AAPL 2011 Texas Land institute September 13, 2011 Christopher B. McGill Managing Director, Policy Analysis 0
Natural Gas Production Monthly 1998 2010 1
2011 Daily Dry Natural Gas Production (after extraction losses) 70.0 65.0 60.0 55.0 50.0 45.0 40.0 Bcf per day 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Jan 2011 Jun 2011 Dec 2011 Source: Bentek Energy LLC, Energy Market Fundamentals, August 16, 2011.
Comparisons of January 2006 vs. January 2011 Residential Gas Bills and Prices Illinois Massachusetts 2006 Residential Price $13.64 $19.41 2011 Residential Price* $8.08 $13.85 2006 Gas Bill $222.41 $264.89 2011 Gas Bill* $181.41 $241.79 *Estimated, based on regional EIA short term forecasts, historical data, and heating degree days. Source: Energy Information Administration 3
Comparisons of Residential Gas Bills Using January 2006 and January 2011 Prices and January 2011 Consumption Levels Illinois Massachusetts January 2011 Gas Bill Using $181.41 $241.79 January 2011 Residential Prices January 2011 Gas Bill Using $306.25 $338.82 January 2006 Residential Prices Savings Due to Lower Prices $124.84 $97.03 4
U. S. Natural Gas and Crude Oil Prices $ per MMBtu 25 20 Natural Gas Henry Hub Spot Crude Oil WTI Spot 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Energy Information Administration, U.S. DOE. 5
U. S. Natural Gas Prices dollars per thousand cubic 25 20 Henry Hub spot price Composite wellhead price Forecast 15 10 5 0 Jan 2007 Jan 2008 Jan 2009 Jan 2010 Jan 2011 Jan 2012 Source: Short-Term Energy Outlook, August 2011 6
The Politics of Energy: Natural Gas Job Creation 200,000 Direct, Indirect and Induced Jobs Created by Natural Gas Extraction Growth since 2007 Source:Timothy Considine, Robert W. Watson and Nicholas B. Considine, The Economic Opportunities of Shale Gas Development, Manhattan Institute, May 2011. 7
WAVE, GOODBYE, TO WHERE WE HAVE BEEN Source: American Association of Petroleum Geologists.
WAVE, HELLO, TO WHERE WE ARE GOING Source: www.wikipedia.org/wiki/utica_shale.
Marketed Natural Gas Production Source: Energy Information Administration.
Hydraulic Fracturing Source: American Petroleum Institute. 11
Hydraulic Fracturing Treatment Woodford Shale, Canadian County, Oklahoma Source: JPTOnline, Society of Petroleum Engineers.
US Shale Gas Production Navigant Consulting 1998 2011 18 16 14 Billion Cubic Feet per day 12 10 8 6 4 2 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011est 13
U.S. Dry Natural Gas Reserves (1988 2009) 300 250 200 Trillion cubic Feet 150 100 50 0 Source: Energy Information Administration. Data source: Potential Gas Committee (2009) 14
Energy Information Administration Reserves and Production of Dry Natural Gas in the United States (TCF) EIA Dry Gas Year Reserves Production 1990 169 17.8 1992 165 17.8 1994 164 18.8 1996 166 18.9 1998 164 19.0 2000 177 19.2 2002 187 18.9 2004 193 18.6 2006 211 18.5 2008 245 20.4 2009 273 21.6 15
Shale Basins and the U.S. Pipeline Grid Source: American Clean Skies Foundation. 16
PGC Resource Assessments, 1990 2010 Total Potential Gas Resources (mean values) Data source: Potential Gas Committee (2009)
Potential Gas Committee Determination of Future Supply of Natural Gas in the United States (TCF) DOE Traditional Coal Future Cumulative Ultimate Reserves + Resources + Gas = Supply + Production = Resource 1990 169 855 147 1,172 777 1,949 1992 165 854 147 1,166 815 1,981 1994 164 881 147 1,192 853 2,045 1996 166 921 146 1,234 893 2,127 1998 164 896 141 1,202 933 2,134 2000 177 936 155 1,268 973 2,241 2002 187 958 169 1,314 1,013 2,327 2004 193 950 169 1,312 1,053 2,364 2006 211 1,155 166 1,532 1,091 2,623 2008 238 1,673 163 2,074 1,132 3,206 2010 273 1,739 159 2,170 1,176 3,347
Additional Natural Gas Resource Assessments (Tcf) (including proved reserves) Total Year Source Resource Est. Area/Shale (Tcf) 2008 EIA AEO 2,119 USA 347 2009 EIA AEO 2,620 USA 818 2009 ADV Res 13,231 World 6,622 Total World Production about 107 Tcf Annually 19
Industry Critical Practices and Technology Opportunities Reduce Land Footprint Water Management Fugitive Air Emissions Well Integrity Best Practices Fracture Fluid Chemistry Incident Response Basin Specific Baseline Data Acquisition 20
NORTH AMERICA LNG IMPORT CAPACITY 2010 Everett, MA 1.035 Bcfd Cove Point, MD 1.800 Bcfd Elba Island, GA 1.600 Bcfd Lake Charles, LA 2.100 Bcfd Gulf Gateway, LA 0.500 Bcfd Northeast Gateway, MA 0.800 Bcfd GDF Suez-Neptune, MA 0.400 Bcfd Freeport, TX 1.500 Bcfd Sabine, LA 4.000 Bcfd Hackberry, LA 1.800 Bcfd ` Other North America 2.700 Bcfd Total 18.235 Bcfd Source: Federal Energy Regulatory Commission
120.0 100.0 80.0 60.0 40.0 20.0 0.0 Daily Natural Gas Consumption by Sector January 1 December 31, 2010 11 21 1 May 10 11 21 31 10 20 30 10 Jul 20 30 9 19 29 Sep 8 18 28 8 18 28 7 Nov 17 27 7 17 27 Jan 1 11 21 31 10 20 2 12 22 Source: Bentek Energy LLC, Energy Market Fundamentals, December 31, 2010. Pwr Gen Industrial Res/Com Bcf per day Mar
40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Daily Natural Gas Consumption Power Genration January 1 July 22, 2011 18 27 Jan 10 19 28 6 15 24 5 14 23 Apr 10 19 28 7 16 25 3 12 21 30 9 18 27 5 14 23 Sep 10 19 28 7 16 25 3 12 21 30 9 Source: Bentek Energy LLC, Energy Market Fundamentals, July 22, 2011. Bcf per day Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Other nations are realizing the potential of natural gas vehicles and moving forward. North America 120,000 NGVs Europe 1,300,000 NGVs Asia 1,300,000 NGVs South America 4,200,000 NGVs Africa 122,000 NGVs There are over 12 million natural gas vehicles on the road worldwide but less than 120,000 are in the United States. 24
Infrastructure: Refueling stations 6 15 7 3 7 2 1 16 14 1 2 3 101 Natural Gas Refueling Stations (in operation as of 12/31/2010) 1 247 11 35 72 29 10 35 1 2 50 9 7 4 23 10 6 2 5 10 19 24 20 1 11 16 5 14 RI 5 MA 22 CT 15 DE 1 DC 2 MD 6 0 9 stations 10 19 20 49 Source: http://www.afdc.energy.gov/afdc/fuels/stations.html 50 or more 25
Building Blocks to a National Strategy: Natural Gas as a Transportation Fuel Rail Marine Passenger vehicles Off-road and Non-road Diesel Long Haul Trucking Medium and Heavy Duty Refueling Infrastructure Return to Base Fleets Light, Medium, and Heavy Duty e.g. city buses, refuse trucks, private delivery fleets, taxis Today Near-term Midterm Longterm 26
OEM Outreach Committee On going conversations with automakers including Honda, Ford, GM, Chrysler, and Mercedes about natural gas vehicles and opportunities in the North American market. Completing a survey of participating AGA and ANGA member companies on anticipated fleet purchases that could be filled by natural gas offerings. Negotiating an agreement with an automotive contractor, the Car Lab, to complete four conversions to bi fuel CNG/gasoline vehicles and complete initial testing of the vehicles. Continuing discussions with Mercedes to direct a demonstration program of thirty E Class bi fuel vehicles. 27
Natural gas vs conventional gasoline Seattle CNG - $1.60 Gas - $3.79 On average, CNG costs 47% less than gasoline San Francisco CNG - $2.44 Gas - $3.89 Los Angeles CNG - $2.74 Gas - $3.81 Salt Lake City CNG - $1.26 Gas - $3.37 Denver CNG - $2.50 Gas - $3.45 Omaha CNG - $1.93 Gas - $3.68 Nashville CNG - $1.63 Gas - $3.59 Detroit CNG - $1.94 Gas - $3.78 New York CNG - $2.70 Gas - $4.03 Wash., DC CNG - $2.40 Gas - $3.94 San Diego CNG - $2.89 Gas - $3.80 Dallas CNG - $2.49 Gas - $3.65 Atlanta CNG - $2.34 Gas - $3.72 Ft. Lauderdale CNG - $2.19 Gas - $3.77 Source: CNG prices captured in July 2011 by CNGPrices.com Gas prices reflect city average on July 20 from GasBuddy.com 28
Recurring Natural Gas Energy Themes Market Stability Resource Abundance with Development Challenges Seasonal, Peak Month and Peak Day Reliability Political, Policy and Regulatory Uncertainty 29
Natural Gas Production Outlook EIA/Annual Energy Outlook 2011 30
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Christopher B. McGill Managing Director, Policy Analysis cmcgill@aga.org 33