US Energy Independence & Energy Exports Fred C. Beach, Ph.D. Earth Wind & Fire Conference Addison, TX. 4 October, 2014 10/12/2014 1
Global Consumption Trends 2011 Energy Consumption, + 2.5% OEDC, Down Non-OEDC, Up Oil Consumption, + 0.7% OEDC, -1.2% Non-OEDC, +2.8% Natural Gas Consumption, +2.2% EU, -9.9% China, +21.5% 87 % of the Worlds Energy Consumption Comes from Fossil Fuels and the Percentage Is Growing Coal Consumption, +5.4% OEDC, -1.1% Non-OEDC, +8.4% 10/12/2014 2
Energy Dependence 1970-2010 90% 80% 70% 60% 50% 40% 1970 1990 2010 30% 20% 10% 0% US Germany France UK Italy Spain Japan 10/12/2014 3
U.S. Energy Independence Trend US for 2012 (Quads) Consumption = 95 Production = 80 Imports = 15.8% 2013 12.9% 10/12/2014 4
EIA 2010 vs 2012 Forecast Change 10/12/2014 5
U.S. Oil Production 1900-2010 10/12/2014 6
U.S. Oil Production, Technology Breakthrough? 10/12/2014 7
Actually, It Was A Price Revolution 10/12/2014 8
U.S. Petroleum Liquids Net Imports 10/12/2014 9
U.S. Petroleum Liquids Net Imports 10/12/2014 10
U.S. Coal Production 10/12/2014 13
U.S. Coal Exports 10/12/2014 14
Coal Retirements About 50 GW of coal capacity may retire by 2020 Almost 21 GW already retired in 2010-13 (mostly older units) Announced about 29 GW (2014-2020)
Gürcan Gülen, Ph.D. CEE-UT, 7
US Natural Gas Production Source: EIA Annual Energy Outlook 2013
U.S. Natural Gas Production 10/12/2014 24
Technically Recoverable Resource Estimates Source: Based on a widely used chart produced by Gas Technology Institute (GTI).
At What Price Can Producers Deliver? $9 $8 $7.84 10% Return $7 $6 $7.28 $7.16 $0.66 $0.65 $6.67 $0.61 $0.71 U.S. Cash Operating Costs $/MCFE U.S. All Source FD Costs $/MCFE Henry Hub Spot Price $4/MCF $/MCFE $5 $4 GL Uplift: how much, $3.73 when & where? $2.7N 1 $2.99 $3.66 Note: All Source FD Costs are 3-year rolling averages As of: December 4, 2013 $3 $2 $3.91 $3.52 $3.40 $1 $2.41 $- Average All Average All Average All Average All Producers Producers Producers Producers (2009) (2010) (2011) (2012) Monitoring U.S./Global Oil and Gas: Upstream Attainment, Producer Challenges http://www.beg.utexas.edu/energyecon/thinkcorner/think%20corner%20-%20producers.pdf Gürcan Gülen, Ph.D.
How Much Demand? At What Price? Power generation Industrial demand Exports (LNG and pipeline) Transportation (LNG, CNG) not covered today
Different Views of the World 2.5 Consumption of Natural Gas in Power Generation (Index, 2010 = 1) 2.0 Avg y-y growth of 2.5% 1.5 1.0 0.5 0.0 AEO Real GDP IHS Real GDP AEO Electricity IHS Electricity 2010 2015 2020 2025 2030 2035 2040 Based on data from EIA AEO 2013 & IHS Global Insight
Nuclear Relicensing? 4 recent announcements 5,500 MW in 3 plants under construction
Industrial Gas Demand A Growth Scenario based on Projects in Progress 9 8 TCF 7 6 5 4 3 2 1 GTL MTG Metals Propylene Polyethylene Chlor-Alkali Methanol Ammonia-urea-fertilizer Ethylene Crackers Base Demand (2012) 0 2013 2014 2015 2016 2017 2018 2019 2020 Source: CEE Industrial Projects Database
Increasing Gas Exports? 7 terminals received 8 permits to export LNG to non-fta countries (as of April 2014) Only 3 with FERC approval Construction started on 2 liquefaction trains of the Sabine Pass terminal in August 2012 The first exports are not expected until 2016 Forecasts cover a wide range from 1.6 to 3.6 tcf by 2025 Pipe exports to Mexico have been increasing and are expected to reach 2.4 tcf by 2040 (EIA AEO) or early 2020s (based on pipe projects).
Proposed Does Not Equate to Realized
Gürcan Gülen, Ph.D. Is U.S. LNG Competitive? $/MMBtu 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 $10 Japan pre- Fukushima $9-11 NBP 0.4 1.3 3 3 Regasification Sep 14 NBP $6-7 0.4 1.3 Shipping Liquefaction Field to Terminal Henry Hub $14-19 Asia spot 0.8 2 3 3 3 5 1 1 1 1 6 6 6 6 The Attraction "Reality" High Cost Delivery to Atlantic Basin 0.8 3.5 High Cost Delivery to Pacific Basin Sep 14 LNG $10.5 http://www.beg.utexas.edu/energyecon/thinkcorner/is%20us%20lng%20competitive.pdf 0.9 6 Super High Cost Delivery to Pacific Basin CEE-UT, 33
A strong demand stack scenario 45 40 35 TCF LNG Exports 2030 = 1.0 (EIA ER = 3.5) Pipe Exports 2030 = 3.9 (EIA ER = 3.4) LNG exports CEE Pipeline exports CEE 30 Power generation CEE 25 Power 2030 = 15.9 (EIA ER = 10.1) Industrial CEE 20 15 10 Industrial 2030 = 8.8 (EIA ER = 8.5) Other (Res, Comm, Trans) EIA ER Dec 2013 Total demand CEE High Case 5 Other 2030 = 10.8 (residential+ commercial 10.5) 0 2012 2015 2018 2021 2024 2027 2030 CEE analysis; EIA ER refers to EIA 2014 Early Release, Dec 2013 (reference case) Total supply EIA ER Dec 2013
EIA 2010 vs 2012 Forecast Change By 2020 North America Could be Energy Independent 10/12/2014 35
The Energy Economies In the US, not everywhere is like TX or ND Growth has been anemic and uneven Over time and across the states Labor force participation at historic lows ~2 million fewer jobs than early 2008 Public discontent with and distrust of the politicalsystem Can the US reach a path of steady growth at >3%? Especially if our trade partners falter (Europe, China) The World Economy Runs on Energy & Runs Best on Cheap Energy
Energy Dependence 1970-2010 90% 80% 70% 60% 50% 40% 1970 1990 2010 30% 20% 10% 0% US Germany France UK Italy Spain Japan 10/12/2014 43