U.S. Natural Gas Markets Where Is It All Going to Go? October 19, 217
Today s Agenda» Current Natural Gas Market Production Shifting gas flows Demand LNG, Power and Mexico Evolving values basis and price» Market Outlook Production New pipeline capacity Demand Rockies Canadian supplies Permian/Midcon» Where is it all going to go? 2
MMB/d U.S. Total Mb/d Permian MMb/d Production of Crude Oil and Natural Gas 1 9 8 7 6 5 U.S. Crude Oil Production 9.5 9.4 9.3 9.2 9.1 9. 8.9 8.8 8.7 8.6 8.5 U.S. Crude Oil Production Permian 2.6 2.5 2.4 2.3 2.2 2.1 2. 1.9 1.8 4 Source: EIA/RBN 3
MMB/d Bcf/d U.S. Total Mb/d Permian MMb/d Production of Crude Oil and Natural Gas 1 9 8 7 6 5 4 U.S. Crude Oil Production 75 7 65 6 55 5 45 4 9.5 9.4 9.3 9.2 9.1 9. 8.9 8.8 8.7 8.6 8.5 U.S. Lower U.S. 48 Crude Oil Dry Gas Production Production Permian Marcellus /Utica 35 3 25 2 15 1 5-2.6 2.5 2.4 2.3 2.2 2.1 2. 1.9 1.8 Source: EIA/RBN 4
BCF/D LNG Exports = Cheniere Sabine Pass 3. 2.5 Pipeline Deliveries to Cheniere s Sabine Pass LNG 2. 1.5 1..5. Source: Genscape 5
BCF/D Exports to Mexico: South Texas and West Texas 4.5 U.S. Natural Gas Exports to Mexico 4. 3.5 3. 2.5 2. Source: EIA 6
Bcf/d Northeast Natural Gas Production vs. Demand Northeast Became a Net Production Region in 215 25 2 15 Production Demand 1 5 7
MMCF/D Major Shift in Rockies Express Gas Flows REX East to West 3,5 3, Up 91 MMCF/D YTD 2,5 REX 2, 1,5 Up 977 MMCF/D Up 627 MMCF/D 1, 5 8
$/MMbtu $/MMbtu $/MMbtu $/MMbtu Northeast/Midwest Basis Trends vs Henry Hub $.5 $.4 $.3 $.2 $.1 $. -$.1 -$.2 MichCon 215 216 217 215: $.21 216: $. 217: -$.2 $.5 $.4 $.3 $.2 $.1 $. -$.1 -$.2 Dawn 215 216 217 215: $.33 216: $.11 217: $.12 215: -$1.14 216: -$.99 217: -$.54 $.2 $.15 $.1 $.5 $. -$.5 -$.1 -$.15 -$.2 Chicago 215 216 217 215: $.13 216: $. 217: -$.7 $.5 $. -$.5 -$1. -$1.5 -$2. -$2.5 Dominion South 215 216 217 9
Historical Henry Hub Natural Gas Prices & Forward Curve $/MMbtu $4. $3.5 $3. $2.5 $2. $1.5 $1. $.5 $. History Forward Curve Source: CME/NYMEX 1
Natural Gas Production Forecast RBN Supply/Demand Methodology 1 Develop forward price scenario 2 Calculate Impact on Producer Economics 3 Estimate Producer Response 4 Compute Implications on..production Volume 5 Determine Market Response 11
$/Bbl $/MMbtu Crude Oil and Natural Gas Price Scenarios $75 Crude Oil: WTI Cushing $3.75 Natural Gas: Henry Hub $65 $55 $45 $35 $3.25 $2.75 $2.25 Advance Growth Cutback Advance Growth Cutback 12
Bcf/d Lower 48 Dry Gas Production Forecast Scenarios History / Advance Growth Cutback Scenario 12 12 12 1 1 1 8 8 8 6 6 6 4 +2.2 Bcf/d Per Year +6. Bcf/d Per Year 4 +3.9 Bcf/d Per Year 4 1.9 Bcf/d Per Year 2 2 2 13
Regional Natural Gas Production Outlook Advance Growth Cutback Source: RBN (forecast) /PointLogic (historical) 14
Production (Bcf/d) Regional Natural Gas Production Outlook Advance Growth Cutback 3 Texas 25 2 15 1 5 Source: RBN (forecast) /PointLogic (historical) 15
Production (Bcf/d) Production (Bcf/d) Regional Natural Gas Production Outlook Advance Growth Cutback 36 Western Texas 255 24 153 12 51 Source: RBN (forecast) /PointLogic (historical) 16
Production (Bcf/d) Production (Bcf/d) Regional Natural Gas Production Outlook Advance Growth Cutback 3 146 12 255 1 24 8 153 6 12 4 52 1 Western Rockies Texas Source: RBN (forecast) /PointLogic (historical) 17
Production (Bcf/d) Production (Bcf/d) (Bcf/d) Regional Natural Gas Production Outlook Advance Growth Cutback 3 146 12 255 1 24 8 153 6 12 4 52 1 8 7 6 5 4 3 2 1 Western Rockies Offshore Texas Source: RBN (forecast) /PointLogic (historical) 18
Production (Bcf/d) Production (Bcf/d) Production (Bcf/d) (Bcf/d) Regional Natural Gas Production Outlook Advance Growth Cutback 1 3 146 12 9 25 8 5 1 7 24 68 155 3 6 4 1 3 2 4 2 5 1 1 8 7 6 5 4 3 2 1 Western Southeast Rockies Offshore Texas Source: RBN (forecast) /PointLogic (historical) 19
Production (Bcf/d) Production (Bcf/d) Production (Bcf/d) (Bcf/d) Regional Natural Gas Production Outlook Advance Growth Cutback 3 14 8 1614 12 9 7 12 25 8 5 6 1 7 1 24 5 68 8 4 155 3 6 36 4 1 3 2 4 24 2 5 1 12 1 Western Southeast Rockies Mid-Continent Offshore Texas Source: RBN (forecast) /PointLogic (historical) 2
Production (Bcf/d) Production (Bcf/d) Production (Bcf/d) (Bcf/d) (Bcf/d) Regional Natural Gas Production Outlook Advance Growth Cutback 3 14 8 156 14 12 945 7 12 25 8 5 4 6 1 7 1 2 354 5 63 8 8 4 155 253 6 4 36 2 1 3 2 15 4 24 21 5 1 12 15 Western Northeast Southeast Rockies Mid-Continent Offshore Texas Source: RBN (forecast) /PointLogic (historical) 21
Natural Gas Pipeline Projects--Northeast Midwest via Ohio (4.8) 22
MMcf/d Natural Gas Infrastructure Development East East- 1.7 Bcf/d Enbridge- Penn East Williams- Constitution 2, 1,5 1, Constitution Penn East 5 217 218 219 22 23
Bcf/d Natural Gas Infrastructure Development Atlantic EQT- Mountain Valley Dominion- Atlantic Coast Pipeline Williams- Atlantic Sunrise 6. 5. 4. 3. 2. 1.. Atlantic Coast Mountain Valley Atlantic Sunrise 24
MMcf/d Natural Gas Infrastructure Development Gulf Kinder Morgan- SW Louisiana Supply Enbridge- Access South TransCanada/CPG- Leach/Rayne Xpress Mountaineer/Gulf Xpress Kinder Morgan- Broad Run Expansion 3, 2,5 2, 1,5 1, 5 217 218 219 22 Mountaineer/Gulf Xpress Broad Run Expansion SW. Louisiana Supply Leach/Rayne Xpress Access South 25
MMcf/d Natural Gas Infrastructure Development Midwest Energy Transfer- Rover NEXUS Midwest via Ohio (4.8) Enbridge- Lebanon Extension 6, 5, 4, 3, 2, 1, 217 218 219 22 NEXUS Lebanon Extension Rover 26
MMcf/d Natural Gas Infrastructure Development Canada 6 National Fuel Gas- Northern Access National Fuel Gas- Empire North Expansion 5 4 3 Northern Access Empire North Expansion 2 1 217 218 219 22 27
Bcf/d Bcf/d Marcellus/Utica Gas Pipeline Capacity Additions 16 14 12 1 8 6 4 2 16 14 12 1 8 6 4 2 - Gulf via Ohio MidWest (Ohio) South (Atlantic) East Canada Production (Growth) Northeast to Gulf Coast Production (Growth) Total 28
Displacement of Rover and Nexus Volumes Michcon +1.87 1.87 1.3 Nexus Dawn +1.87 2.24 Chicago +2.62.75.84 3.2 SW Marcellus & Utica.38 1.42 To the Gulf 29
More Rockies Gas West? 2. Rockies to NW (Ruby and NW Pipeline)» Kern River flows full into Southern California eliminating this as an outlet for incremental Rockies gas. Bcf/d 1.5 1.5 1. 1..5.5.» Rockies gas flows to NorCal and PNW has seen declines due to competitive Canadian flows and stagnant demand.. 3. Kern River Flows 2.5 2. 2. 1.5 1..5. 1.5 Bcf/d Bcf/d Bcf/d 2. REX Flows East 1..5. Rockies South» Southern flows to interconnecting California pipes have seen erosion as Midcon/Permian gas targets this premium market.» Best option for Rockies gas is still via REX which has significant west-toeast MVCs. 3
Bcf/d Bcf/d Bcf/d Canada Gas Is Holding Its Own Out West Western Canadian Inflows - Net Sumas 1.2 1..8.6.4.2. Sumas Kingsgate Western Canadian Inflows GTN @ KINGSGATE 2.5 2. 1.5 1..5. 2.5 California Gas Fired Power Demand 2. 1.5 1. California.5. 31
Bcf/d Bcf/d Bcf/d Bcf/d Permian and Midcon Gas Chasing Markets 5. Midcon to Midwest 3.5 3. 2.5 2. 1.5 1..5. Permian & Midcon Going West 4. 3. 2. 1.. $. -$.1 -$.2 -$.3 -$.4 Waha Basis -$.5 Permian Going East to Texas Markets 1..8.6.4.2. Permian Going to Mexico Flow Mexico Flow Southeast Flow East 3.5 3. 2.5 2. 1.5 1..5. 32
BCF/D U.S. LNG Export Facilities and Outlook 25 Corpus (1-2) Freeport (1-3) Elba Island (1-6, 7-1) Cameron (1-3) Cove Pt Sabine (1-5) Low Exports High Exports 2 15 1 5 High Export Scenario Expansions Cameron 4-5 Lake Charles 1-3 Corpus Christi 3 Sabine Pass 6 Cove Point Low Export Scenario Second Wave (Louisiana) Magnolia LNG/ LNG Ltd. Golden Pass 1-3/ Qatar Exxon Driftwood/ Tellurian Davant/ Louisiana LNG Pointe a la Hache & Lake Charles / Venture Global Monkey Island / SCT&E Cameron / G2 LNG Venice/ CE FLNG Second Wave (Texas) Port Arthur LNG/ Sempra Brownsville/ Annova LNG Brownsville/ 3 rd Point, Samsung Brownsville-Rio Grande / Next Decade Second Wave (Other) Pascagoula, MS / Kinder Morgan Jordan Cove, OR / Veresen 33
Bcf/d Pipeline Capacity and Demand Outlook For Mexico 15. 1. Max Waha to Mexico Exports Waha Exports Forecast Exports to Mexico (ex-waha) Pipeline Capacity 5.. 34
Bcf/d U.S. Gas Fired Power Generation (RBN s Growth Scenario) 3. 29. 28. 27. 26. 25. 24. 23. 22. 21. 2. 35
Bcf/d Where Is It All Going to Go? US West/NE Supply Growth (RBN Growth) vs. Expansions to the Gulf 16 14 12 1 8 6 4 2 NE Expansions South +8.2 Bcf/d Approved Approved NE Production Growth West US Production Growth Expansions to SE/Gulf West Expansions East +5.6 Bcf/d Southeast/Gulf 36
Marcellus/Utica vs. Rockies vs. Permian vs. Midcon Who Wins Who Loses? Production Demand REX Reversal Production Demand Rover/ Nexus Production Demand» The next wave of Marcellus/Utica production growth will move to Michcon/Nova via Rover and Nexus creating supply surpluses in the Midwest» With no alternative markets, Rockies gas will continue to move east into the Midwest» Midwest surpluses will compete with Permian associated gas production and Appalachian gas moving on pipeline reversals to the Gulf Coast» Midwest surpluses will further aggravate oversupplies competing for the only growth market in North America the Southeast/Gulf 37