The Impact of Recent Hurricanes on the U.S. Gas Markets for the Upcoming Winter

Transcription

1 The Impact of Recent Hurricanes on the U.S. Gas Markets for the Upcoming Winter Presented to: Interstate Natural Gas Association of America October 28, 2005 Energy and Environmental Analysis, Inc N. Fort Myer Drive Suite 600 Arlington, Virginia Contacts: Kevin R. Petak Bruce B. Henning (703)

2 Natural Gas Industry Shippers Storage Commercial Residential 272,500 Gas Wells Producers Majors Independents Gathering and Processing 30 Major Interstate Pipelines Storage Industrial & Utilities 1200 Distributors Gas Equipment Manufacturers

3 Purpose of Study The purpose of this study is to assess the impact of recent hurricanes on gas markets throughout the U.S. for the upcoming winter. The primary objective is to determine the adequacy of gas supply considering different recovery scenarios for Gulf Coast gas supplies and different weather conditions.

4 Overview of EEA Model Applied in this Study Study relies on results from EEA s Gas Market Data and Forecasting System (GMDFS), a widely used model for the North American natural gas market. Model recently used for three widely referenced studies: 2003 National Petroleum Council (NPC) Study. American Gas Foundation (AGF/AGA) Study in published in February, INGAA study on gas market infrastructure published in 2005, 2004, and EEA s GMDFS solves for supply/demand balances at market clearing prices in the future. Model is ideal for quantifying impacts of supply disruptions (i.e., Gulf Coast supply outage).

5 Model Used to Analyze Hurricane Impacts Courtesy of EEA

6 EEA Reference Case (without Hurricane Outages) Curtailment Probability 20%

7 Major Pipeline Projects Certificated (MMcf/d) January 2004 to October 2005 Northwest (113) 1. TransColorado (125, 300) 2. CIG (118) 3. Rendezvous (300) 4. WIC (116) 5. WIC (350) 6. Entrega (EnCana) (1,500) 7. Questar (102) Cheyenne Plains (560,170) ANR (107,143) Northern Border (Chicago III) (130) Algonquin (140) Transcontinental (105) Mill River (800) CIG (105) El Paso (502) Transwestern (375) CenterPoint(113) Golden Pass (2,000) Trunkline (200) San Patricio (1,000) Discovery (150) Petal (600) Trunkline(1,500) 19.7 BCF/D Total Cheniere Sabine (2,600) 1,444 Miles Vista Del Sol Cheniere Corpus Christi (1,100) (2,600) Calypso (832) Ocean Express (842)

8 Major Pipeline Projects Pending (MMcf/d) October 2005 ANR (168) NE ConneXion (Tennessee) (800) Algonquin (800) Midwestern (120) Dominion (700) Columbia (172) Jewell Ridge (East Tennessee) (235) Logan Lateral (Texas Eastern) (900) 15.4 BCF/D Total 879 Miles Golden Pass (2,000) Cameron (1,500) Dominion Southern (200) Point Comfort (1,000) Cheniere Creole Trail (3,300) Florida Gas (160) McMoRan (1,500) Compass Pass (1,000) Pearl Crossing (2,000) Triple-T Extension (Tennessee) (200) Cypress Pipeline (Southern Natural) (500) Seafarer Pipeline (El Paso) (800)

9 Studied Recovery Scenarios Base Case Best guess at recovery pattern for gas supply in the Gulf Coast area. LNG imports a little above last winter s level, averaging about 2 Bcfd. No supply boost due to ethane rejection. Worst Case Slower than expected recovery for Gulf Coast supply with less capacity improvement during winter. Gas quality restrictions reduce the effectiveness of partial processing (JT effect). LNG imports average about 1.6 Bcfd. Incremental gas from Egypt, Nigeria, and Trinidad goes to Europe. No supply boost due to ethane rejection. Best Case Faster than expected recovery. Greater capacity improvement than anticipated. More effective Rita work-arounds. LNG imports average about 2.4 Bcfd. Incremental gas makes its way to U.S. with mild European winter. Some supply boost due to ethane rejection.

10 Comparison of Gulf Coast Recovery Scenarios Bcf per Day Shut In 27-Aug-05 3-Sep Sep Sep Sep-05 1-Oct-05 8-Oct Oct Oct Oct-05 5-Nov Nov Nov Nov-05 3-Dec Dec Dec Dec Dec-05 7-Jan Jan Jan Jan-06 4-Feb Feb Feb Feb-06 4-Mar Mar-06 INGAA Worst Case INGAA Best Case Base Case

11 Definition of Curtailment Pertaining to This Study A curtailment situation occurs when the EEA Model indicates that supply into a market region is not sufficient to meet all demand even when all economic alternatives 1 have been exhausted. At that point only firm pipeline transportation commitments are being honored. Interruptible transport customers, including electrical generators and industrials, are: Either shutoff Or, only if available, have obtained firm capacity in the secondary market from firm contract holders with alternatives. All released capacity with recall provisions: Have been returned to the primary contract holder if capacity is necessary to meet delivery obligations. Pipelines are in balance: Everybody, who does not deliver gas (production or storage) into the pipeline, will not receive gas from the pipeline. Everybody that has a contract with the LDC to shut off during a peak period has been shut off. 1) Economic alternatives include fuel switching and dispatch options.

12 Working Gas Fill Level (Bcf) INGAA Base Case Weather Runs U.S. March 2006 Working Gas Levels Versus 1,600 1,400 1,200 1, Market OK, 67% probability Weather Market Stressed but Probably OK, 19% probability Severe Stress with Potential for Load Curtailment, 14% probability 20% % -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% % Difference from Normal Weather

13 INGAA Base Case Curtailment Probability 30%

14 INGAA Base Case Average Curtailments in Bcf 1 State Average Curtailments (in Bcf) Average Total Consumption (in Bcf) Percent of Total Consumption Curtailed Average Industrial and Power Consumption (in Bcf) Percent of Industrial and Power Consumption Curtailed AL % % AR % % CT % % DC % 0 6.2% DE % 1 6.2% FL % % GA % % IL % % IN % % KY % % LA % % MA % % MD % % ME % 9 6.0% MI % % MO % % MS % % NC % % NH % 7 6.0% NJ % % NY % % OH % % PA % % RI % % SC % % TN % % VA % % VT % 1 6.0% WI % % WV % 8 4.8% Total , % 1, % 20% 1. Represents average levels of curtailment occurring in coldest weather cases where curtailment was necessary to balance the market.

15 INGAA Worst Case Weather Runs U.S. March 2006 Working Gas Levels Versus 1,600 Weather 1,400 Working Gas Fill Level (Bcf) 1,200 1, Market OK, 48% probability Market Stressed but Probably OK, 33% probability Severe Stress with Potential for Load Curtailment, 19% probability % -10% -5% 0% 5% 10% 15% % Difference from Normal Weather

16 INGAA Worst Case Curtailment Probability 40%

17 INGAA Best Case Weather Runs U.S. March 2006 Working Gas Levels Versus 1,600 Weather 1,400 Working Gas Fill Level (Bcf) 1,200 1, Market OK, 72% probability Market Stressed but Probably OK, 19% probability Severe Stress with Potential for Load Curtailment, 8% probability - -15% -10% -5% 0% 5% 10% 15% % Difference from Normal Weather

18 INGAA Best Case Curtailment Probability 27%

19 Conclusions Prompt recovery of Gulf Coast supplies is very important for the upcoming winter. Supply/demand balance was already in a very tight situation before supply disruptions due to recent hurricanes. Between 2.5 and 3.5 Bcfd (5 to 7 percent) of U.S. gas production missing from market this winter. Relatively high gas prices (greater than the closing price for the November futures contract) are to be expected. Winter weather will be an important determinant of how the gas market is likely to balance during the upcoming winter. Industrial demand destruction will help keep the market in balance. Under colder weather scenarios, curtailment of gas load may be necessary.

20 Conclusions (Continued) Localized regional curtailments may occur if the winter weather is 5 percent or greater colder than normal. Historically, this type of winter weather occurs in 1 out of every 7 winters. Curtailments likely to be concentrated east of the Mississippi River, with likelihood rising away from the Gulf Coast toward the Northeast. Delayed recovery of Gulf Coast supplies significantly increases likelihood of curtailments, particularly on the East Coast. Curtailments, if and when necessary, will not be large as a percent of total winter gas load. However, because they would most likely be concentrated in a cold week or two, they could be a large percent of total industrial and power load if and when they occur.