Natural Gas Next: The Rockies and the West

Transcription

1 Natural Gas Next: The Rockies and the West Callie Kolbe, Manager, Energy Analysis Sadie Fulton, Senior Energy Analyst September 25, 2017

2 Jordan Cove Back again?

3 There is even more gas?

4 NIMBY!

5 Renewable Targets

6 The Rockies and the West Production: Where can it go? Demand: The impact of renewables How pipeline flows are changing Expectations through Summer 2018

7 Late-Summer Heat in West Population Weighted Degrees Western Temperatures Population Weighted Degrees Rockies Temperatures

8 Bakken-MT Bakken-ND Other-MT Williston, Non-Bakken-ND Big Horn-MT Powder River-MT Williston, Non-Bakken-SD Big Horn-WY Powder River-WY Other-SD Wind River Other-UT Overthrust Uinta Green River- WY Green River- CO Piceance Denver Julesburg- WY Denver Julesburg- CO Rocky Mountain Region 26 Producing Areas Paradox- UT Other-CO San Juan- CO Raton-CO Anadarko-CO

9 Rocky Mountain Region Gas Production, by Producing Area DJ Bakken Source: PointLogic Energy

10 Rockies Production Shrinking Bcf/d Powder River Uinta San Juan Piceance Denver - Julesburg Green River - Overthrust Other Forecast Rockies production expected to continue to succumb to pressures from Northeast production explosion, widely available Canadian gas, and shrinking western demand.

11 Rockies Supply & Demand Bcf/d In the last 5 years, winter balance has averaged 7 Bcf/d. Summer balance has averaged 8.9 Bcf/d Demand Balance Supply Demand Forecast Balance Forecast Supply Forecast

12 Rockies Gets Shorter (well less long) 2012 vs Supply Demand Lower production, combined with modest residential growth was second consecutive year of production decreases. Source: PointLogic Energy

13 Pet-Chem Projects Lead Industrial Demand Growth But Not in West Most of the gas-intensive projects are not slated for buildout along the West and Rockies. Source: IHS-Markit & PointLogic Energy

14 West Gets Shorter 2012 vs Supply Demand Higher demand driven by power and exports to Mexico. Source: PointLogic Energy

15 Power Burn Per Temp in the West 9 Jan.-Sept. Power Burn per Degree in the West, Western Power Burn in Bcf/d YTD 2017 Power YTD 2016 Power YTD 2015 Power YTD 2014 Power YTD 2017 Power Trendline YTD 2016 Power Trendline YTD 2015 Power Trendline YTD 2014 Power Trendline Western Temperatures in Population Weighted Degrees

16 Nat Gas Power Growth Stronger in West than in Rockies Western Electricity Generation by source Rockies Electricity Generation by source 500 1, Generation (Million MW Hours) ,150 1,100 1,050 1, Generation (Million MW Hours) Total Hydro Nuclear Wind Coal Natural Gas Solar Total Hydro Nuclear Wind Coal Natural Gas Solar

17 California Loves Renewables As California s drought conditions lightened, hydro came back in For context, natural gas generation bumps around 20,000-40,000 thousand MW hours in California.

18 Coal Retirements are History in the Rockies Source: EIA

19 West adds Solar and Gas; Rockies adds Wind GW Western Power Generation Additions GW Rockies Power Generation Additions Natural Gas Wind Solar Natural Gas Wind Solar

20 Western Supply & Demand Bcf/d In the last 5 years, winter balance has averaged -7 Bcf/d. Summer balance averaged -5.5 Bcf/d Supply Balance Demand Supply Forecast Balance Forecast Demand Forecast

21 The Flow Pattern Box Competition: Canada and Bakken Competition: Canada & constraints Competition: SCOOP/STACK & Northeast Competition: Growth from Permian

22 Bakken Supply: Large on Northern Border MMcf/d Northern Border Outflows (Jan.-Sept.) Outflows to Midcontinent Bakken Sourced Supply 40% 35% 30% 25% 20% 15% 10% 5% 0% Bakken % of Supplies

23 The Flow Pattern Box Competition: Canada and Bakken Competition: Canada & constraints Competition: SCOOP/STACK & Northeast Competition: Growth from Permian

24 Rockies Eastbound Flows (Jan.-Sept.) Bcf/d REX CIG Cheyenne Plains Southern Star

25 Rockies Westbound Flows MMcf/d Northwest Pipeline Ruby Pipeline Kern River TransColorado Northwest West Southwest South

26 2012 vs. 2017: Flow Patterns Jan.-Sept. Net Rockies (Bcf/d) 2012: (6.8) 2017: (7.0) Change: +(0.2) (0.1) Jan. Sept. Net West (Bcf/d) 2012: : 6.9 Change:

27 Summer 2016 vs. 2017: Flow Patterns April-Sept. Net Flows from Rockies (Bcf/d) 2016: (7.7) 2017: (7.4) Change: -(0.3) +0.1 April-Sept. Net Flows to West (Bcf/d) 2016: : 6.9 Change: - (0.15) +0.4

28 Traditional Constraints PG&E Redwood Path: 88.5% 2.1 Bcf/d PG&E Redwood Path: 89.5% 2.1 Bcf/d Utilization Capacity (summer to date) 2016 Ruby (West): 26% 2.4 Bcf/d 2017 Ruby (West): 26% 2.4 Bcf/d Kern River (Veyo): 93% 2.4 Bcf/d Kern River (Veyo): 86% 2.4 Bcf/d Transwestern (W. Thoreau): 77% 1.2 Bcf/d PG&E Baja Path: 36% 1.1 Bcf/d PG&E Baja Path: 31% 1.1 Bcf/d Transwestern (W. Thoreau): 76% 1.2 Bcf/d El Paso South ML at Cornudas: 75% 2.4 Bcf/d El Paso South ML at Cornudas: 82% 2.4 Bcf/d

29 Rockies & West Basis Widen $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 -$0.10 -$0.20 -$0.30 -$0.40 -$0.50 Rockies and West Basis Opal S. California Border Malin PG&E CG Opal2 S. California Border3 Malin4 PG&E CG5 Above-average Rockies storage inventories, along with cheap supply from western Canada and the Permian Basin, will continue to limit Rockies outflows, keeping basis discounts wider than last year North and South California basis remains wider than the five-year average in both regions because of weak power sector gas demand and large discounts in California s supply regions. Source: IHS

30 Rockies and the West: Conclusions As Northeast supply spills over into neighboring regions, it will put downward pressure on traditional supply basis because it is closer and cheaper to premium markets. Competition in the Midwest forces Rockies supply to shift to the West. Pipeline constraints to the Southwest play an important role in dictating how Rockies gas will find a home in the West.

31 Appendix

32 Rockies Gets Slightly Less Long Summer 2016 vs Dry Prod Supply Canadian Imports Total Supply Power Demand Industrial Res/Com Total Demand Source: PointLogic Energy

33 West Gets Slightly Longer Summer 2016 vs Supply Demand Dry Prod Canadian Imports Total Supply Power Industrial Res/Com Mexican Exports Total Demand Power demand collapses summer-on-summer Source: PointLogic Energy

34 Pricing: California Hub Basis $/MMBtu Malin Basis PG&E-Citygate Basis SoCal Border Basis SoCal-Citygate Basis Note: Negative numbers indicate a price discount to Henry Hub.

35 Competition from Canada Canadian Flows into Rocky Mountains Canadian production nearly doubles Rockies quantities to ship. Bcf/d

36 Change in Flows Demand: Winter = 10.7 Summer = 9.2 Demand: Winter = 4 Summer = 2.2 Rockies to Mid-Continent: 5.8 Winter, 6.2 Summer All data: Average of last 5 years, Bcf/d

37 Big-Picture Flows: Summer 2017 Demand = 9.0 Demand= 2.1 Rockies to Mid-Continent: 6.6 All data: Summer 2017 (April-September), Bcf/d

38 West Production: Small and Steady Bcf/d Other Monterey Shale Suan Juan-NM Permian-NM Forecast Production in Western Region dominated by Permian-NM and San Juan-NM. Source: PointLogic Energy We expect production for the Western region to remain relatively flat at 3.6 Bcf/d through the forecast period as increasing production from Permian-NM is offset by losses in the rest of the region.

39 West Demand Bcf/d * * Winter Summer Industrial Res/Comm Power

40 Power Burn Per Temp: Rockies 1 Jan.-Sept. Power Burn per Degree in the Rockies, Rockies Power Burn in Bcf/d YTD 2017 Power YTD 2016 Power YTD 2015 Power YTD 2014 Power YTD 2017 Power Trendline YTD 2016 Power Trendline YTD 2015 Power Trendline YTD 2014 Power Trendline Rockies Temperatures in Population Weighted Degrees