March 13, 2013 Nashua, NH Natural Gas Market Conditions; & Gas & Power In New England Presentation to: Consumer Liaison Working Group Stephen Leahy Northeast Gas Association
Topics The Best of Times: natural gas market trends Changing Times: how shale is changing traditional market flows Familiar Times: gas & power in New England
About NGA Non-profit trade association Local gas utilities (LDCs) serving New England, New York, and New Jersey Several interstate pipeline companies LNG importers (Distrigas, Repsol) and LNG trucking companies About 200 associate member companies, from industry suppliers and contractors to electric grid operators www.northeastgas.org
Continued on NGA web site http://www.northeastgas.org/about-nga/antitrust-guidelines
Best of Times
Production Up, Commodity Price Down U.S. production remains high despite low prices. EIA: average U.S. wholesale natural gas prices fell 31% in 2012. Source: U.S. EIA, 2-21-13
Lower Air Emissions In 2011, there was a 4.6% reduction in CO 2 emissions from power generation in the U.S. due primarily to greater use of natural gas and renewables and less coal. 250,000 200,000 150,000 100,000 50,000 0 Electric Utility Emissions, MA, 1990-2010 1990 2000 2010 NOx SO2 Source: U.S. EIA - U.S. EPA, Jan. 2013 30,000,000 25,000,000 CO2 Emissions, Electric Utilities, MA, 1990-2010 President Obama, State of the Union, 2-12-13: The natural gas boom has led to cleaner power and greater energy independence. We need to encourage that. 20,000,000 15,000,000 10,000,000 5,000,000 0 1990 2000 2010
Lower Wholesale Electric Prices NY ISO, Jan. 2013 The average wholesale electric energy price for 2012 was the lowest in the 12-year history of New York s competitive markets for wholesale electricity. ISO-NE, Jan. 2013 Wholesale electricity prices in New England fell by nearly 23% last year to their lowest levels since 2003. Lower natural gas prices and lower demand cited as key factors. Source: FERC
Growing Regional Interest CT Comprehensive Energy Strategy Maine Natural Gas Task Force NJ s 2011 Energy Master Plan calls for residential expansion, especially to southern parts of the state New York City is phasing out #4 and #6 oil in buildings over coming years role of natural gas will grow NYS DPS looking at existing natural gas franchise expansion policy statewide VT Gas expansion project.
Gas Utility Service Areas
Northern New England
Home Heating Share Growing 3,000 2,500 2,000 1,500 1,000 500 0 Average Consumer Expenditures for Heating Fuels, 2006 2012 2006 07 2007 08 2008 09 2009 10 2010 11 2011 12 2012 13 Forecast Source: U.S. EIA, Oct. 10, 2012. Natural gas data is for Northeast states of CT, ME, MA, NH, NJ, NY, PA, RI, VT. Heating oil is U.S. average. Natural Gas Heating Oil Natural gas is 37% of New England home heating market. Oil is 42%; electricity is 12%. NSTAR Conversions, 2003-2012 6.
Natural Gas Vehicles (NGVs) Photos courtesy of AVSG and Enviro Express If we start making cars and trucks that run on natural gas, there s the potential to create over a half a million American jobs With rising gas prices and growing instability in oil regions around the world, the time to act is now. - Rep. John Larson, CT, lead co-sponsor of NAT GAS Act, U.S. Congress
BENTEK: Northeast Production Can Grow by 8.0 Bcf/d by 2017 Source: BENTEK Energy. Presented at NGA Market Forum, April 25, 2012.
Pipeline Projects National Fuel, Line N 2013 National Fuel, West to East Iroquois, Wright Interconnect Prepared by NGA, based on publicly available information. Project locations approximate. As of 1-13. Tennessee, Northeast Expansion VERMONT Empire, Tioga County II Tennessee, MPP Williams, Northeast Supply Link Williams & Cabot, Constitution Pipeline Tennessee, Northeast Upgrade Tennessee, Rose Lake Spectra, AIM Spectra, NJ / NY Expansion Williams, Rockaway Lateral/Northeast Connector Spectra/Texas Eastern, Millennium, TEAM 2014 Minisink & Hancock Compression Projects
Projects In-Service This Year (all outside New England) Tennessee s Northeast Upgrade : 636 MMcf/d Tennessee s MPP Project : 240 MMcf/d Millennium s Minisink Compressor : 150 MMcf/d National Fuel Gas s Line N : 30 MMcf/d Transco s Northeast Supply Link : 250 MMcf/d Spectra s NJ-NY Expansion : 800 MMcf/d Photos courtesy of Spectra Energy, 12-12
Changing Times
Northeast (and New England) Supply Dynamic: Transformation Traditionally, end of the pipeline ; long-haul transportation from Gulf Coast, western Canada Changes: Marcellus Shale volumes increasing, displacing Gulf and other long-haul supplies Lower imports from Canada Lower imports of LNG Exports from the Northeast to Canada Use of off-system CNG and LNG as supply Higher pipeline utilization and more frequent capacity constraints at western points
PNGTS M&NE Iroquois Tennessee Algonquin 5 Interstate Pipelines Serve New England Copyright: Northeast Gas Association Prepared by: Coler & Colantonio, Inc. February 2012
Marcellus Shale Supply Growth on Tennessee Gas Pipeline Source: Tennessee Gas Pipeline/Kinder Morgan, 11-12
Imports from LNG and Canada are Lowering LNG IMPORTS, 2009-12 *Brunswick Pipeline Flows Source: Distrigas, 12-3-12
Higher Utilization, Less Available Capacity for Non- Firm Days with Zero Interruptible Capacity Available on Algonquin Pipeline, Last 3 Years Source: Spectra Energy
TGP: Restrictions of Various Interruptible Services: Winter Period Northeast Locations Comp. Station #245 Comp. Station #315 Comp. Station #321 Percent Days Restricted (Nov Mar) Description 2009/2010 2010/2011 2011/2012 W. Winfield NY flowing all points east Wellsboro, PA flowing west, south Eastern PA flowing east 41.72% 96.03% 99.34% 0.00% 25.17% 90.79% 37.75% 47.68% 9.21% * Comp. Station #325 NW NJ east to NJ,NYC, SW CT 0.00% 86.75% 6.58% * * TGP footnote: Dramatic reduction in restrictions post 300 Line Expansion placed in service Nov. 2011 Source: Tennessee Gas Pipeline/Kinder Morgan
TGP: Restrictions of Various Interruptible Services: Summer Period Northeast Locations Percent Days Restricted (April- October) Description 2010 2011 2012 Comp. Station #245 Comp. Station # 321/325 W. Winfield NY flowing all points east Eastern PA and NJ flowing east 22.43% 78.50% 94.12% 11.68% 73.36% 0.00%* Comp. Station # 315 Wellsboro, PA flowing west, south 0.00% 99.53% 100% * Dramatic reduction in restrictions post 300 Line Expansion placed in service Nov. 2011 Source: Tennessee Gas Pipeline/Kinder Morgan
Familiar Times
New England Annual Gas Consumption by Sector 2011 2004 2000 Residential Commercial Industrial Power Gen 0 100 200 300 400 500 600 700 800 900 1,000 Billion cubic feet Source: U.S. Energy Information Administration
Gas Power Plants in Region: Firm vs. Non-Firm Source: Repsol
This Winter Gas demand up about 3%. January slightly warmer weather, February normal weather. Gas system operated well. Week of Jan. 21 was good test. Some near-record throughput by LDCs and pipelines. Canaport sent out average of 800 million per day during 6-day cold stretch, and over 900 million on Jan. 22. As anticipated, several pipelines issued restrictions at times of strong demand, reflecting constrained capacity, particularly at western end of region. Spot market prices spiked as high as $35 in New England and Northeast. Why? Pipelines at capacity. Resulting impact on electric prices. Gas utilities (LDCs) not really affected by spot market price as they have in place long-term supply and storage arrangements.
A Cold Week in January Average Tues, 1 22 Wed., 1 23 Thurs, 1 24 Fri, 1 25 Temperature Boston 20 F 14 F 13 F 12 F New York City 20 F 16 F 17 F 18 F Natural gas demand (Bcf per Tues, 1 22 Wed., 1 23 Thurs, 1 24 Fri, 1 25 day) New England 3.77 3.75 3.68 3.42 New York City 4.95 4.94 4.99 4.58 Day ahead spot natural gas price per MMBtu Tues, 1 22 Wed., 1 23 Thurs, 1 24 Fri, 1 25 New England $12.34 $21.25 $29.94 $34.25 New York City $16.03 $20.75 $33.96 $36.00 Henry Hub $3.63 $3.53 $3.56 $3.42 Day ahead onpeak electricity price per MW Tues, 1 22 Wed., 1 23 Thurs, 1 24 Fri, 1 25 New England $143.37 $200.74 $226.84 $260.51 New York City $146.80 $173.10 $224.96 $253.36 Source: U.S. EIA
Constraint Points Source: U.S. EIA, 1-25-13
Securing Pipeline Capacity The pipelines operate as they are designed on peak days Facilities are designed to support primary firm obligations Most generators in region do not have firm contracts back to a liquid supply point On peak days, only firm services will be assured flow Absent firm commitments, generators will not have gas supplies to meet electric generation needs Generators indicate that the regional electric market does not provide incentives for them to enter into firm contract arrangements, or to utilize alternate fuel back-up Infrastructure counts Pipeline investments would ease regional gas constraint points and lower prices pending customer commitments
Concentric Analysis from 2012 Concentric Energy Advisors conducted a study for Spectra Energy in spring 2012 reported on at March 2012 Consumer Liaison session Additional pipeline capacity could lower natural gas costs in New England (as well as ease bottlenecks/constraint points) Concentric Energy Advisors estimates $600 MM + in savings for New England $300 MM direct benefit from additional pipeline infrastructure Assuming $150 MM cost of service, $1 investment yields $2 savings
Discussions Continue New England Gas-Electric Discussion Group NESCOE ISO-NE Strategic Plan FERC Electric-Gas Market Coordination
NGA Regional Market Trends Forum April 30, Hartford, CT Presentations on: Pipeline projects Accelerated infrastructure replacement System expansion More info at: www.northeastgas.org