Québec Natural Gas Market Review. Shahrzad Rahbar, PhD President

Transcription

1 Québec Natural Gas Market Review Shahrzad Rahbar, PhD President Octber 8,

2 Overview Cntext Transitin prcess Energy East 2

3 Industrial Gas Users Assciatin Funded 40 years ag as a calitin f large industrial gas users Membership frm mining, steel, aluminum, petrchemicals, pulp and paper and manufacturing sectrs Over 20,000 direct emplyment in Québec 9000 suppliers and 20,000 indirect jbs in Québec Annual cntributin t the Québec ecnmy in excess f $7.5 billin 740,000 jbs wrldwide Cnsumptin exceeds 100 PJ per year Members are in cyclic cmmdity business and cmpete internatinally Energy csts factr in internatinal cmpetitiveness 3

4 The Changing Energy Landscape Technlgy advancement enabled shale gas and tight il Canada s single custmer has fund its wn supply f il and gas QC is in prximity f shale gas bubble Demand fr ur il cmes frm the develping ecnmies nt the US Shale gas supply has turned the cntinental natural gas market n its head Within five years NA has gne frm being gas deficient t having excess Vast supplies f shale gas Michigan Pennsylvania & Ohi reserves much larger than WCSB BC shale targeted fr LNG exprt markets WCSB supply targeted at Alberta wn use Changing trade patterns fr il and gas 4

5 Infrastructure Needs t Catch-up Pipeline netwrk is ptimized fr yesterday s supply picture Tw sides f the cin: Stranded Assets and Pipeline Bttleneck Plicy & regulatins are ptimized fr stable market cnditins Pace f change is much faster than befre Scale f change transcends jurisdictinal bundaries Getting the transitin right attracts jbs & grws the ecnmy Reliable access t cst cmpetitive energy attracts industrial develpment Prximity t Marcellus and Utica shuld attract industrial investment t QC Mismanaging the transitin is a cstly lst pprtunity New flw cnfiguratin will shape trade & investment patterns fr several decades 5

6 Unduly Turbulent Transitin Pipeline majrs fught and cntinue t fight vigrusly Flurry f regulatry activity (NEB, OEB and the Régie) Threats t security f supply Settlement Agreement aims at remving bttlenecks NEB apprval pending Cnstructin prjects apprved by the OEB Energy East aims at addressing the stranded asset issue Cntinued cnflict amng pipeline majrs Ontari and Québec Cnsultatins underway Painful, cstly and unsettling t markets 6

7 IGUA Perspective n the Transitin Industrials need access t reliable and cmpetitively priced energy t survive, create jbs and grw the ecnmy We recgnize that changing the architecture f the gas infrastructure is nn-trivial and entails cst We expect the transitin t benefit the market nt be detrimental t it Supply diversity and mre cmpetitive landed price f gas shuld grw the prvincial ecnmy and fuel industrial revival Security f supply shuld nt be a threat nr shuld it drive the landed price f gas in the prvince 7

8 Transitin Prcess Anmalies N fcus n capitalizing n the prximity t new shale supply fr ecnmic develpment Ecnmic revival witnessed in Michigan, Ohi and Pennsylvania sadly lacking in Québec and Ontari Granular level: we underestimate future demand Managing a cntinental/reginal energy shift thrugh a jurisdictinal regulatry lens is restrictive Piecemeal and inefficient regulatry prceedings Oblivius t the impact n secndary markets Granular level: Majr prblem fr Québec industrials (half the gas vlume) Rely heavily n the secndary market Will be expsed t New England delivered gas prices because the marketers wh have firmed up capacity price services fr the hungry US Nrth East market Unfrtunate balance: Markets are deprived f the pprtunities but expsed t the threats 8

9 IGUA and Energy East Enthusiastic abut the cncept f the prject Leverages Canadian energy resurces t strengthen the industrial base in Canada Brings new life t the petrchemical industry Repurpses underutilized gas assets Cncerned abut the specifics N issue with the transfer upstream f the Nrth Bay shrtcut Issue with the capacity and cst implicatins f repurpsing the Nrth Bay shrt cut Capacity Cst 9

10 Capacity Shrt Fall is a Cncern TransCanada s prpsal amunts t a 20% net reductin in capacity available in the Eastern Ontari Triangle Future demand is slely based n FT cntracts while we knw that the existing capacity is fully utilized The level f cnstraint n the secndary market is unclear The almst 600 TJ/day difference between the LDC and TransCanada demand prjectins is discncerting The future f exprt vlumes seems t be the key difference In the absence f cnsensus amng the pipeline majrs n future demand fr gas, IGUA can nt supprt any net reductin in capacity Excess capacity is cstly but capacity shrt fall is detrimental Security f supply and the secndary market efficiency at risk 10

11 Crss Subsidizatin is a Cncern IGUA welcmes repurpsing underutilized gas assets frm Empress t Nrth Bay IGUA has n bjectin t repurpsing the Nrth Bay shrt cut prvided there is n incremental cst t gas markets frm the capacity replacement Impsing additinal cst n gas markets fr building replacement capacity fr used and useful assets is cnstrued as crss-subsidizatin between energy markets and shuld be discuraged 11

12 Energy East Cnsideratins fr Québec Step up presence at the NEB, and crdinate messaging with Ontari Seek sufficient pipeline capacity t meet current and future demand fr gas Discurage crss subsidizatin between energy markets Gas Market Transitin Develp radmap fr ecnmic develpment based n prximity t shale supply Empwer the Régie t crdinate with OEB and NEB in addressing related pipeline issues Enhance gas market transparency NEB t develp versight capability similar t FERC 12

13 Thank Yu 13