to "buy", "sell" or "hold" an investment. Information available via the Services should not be considered as information sufficient upon which to base an investmentdecision. BLOOMBERG, BLOOMBERG PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG ANYWHERE, BLOOMBERG TRADEBOOK, BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG PRESS and BLOOMBERG.COM are trademarks and service marksof BFLP, a Delaware limited partnership, or its subsidiaries. © 2015 Bloomberg Finance L.P. All rights reserved. This document and its contents may not be forwarded or redistributed without the prior consent of Bloomberg.
Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 11 of 12
Access Northeast Transports Gas for New England Power GeneratorsAnalysts: Syarifa Galeb & Vincent G PiazzaJun 11, 2015Access Northeast pipeline,owned by Spectra, Eversourceand National Grid, may help tobring more gas supply to powergenerators. Contrary to the usualgas pipeline contracts, Access' firmcapacity agreements will be held byelectric utilities, and the cost to buildthe pipeline will be spread acrosselectric customers. Generators willsecure capacity from the utilitieswhen supply is needed and pay forwhat they use. These payments willoffset the rates paid by customers toutilities.
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Themes > Chapter: Winter Natural Gas Demand in New England >> Exhibit 12 of 12
More Natural Gas Supply May Lower New England Power PricesAnalysts: Vincent G Piazza & Syarifa GalebJun 12, 2015As natural gas is becoming theprimary fuel for electricity generationin New England, creative solutionssuch as a new type of pipelinecontract are needed to ship moregas to power generators. Imminentretirement of coal, oil and nuclearpower plants in the next five yearswill require even more gas supply.The firm capacity agreementproposed by Access Northeast maylead to other new types of contractto bring new gas supply and mayeventually lower power prices in theregion.
New England Electricity Prices (Cents/kWh)
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