A Strategic View of Natural Gas Projects

Transcription

1 A Strategic View of Natural Gas Projects Joseph E. Ramsey Group V. P. Spectra Energy INGAA Foundation Spring Meeting April 12, 2012 Spectra Energy

2 Discussion Points Shale technology that transformed the natural gas industry is revitalizing natural gas liquids and U.S. crude oil production resulting in a resurgence of North American energy Prolific shale plays and geographic shifts in supply locations are resulting in historic changes in the natural gas industry Growing confidence in supply availability and price stability is resulting in new-build demand side investments With simultaneous and large scale infrastructure required across the energy spectrum, natural gas industry could face increasing challenges with siting, resources and costs Clear opportunity for natural gas to become a more important part of our economy, our energy security and our global competitiveness Spectra Energy 2

3 The Geographic Shift of Supply: Marcellus Canadian Imports LNG Rockies MidContinent Supply Eagle Ford Gulf Coast Utica Marcellus Supply dynamics are changing, shifting to growing Appalachian shale Marcellus production more than doubled in 2011 from 2 bcf/d to 4.8 Bcf/d at year end Consultants predict Marcellus to range from 6 Bcf/d to 8 Bcf/d by 2015 As one of the lower breakeven plays, drilling is economic in a low price environment Utica shale underlies Marcellus and could add to the trend as the play develops Spectra Energy 3

4 Natural Gas Shale Economics Low gas prices resulting in accelerated rig pull back in higher breakeven plays; rigs shift to liquid rich, low breakeven plays and oil Current forecasts are not anticipating a decline in overall North American production Declining gas drilling being partially offset by rising associated and rich gas production, continued improvements in drilling efficiencies and well performance A backlog of drilled uncompleted wells exists in many plays Marcellus & Utica Break-even Price Ranges ($/MMcfd) $4.26 $3.89 Marcellus Central (Dry) $3.44 $2.43 Marcellus NE PA $2.11 $1.14 Marcellus Wet $2.00 Utica Source: Tudor Pickering, Wood Mackenzie Spectra Energy 4

5 North American Natural Gas Demand North American demand is anticipated to grow at 1.6% per year Demand growth is primarily driven by the gas fired power generation sector; seeing signs of growth in the industrial sector Increased demand growth in the Southeast and Northeast regions 100 North American Gas Demand Projection (Bcf/d) Power Generation Industrial 20 Commercial Residential E 2015E 2020E 2025E Source: ICF January 2012 Spectra Energy 5

6 The Politics of Energy Tailwinds - pushing forward President s State of the Union and Report from White House Jobs Council promote development of domestic natural gas to fuel manufacturing, power markets,etc. Clean energy shift to reliable and affordable; Focus on enhancing North American energy security High gasoline prices elevates natural gas transportation discussion Natural gas well positioned to address economic growth and deficit reduction policy priorities in U.S. and Canada Canadian regulatory streamlining Executive Order focused on streamlining Federal permitting reviews/decisions for energy infrastructure projects U.S. EPA emission rules for industrial / power sectors FERC focus on gas/electric integration Energy Policy/ Politics Regulatory Headwinds - pushing backward U.S. DOE conditioning LNG exports; Congressional interest growing as manufacturers and Non-governmental Organizations (NGOs) raise price concerns Keystone XL Pipeline decision impacts for siting/permitting projects Some states/provinces continue moratoriums on hydraulic fracturing Implementation of pipeline safety act EPA, Interior, DOE, SEC, etc. reviewing regulation of natural gas development, including areas such as hydraulic fracturing and emissions from transmission/storage Corporate Tax Reform President endorsing extension of accelerated depreciation for 2012 investment Tax Policy MLP structure, oil/gas tax treatment and dividends President s targeted tax proposals Spectra Energy 6