Suzanne Minter - FIRT FIRT Outlook... · Production Growth Trumps High‐ Demand Case 0 500 1000...
Transcript of Suzanne Minter - FIRT FIRT Outlook... · Production Growth Trumps High‐ Demand Case 0 500 1000...
Suzanne MinterManager, Oil and Gas Consulting
BENTEK Energy
Natural Gas Outlook
© 2013 Platts, McGraw Hill Financial. All rights reserved.
North American Natural GasThe Fertilizer Institute
November, 2014
Talking points
3
• This summer saved us – storage at unforeseen levels could pressure near term price outlook
• North American production growth continues to shape market; breaking traditional flow patterns and pricing relationships
• Drilling economics favor wet plays with NGLs or Oil over dry Natural Gas plays.
• US production growth is very focused on the Utica and Marcellus plays in the Northeast.
• Gas fired power generation demand rises while industrial demand growth increases especially in the Gulf Coast.
• New North American gas production exceeds domestic demand growth in forecast; exports (LNG + Mexico) required to balance market
Filled storage just in time for winter…..
3.5
‐0.2 ‐0.2
3.1
‐1.1
0.6 0.8 0.2 0.5
Dom
Prod
LNG
Can Im
ports
Supp
ly
Power
Indu
stria
l
Res/Co
m
Mex Ex
Dem
and
2014 summer vs. 2013 summer
Supply Side Demand Side
Source: BENTEK Supply & Demand Report
Summer 2014 : 2.6 Bcf/d Long Versus Summer 2013
7501,0001,2501,5001,7502,0002,2502,5002,7503,0003,2503,5003,7504,000
5 Yr Avg 5 Yr Min
2013/2014 LT Forecast
Storage inventory carry‐out within ~200 Bcf of the 5 year average
US Storage Inventories (Bcf)
Source: EIA/BENTEK Market Call Short Term
YTD ‐ production continues to boom – Since August
YOY is up 4.5 Bcf/d – Forecast tend to continue
50.0
55.0
60.0
65.0
70.0
75.0
Bcf/d
2010 2011 2012 2013 2014 Forecast
+4.5 Bcf/d
+3.8 Bcf/d
Source: EIA/BENTEK
Winter‐over‐winter outlook
(0.3)
0.3
(4.4)
(0.1)
0.6
(3.9)
4.5
(0.1)
(1.4)
3.0
Indu
stria
l Dem
and
Power Dem
and
Res/comm Dem
and
Pipe
Loss
Expo
rts to Mexico
Total D
eman
d
Prod
uctio
n
LNG
Impo
rts from Can
ada
Total Sup
ply
Winter 13‐14 vs. Winter 14‐15 (Bcf/d)
US looks to be net‐long 6.9 Bcf/d winter‐over‐winter
Production Growth Trumps High‐Demand Case
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Bcf
US Storage inventories Base Forecast High winter demand forecast
o 760 Bcf lower season‐ending inventory in high demand scenario
o total volumes withdrawn are still nearly 400 Bcf less than 13‐14 withdrawal
o inventories end above year‐ago levels
o 760 Bcf lower season‐ending inventory in high demand scenario
o total volumes withdrawn are still nearly 400 Bcf less than 13‐14 withdrawal
o inventories end above year‐ago levels
High demand scenario: o res/comm demand from Winter 13‐14o adds 130 Bcf of freeze offs beyond base‐forecast
o all‐other fundamentals constant
High demand scenario: o res/comm demand from Winter 13‐14o adds 130 Bcf of freeze offs beyond base‐forecast
o all‐other fundamentals constant
What if we get another record‐setting winter?
Long Term Outlook
To date displaced imports coupled with increased
domestic demand have balanced US NG growth
11
8.1
12.8
(3.6)(1.0)
2.9 1.3
3.5 1.2 0.0 0.2
9.1
‐6.0‐4.0‐2.00.02.04.06.08.010.012.014.0
Total Sup
ply
Prod
uctio
n
Impo
rts from
Can
ada
LNG
Dem
and from
Pow
er
ResCom
m Dem
and
Indu
stria
l Dem
and
Expo
rts to M
exico
LNG Exports
Pipe
Loss
Total D
eman
d
Bcf/d
2009‐2014 Fundamentals
Source: BENTEK Cell Model
Going forward, power burn and exports are key balancing items to lower 48 NG growth
12
15.1 15.9
(0.6) (0.1)
5.8
(0.2)
2.1 1.5
5.8
0.2
15.2
‐2.00.02.04.06.08.010.012.014.016.018.0
Total Sup
ply
Prod
uctio
n
Impo
rts from
Can
ada
LNG
Dem
and from
Pow
er
ResCom
m Dem
and
Indu
stria
l Dem
and
Expo
rts to M
exico
LNG Exports
Pipe
Loss
Total D
eman
d
Bcf/d
2014‐2019 Fundamentals
Source: BENTEK Cell Model
19/+9
196/+33
51/‐3
48/‐3
26/+14
5/‐4
33/‐2
21/+1
37/+6
134/+15
7/‐1
1/+1
234/+15
53/+20
9/+4
64/+12
21/‐1
7/+1
Active rig count: Nov 7, 2014 / Change in rig count from Nov 1, 2013
Rig Increases Dry Gas Focused Areas
Rig Increases Liquids‐Rich/Oil Focused Areas
Rig Declines Source: BENTEK, Nov 2014
1/‐3
86/‐25
86/+22
46/+7
47/‐26
12/+2253/+38
567/+106
40/+10
13/+1PICEANCE
CALIFORNIA
MICHIGAN
POWDER RIVER
GREEN RIVER
WIND RIVER
OTHER ROCKIESWILLISTON
SAN JUAN
UINTA
OTHER APPALACHIAN
D-J
MARCELLUS WET
MARCELLUS DRY
UTICA
ILLINOIS
ARK FAYETTEVILLE
ARK WOODFORD
OFFSHORE
TX GULFEAGLE FORD
PERMIAN
ANADARKO
FT WORTH
AL-MS-FL
LA GULF
EASTTX
ARKLA
OTHER MIDCONTINENT
TX GULF
38/+8
RATON1/+1
Plays with high returns attract drilling rigs
TOTAL
2173CHANGE
+253
Production in the US to reach 83 Bcf/d by 2019 ‐ driven by NE growth
+10.5
+1.6
(0.1)
+1.1
+1.4
+0.9
US Gas Growth 2014 – 2019 15.9 Bcf/d
+0.3
Source: Bentek CellCast Oct 2014 14
+0.4
(0.1)
Backlog: Rely on expansion projects to relieve well backlog
0
500
1,000
1,500
2,000
2,500
# Wells
Well Backlog by Production Region (drilled but not producing)
NE PA Dry South PA Dry SW PA WV Wet WV Dry OH 15
5‐10 Bcf/d of Trapped
Production
1,992 Wells in Inventory
Southeast expansion projects bring 15 Bcf/d of capacity
16
LNG Demand
SE Demand
LNG Demand
LNG Demand
Pipeline Capacity MMcf/dTransco 4.225TETCO 2.62Tennessee Gas 3.17Texas Gas 1.21Trunkline 1*Columbia Gulf 1.44NGPL 0.75ANR 0.6*Total 15
US demand growth relies on exports
+3.0
+2.9 +6.0
+0.2
+1.3
US Demand2014‐201915.2 Bcf/d
Source: : Bentek CellCast Sep 2014 17
+1.1
+0.3
+2.0‐0.2
+0.3
+2.3
+1.1 +1.8
+0.5
US Domestic Demand2014‐20197.9 Bcf/d
New Gas Fired Generation and Coal Retirements Lead to Significant Increase in Power Demand
18
Under Construction
Year MW
2014 2,908
2015 3,804
2016 4,815
2017 1,664
Total 13,191
Gas Burn Equivalent
1.2 Bcf/d
Under Construction + Proposed Gas Burn
Equivalent
5.3 Bcf/d
Gas Burn Equivalent assumes all plants are combined‐cycle running at 50% utilization with heat rates of 7.5.Source: North American Power Plant Databank
2.4
1.10.7
0.3
0.8
0.1
0.2
0.1
US Power Gen Demand Growth 2014‐20195.8 Bcf/d (27%)
Southeast leads industrial demand growth
+0.2
+0.3 +0.7
+0.0
+0.6
Industrial Growth
2014‐20192.1 Bcf/d
Source: : Bentek CellCast October 2014, Industrial Project Tracker 19
+0.2+0.1
+0.0
High concentration of projects on gulf coast
20
Nearly 90% comprised of Methanol and Ammonia Plants
LNG Terminal
21
US LNG exports hit 7 Bcf/d by 2019 and 8 Bcf/d by 2020
11.6Bcf/d of MOUs have been signed on 17.4 Bcf/d of proposed capacity. • LNG Exports could average 8 Bcf/d in 2020• Export forecast risk is to the upside
Gulf Coast Export Terminals:Freeport LNG– 1.76 Bcf/d Lake Charles – 2 Bcf/d Sabine Pass – 2.4 Bcf/d Cameron – 1.6 Bcf/d
0
2
4
6
8
10LNG Exports By Facility (Bcf/d)
Sabine Pass Freeport CameronCove Point Lake Charles Elba Island
Mexico plans more than 40 Gas‐fired power projects
22
Mexico’s Pipeline Expansion Program:17 Pipeline Expansions
9 Border Crossing Projects4 Bcf/d US Import Capacity Increase
Mexican Power Expansion2014 – 202627,446 MW
4.1 Bcf/d @ 80%; 7.5 heat rate
0.00.51.01.52.02.53.03.54.0
Bcf/d
Exports to Mexico to Increase 1.5 Bcf/d to 3.6 Bcf/d by 2019
Exports to Mexico Forecast2014 Vs 2019 Average Annual
Growth in power burn critical as well as with LNG and Mexican exports to balance production forecast
26.5 25.7
19.9 22.1
21.827.4
0
10
20
30
40
50
60
70
80
90
100
Bcf
/d
PIPE LOSS RC INDUSTRIAL POWER Mex Exports LNG EXPORT Production Total Supply
2.2 Bcf/d Long
8.8 Bcf/d Long
Source: BENTEK Market Call Long Term NG
$3.20
$3.40
$3.60
$3.80
$4.00
$4.20
$4.40
$4.60
$4.80
$5.00
NYMEX (11/14/14) BENTEK HH Spot Forecast (10/27/14)
NYMEX Forward Curve Expectations
Source: BENTEK Market Call Short/Long Term, NYMEX
$4.16 Bentek Average ($4.04 NYMEX) Thru Dec 2019
Summer 2015 looks increasingly bearish
$0.49 Delta Between NYMEX and Bentek 2019; Demand Assumptions
Biggest Risk To Production Scenerio
Gas, oil and NGL price comparison: MMBTU equivalent
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$/MMBtu Equivalent
WTI HH MB NGL Brent CAPP
Associated gas production accounts for 45% of current supply
37 36 40
18 20 26
13 15
19
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
10
20
30
40
50
60
70
80
90
% Associated Gas
Bcf/d
Bentek Dry Natural Gas Forecast by Basin Focus
Lean Gas‐Focus NGL‐Focus Oil‐Focus % Associated Gas27
Oil‐weighted production tilts play economics –
Anadarko & Perm forecast to yield 7 Bcf/d associated gas
0%
10%
20%
30%
40%
50%
60%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
IRR% of Production
Oil % Gas % NGLs % Nov'14
Nov 2014 Price Assumptions: Gas = 12 month forward average curve for each regional pricing point (range $2.77 ‐ $4.02/Mcf)Oil = 12 month forward average WTI +/‐ differential (range $62.89 ‐ $83.80barrel)NGLs = weighted average $/barrel , 12‐mo forward average Mt. Belvieu prices (range $28.71 ‐ $40.02/barrel)
Southeast production forecast remains at risk –needs sustained higher prices
0
2
4
6
8
10
12
14
16
Jan‐10 Jan‐11 Jan‐12 Jan‐13 Jan‐14 Jan‐15 Jan‐16 Jan‐17 Jan‐18 Jan‐19
Bcf/d
Offshore Other Fayetteville Haynesville29
+0.2
‐0.2
+0.2
+0.9
Return to Growth Is at Risk
More than ~41 Bcf/d of announced capacity expansions in the Northeast by 2019; Only 32 Bcf/d will provide takeaway for production
NE PA Dry8.0 Bcf/dNE PA Dry8.0 Bcf/d
Wet Marcellus/Utica24 Bcf/d
Wet Marcellus/Utica24 Bcf/d Even with well inventory
back‐log, drilling activity needs to increase in order to fill all the expansions
announced for the region. Potential for 20 Bcf of additional capacity
announced above our current flow forecast
Key Takeaways
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• Year on year production growth coupled with weather are key to determining the storage situation
• North American production growth continues to shape market; breaking traditional flow patterns and pricing relationships
• In current price environment drilling economics favor wet plays with NGLs or Oil over dry Natural Gas plays
• Supply is demand constrained ‐ new North American gas production exceeds domestic demand growth in forecast; exports (LNG + Mexico) required to balance market
• Long term prices of NG, NGLs and Crude may help determine where production growth comes from and how proposed pipeline infrastructure may be builtout
© 2013 Platts, McGraw Hill Financial. All rights reserved.
Thank You
Suzanne Minter, Manager, Oil & Gas Consulting [email protected]