CERI Commodity Report Natural Gas

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1 CERI Commodity Report Natural Gas November-December 15 The Energy Information Administration s New Storage Classifications Paul Kralovic November 19, 15 was an important date for the Energy Information Administration s (EIA) weekly natural gas storage report (WNGSR), a useful and closelywatched indicator of the balance between supply and demand in the Lower- states. It was the day the EIA released its new regional storage classifications, changing from three regions to five regions, altering how the organization reports regional inventories held in underground storage facilities in the Lower- states. 1 The EIA also made changes to its historical data, recalculating storage data back to 1, reflecting the new regional allocations. Figure 1 illustrates the changes introduced in the EIA s new regional classifications for the Lower- states. Historically, the storage data was divided among three regions: West, East and Producing. The former two regions were often referred to as Consuming West and Consuming East. The new storage regions include five divisions: Pacific, Mountain, South Central, Midwest and East. Figure 1: Old Storage Regions (left) and New Storage Regions (right) Source: EIA 3 CERI Commodity Report Natural Gas Editorial Committee: Paul Kralovic, Dinara Millington, Megan Murphy, Jon Rozhon, Allan Fogwill About CERI The Canadian Energy Research Institute is an independent, not-for-profit research establishment created through a partnership of industry, academia, and government in Our mission is to provide relevant, independent, objective economic research in energy and related environmental issues. For more information about CERI, please visit our website at or contact us at info@ceri.ca. The two significant changes include breaking up the Consuming East region into the Midwest region and the East region and breaking up the Consuming West region into the Pacific region and the Mountain region. The Midwest region includes Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Tennessee and Wisconsin, while the new East region now includes Connecticut, Delaware, District of Columbia, Florida, Georgia, Massachusetts, Maryland, Maine, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and West Virginia. It is interesting to note that Nebraska moves from the old East region to the Mountain region, while Minnesota moves in the other direction. New Mexico also moves into the Mountain region from the former Producing region. The original three storage regions were created by the EIA in 1993 but are now out of date. 5 Fueled by rapid technological advancements such as horizontal drilling and hydraulic fracturing, shale production has boomed in the past half dozen years, changing the dynamics of the natural gas market in the Lower-. It is important to note that the EIA has already overhauled gas production data to reflect emerging shale production and has introduced new drilling data to reflect changes in gas field development. For example, in 1993 the top 1 producing areas in the Lower- (in MMcf) were: Texas (,9,), Louisiana (,991,13), Federal Offshore Gulf of Mexico (,79,37), Oklahoma (,9,9), New Mexico (1,9,9), Kansas (,37), Wyoming (3,957), Colorado (,95), Alabama (3,) and California (315,51). 7 In 1, the top 1 producing areas in the Lower- (in MMcf) were: Texas (7,953,33), Pennsylvania (,1,3), Oklahoma (,31,11), Louisiana (1,9,7), Wyoming (1,791,35), Colorado (1,31,39), Federal Offshore Gulf of Mexico (1,55,3), New Mexico (1,1,), Arkansas (1,13,7) and West Virginia (1,,5). New to the top 1 are Pennsylvania, Arkansas and West Virginia, at the expense of Kansas, Alabama and California. All aforementioned states are bolstered by production in various shale plays. The largest producing

2 Page shale gas play in the US is the Marcellus Shale, producing 15.5 billion cubic feet per day (Bcfd) 9 of dry shale gas in October 15, and the fastest growing shale gas play in the US is the Utica Shale, producing 3.1 Bcfd. 1 Both are located in the Appalachian Basin and have thrust Pennsylvania, West Virginia and Ohio into large producers in the US. While Ohio is not in the top 1, its production has risen steeply from, MMcf in 9 to 51,77 MMcf in Natural gas production in Arkansas has increased from 79,95 MMcf in 9 to 1,13,7 MMcf in 1; the state is home to the Fayetteville Shale. 1 Other states that have experienced dramatic increases in shale gas production in the top 1 include Texas (Barnett Shale, Eagle Ford Shale and the west portion of the Haynesville Shale), Louisiana (the eastern portion of the Haynesville Shale) and Oklahoma (Woodford Shale). The new storage regions will lead to a better understanding of natural gas flows in the Lower- states. In addition, the new classifications better reflect the location of storage of the underground facilities in the US. 13 Figure illustrates the size and location of the three different types of underground storage facilities in the US, including depleted natural gas and oil fields, aquifers and salt domes. The former is the most common type of the storage in the US; depleted fields are relatively easy to convert into storage, they have the additional benefit of being located close to either large consuming areas or existing natural gas pipeline systems. 1 It is interesting to note that there are 1 entities that operated nearly underground storage facilities in the US. 15 Figure : US Underground Natural Gas Storage Facilities by Type (as of July 15) Regardless of the new classification system, one thing is for certain, working natural gas in storage is at record levels. As of November 13, 15, total US storage achieved a record level of, Bcf, only to be surpassed a week later by,9 Bcf. 17 This is likely due to warmerthan-normal winter weather thus far in the US, leading to lower heating demand. The previous weekly record of 3,99 Bcf was set on November, 1. 1 Endnotes 1 EIA website, Today in Energy, New classifications of natural gas storage regions will begin November 19, Released on November 1, 15, EIA website, Methodology for EIA Weekly Underground Natural Gas Storage Estimates, November 1, 15, methodology.html 3 PointLogic Energy website, The Updated EIA Natural Gas Storage Regions are Here to Stay, November 1, 15, EIA website, Notes and Definitions, 5 EIA website, Today in Energy, New classifications of natural gas storage regions will begin November 19, Released on November 1, 15, Argus Media website, EIA to roll out changes to gas storage report, November 1, 15 NewsBody.aspx?id=113753&menu=yes 7 EIA website, Natural Gas Gross Withdrawals and Production, Marketed Production, Volumes in Annual Million Cubic Feet, ibid 9 EIA website, Energy in Brief, Shale in the United States, US dry shale gas production figure data, article/shale_in_the_united_states.cfm 1 ibid 11 EIA website, Natural Gas Gross Withdrawals and Production, Marketed Production, Volumes in Annual Million Cubic Feet, ibid 13 EIA website, FAQs about New Regions for Weekly Natural Gas Storage Report, 1 EIA website, Underground Natural Gas Storage, ngpipeline/undrgrnd_storage.html 15 EIA website, The Basics of Underground Natural Gas Storage, Release Date: November 1, 15, storage/basics/ 1 EIA website, Today in Energy, New classifications of natural gas storage regions will begin November 19, Released on November 1, 15, 17 EIA website, Weekly Working Gas in Underground Storage, EIA website, Today in Energy, Working natural gas in storage matches record level, November, 15, todayinenergy/detail.cfm?id=37 Source: EIA 1

3 Page 3 Henry Hub/AECO-C Beginning of Next Month Spot Price (US$/MMBtu) Henry Hub/Chicago Beginning of Next Month Spot Price (US$/MMBtu) Differential Henry Hub AECO-C Differential Henry Hub Chicago Jan-5 Jul- Jan- Jul-9 Jan-11 Jul-1 Jan-1 Jul Jan-5 Jul- Jan- Jul-9 Jan-11 Jul-1 Jan-1 Jul-15 SOURCE: CERI, Platts Gas Daily Price Guide. SOURCE: CERI, Platts Gas Daily Price Guide. Henry Hub/Rockies Beginning of Next Month Spot Price (US$/MMBtu) Chart Title Henry Hub/Southern California Beginning of Next Month Spot Price (US$/MMBtu) 15 Differential Henry Hub Rockies Jan-5 Jul- Jan- Jul-9 Jan-11 Jul-1 Jan-1 Jul Differential Henry Hub Southern California Jan-5 Jul- Jan- Jul-9 Jan-11 Jul-1 Jan-1 Jul-15 SOURCE: CERI, Platts Gas Daily Price Guide. SOURCE: CERI, Platts Gas Daily Price Guide.

4 SOURCE: Canadian Gas Association. SOURCE: CERI, Canadian Gas Association, Statistics Canada. Page , Canadian Heating Degree Days 5-Year Avg US Heating Degree Days 5-Year Avg SOURCE: NOAA. SOURCE: CERI, NOAA, EIA. Canadian Heating Degree Days vs Residential and Commercial Consumption Degree Days BCFPD 1, 7 Degree Days Consumption 1, Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 US Heating Degree Days vs Residential and Commercial Consumption Degree Days BCFPD 1, Degree Days Consumption 1, Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 CERI Commodity Report - Natural Gas

5 SOURCE: NOAA. SOURCE: Environment Canada. SOURCE: NOAA. SOURCE: Environment Canada. Page 5

6 CERI Commodity Report - Natural Gas SOURCE: Environment Canada. SOURCE: NOAA. SOURCE: NOAA. Page

7 SOURCE: Statistics Canada. SOURCE: Statistics Canada, NEB. SOURCE: EIA. SOURCE: EIA. Page 7 Canadian Consumption By Sector (Bcfpd) 1 1 Industrial & Power Commercial Residential 1 1 Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 US Consumption By Sector (Bcfpd) 1 1 Industrial Electric Power Commercial Residential 1 Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 Canadian Marketable Production By Province/Region (Bcfpd) 1 BC, Yukon, NWT AB SK E. Coast Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 US Marketable Production (Bcfpd) 9 US Total Louisiana GOM Federal Waters Texas Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15

8 Page BC, Yukon, NWT Marketable Production (Bcfpd) Saskatchewan Marketable Production (Bcfpd) Alberta Marketable Production (Bcfpd) East Coast Marketable Production (Bcfpd) SOURCE: Statistics Canada, NEB. SOURCE: Statistics Canada, NEB. SOURCE: Statistics Canada, NEB. SOURCE: Statistics Canada, NEB. CERI Commodity Report - Natural Gas

9 Page System Field Receipts TransCanada + Westcoast; Monthly Average (Bcfpd) Canadian Gas Exports to the US By Export Point - West (Bcfpd) Kingsgate Monchy Elmore Huntingdon Oct-1 Dec-1 Feb-15 Apr-15 Jun-15 Aug-15 Oct Alberta System Deliveries (Bcfpd) Empress McNeill AB-BC Alliance Dec-1 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Canadian Gas Exports to the US By Export Point - East (Bcfpd) Emerson Iroquois Others Niagara Oct-1 Dec-1 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 SOURCE: CERI, TCPL, Westcoast Energy. SOURCE: NEB. SOURCE: NEB. Note: As of December 15, Alliance deliveries are no longer available. SOURCE: CERI, TCPL, Alliance Pipeline.

10 SOURCE: NEB. SOURCE: NEB. SOURCE: NEB, EIA. SOURCE: NEB. Page 1 US Imports of Canadian Gas By US Region (Bcfpd) 1 West Midwest East 1 Oct-1 Dec-1 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Total US Pipeline Gas Imports (Bcfpd) 1 1 Canada Mexico 1 Sep-1 Nov-1 Jan-15 Mar-15 May-15 Jul-15 Sep Average Canadian Export Price By US Region (C$/GJ) West Midwest East Oct-1 Dec-1 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Canadian Gas Imports By Import Point (Bcfpd) Courtright Sarnia St. Clair Other Oct-1 Dec-1 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 CERI Commodity Report - Natural Gas

11 Page 11 Eastern US LNG Imports By Facility (Bcf) US GoM LNG Imports By Facility (Bcf) 1 Cove Point Elba Island Everett NE Gateway Neptune Freeport Lake Charles Sabine Pass Cameron Golden Pass Gulf LNG Nov-13 Feb-1 May-1 Aug-1 Nov-1 Feb-15 May-15 Aug-15 Nov-15 Nov-13 Feb-1 May-1 Aug-1 Nov-1 Feb-15 May-15 Aug-15 Nov-15 SOURCE: US. DOE. SOURCE: US DOE. US LNG Imports By Origin (Bcf) Volume-Weighted Average LNG Price (US$/MMBtu) Other Nigeria Trinidad Norway Qatar Yemen Nov-13 Feb-1 May-1 Aug-1 Nov-1 Feb-15 May-15 Aug-15 Nov-15 SOURCE: US DOE. Note: There were no LNG imports for the month of November 1. SOURCE: US DOE.

12 Page 1 SOURCE: US DOE, NEB. SOURCE: US DOE. Japan US LNG Exports to Japan (Bcf) US LNG Re-Exports By Destination (Bcf) 7 Mexico Brazil Egypt Nov-13 Feb-1 May-1 Aug-1 Nov-1 Feb-15 May-15 Aug-15 Nov-15 Nov-13 Feb-1 May-1 Aug-1 Nov-1 Feb-15 May-15 Aug-15 Nov-15 SOURCE: EIA, US DOE. SOURCE: US DOE. CERI Commodity Report - Natural Gas

13 Page 13 North American Active Rigs Canadian Rig Fleet Utilization Weekly Average Active Rigs 3, US WCSB,5 1, Active Rigs Total Rig Drilling Fleet 9, 1, , Jan- Jan-7 Jan- Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 Jan-1 Jan- Jan-7 Jan- Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 Jan-1 SOURCE: CERI, CAODC, Baker Hughes. SOURCE: CERI, CAODC. WCSB Active Rigs by Province Weekly Average Western Canada Active Rigs Weekly Average 7 SK AB BC 5-Year Avg Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 Jan Week Number SOURCE: CERI, CAODC. SOURCE: CERI, CAODC.

14 Page 1 US Total Oil- and Gas-directed Active Rigs US Total Active Rigs,,, 1, 1, 1, 1, 1, Oil-directed Gas-directed Gas-directed % 1% 9% % 7% % 5% % 3% % 1% % Jan- Jan-7 Jan- Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 Jan-1,5 Total Oil-directed GoM Gas-directed Onshore Gas-directed, 1,5 1, 5 Jan- Jan-7 Jan- Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 Jan-1 SOURCE: CERI, Baker Hughes. SOURCE: CERI, Baker Hughes. US Gulf of Mexico Active Rigs 1 Oil-directed Gas-directed 1 Jan- Jan-7 Jan- Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 Jan-15 Jan-1 SOURCE: CERI, Baker Hughes. CERI Commodity Report - Natural Gas

15 Page 15 1, ,5, 3,5 3,,5, 1,5 1, 5 Canadian Working Gas Storage 5-Year Avg US Lower- Working Gas Storage 5-Year Avg Canadian Storage by Region 9 West East Dec-1 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 US Storage by Region,5 East Midwest Mountain Pacific South Central, 3,5 3,,5, 1,5 1, 5 Dec-1 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 SOURCE: CERI, Platt s Gas Daily. SOURCE: CERI, Platt s Gas Daily. SOURCE: CERI, Platt s Gas Daily. SOURCE: CERI, Platt s Gas Daily.

16 Page 1 WC_IJ_WD Western Canadian Storage Injections/Withdrawals 1 5-Year Avg Canadian Storage Injections/Withdrawals 15 5-Year Avg Eastern Canadian Storage Injections/Withdrawals 5-Year Avg SOURCE: CERI, Platt s Gas Daily. SOURCE: CERI, Platt s Gas Daily. SOURCE: CERI, Platt s Gas Daily. CERI Commodity Report - Natural Gas

17 Page US East Storage Injections/Withdrawals 5-Year Avg US Mountain Region Storage Injections/Withdrawals 5-Year Avg US Midwest Region Storage Injections/Withdrawals 3 5-Year Avg US Pacific Region Storage Injections/Withdrawals 5-Year Avg SOURCE: CERI, EIA. SOURCE: CERI, EIA. SOURCE: CERI, EIA. SOURCE: CERI, EIA.

18 Page US South Central Region Storage Injections/Withdrawals 5-Year Avg US Storage Injections/Withdrawals 5-Year Avg SOURCE: CERI, EIA. SOURCE: CERI, EIA. CERI Commodity Report - Natural Gas