Reliability, Competition and Price: The Changing Status of U.S. Natural Gas Systems Kinect Energy Group September 2017

Transcription

1 Reliability, Competition and Price: The Changing Status of U.S. Natural Gas Systems Kinect Energy Group September 2017

2 Topics From Rita and Katrina to Harvey What s changed in the Natural Gas Market over the last decade? The Curious Case of the Forward Curve Why is Nymex futures pricing diverging from the historical norm? The Consumer s Dilemma What is a responsible consumer of natural gas to do in the current market environment?

3 1/1/2000 3/1/2000 5/1/2000 7/1/2000 9/1/ /1/2000 1/1/2001 3/1/2001 5/1/2001 7/1/2001 9/1/ /1/2001 1/1/2002 3/1/2002 5/1/2002 7/1/2002 9/1/ /1/2002 1/1/2003 3/1/2003 5/1/2003 7/1/2003 9/1/ /1/2003 1/1/2004 3/1/2004 5/1/2004 7/1/2004 9/1/ /1/2004 Early 2000 s Pricing $12.00 Nymex Natural Gas Price Settlements $10.00 $8.00 $6.00 $4.00 $2.00 $-

4 Summer 2005 Natural Gas Pricing

5 2005 Hurricane Season

6 Path and Intensity of Hurricane Rita

7 Supply Sensitivity to Gulf Disruptions

8 One Pillar of Natural Gas Production in 2006

9 Hurricane Rita

10 2017 Atlantic Hurricane Season To Date

11 2017 Nymex Pricing No dramatic spike from Hurricane Harvey tearing through the Gulf. Why?

12 Shale Production is solely responsible for domestic production growth

13 Shale Plays

14 Shale Production Growth

15 LNG Exports With 6 LNG export projects on track to be online by 2020, the U.S. will become a major global market contributor 9.4 Bcf per day of capacity (13% of current production) is currently operational or under construction Online Under Construction

16 Border Pricing, Net Imports, and Infrastructure SoCal 6-MoStrip $ Bcf/d San Juan 6-Mo Strip $ Bcf/d WAHA 6-Mo Strip $ Bcf/d South Texas 6-Mo Strip $2.93 Houston Ship 6-Mo Strip $ Bcf/d Henry Hub 6-Mo Strip $3.02

17 Mexico Production and Imports

18 U.S. Electric Generation by Fuel *Nuclear, Hydroelectric, Petroleum

19 Hurricane Harvey Hurricane Harvey did not had a significant impact on NYMEX natural gas pricing The event was net fundamentally bearish, as demand destruction overshowed production outages 7.0 Bcf of onshore production lost 21 Bcf of lost demand from power generators 5.2 Bcf of Gulf of Mexico production lost

20 Domestic Supply Demand Balance Natural Gas Supply Natural Gas Demand

21 Exports

22 Supply Domestic Production

23 Power Generation

24 Natural Gas Storage Net increase of 20Bcf from the previous week Storage is at 3,010 Bcf Present inventories are 279Bcf (-8.5%) lower than last year and 87Bcf (3.0%) above the 5 year average.

25 5 Year Forward Curves 2010 through 2014

26 5 Year Forward Curves

27 Annual Strip Pricing

28 Future Production

29 Future Production - Risks

30 Production Stagnant below $3 A decade of consistent growth in domestic production ground to a halt in an extended sub-$3 price environment

31 Long-Term Market Story Growth is expected in every major sector: Exports will lead the charge, but power generation and industrial demand are also forecast to grow Production stalled with extended sub-$3.00 pricing 2016 was the first year in 10 with declining domestic production Pricing deep across the forward curve is currently at historically low levels Is the market mispricing future costs?