Impact of Shale Gas on Transmission February, 08 2012 February, 2012 1
Transco System Overview System Summary 2,000 Mainline Miles from Texas to New York. Approximately 11,000 Miles of Pipeline. Extensive Offshore Gathering System in the GoM. Over 40 Mainline Compressor Stations with 368 Compressor Units. 1.5 MM Hp at Mainline Stations. Approximately 900 Active Metering Points. 202 MMDth Storage Capacity. System Peak design capacity 9.6 MMDth/d. PINE NEEDLE LNG 4 MMDth W/D 400 MDth/d Inj. 20 MDth/d LEIDY 91.1 MMDth W/D 1,328 MDth/d Inj. 519 MDth/d Zone 5 Zone 6 S-2 12.2 MMDth W/D 137 MDth/d Inj. 104 MDth/d STA. 240 LNG 2.1 MMDth W/D 399 MDth/d Inj. 10 MMDth/d Zone 4 WASHINGTON 77.6 MMDth W/D 817 MDth/d Inj. 431 MDth/d Zone 2 Zone 3 EMINENCE 14.6 MMDth W/D 1,461 MDth/d Inj. 143 MDth/d Zone 1 February, 2012 2
Gas Pipelines, How did we get here? Western Canada The T-Pipes were started in the 40s and 50s to diversify the midwest and east-coast markets from oil to natural gas The routes of the pipes depended on markets and availability of supply Most of the pipes travel up the Mississippi Valley (Central Corridor) Transco is the only one built east of the Appalachian Mtns. Mid- Continent Tennessee Tetco TransCanada Transco Gulf Coast &Gulf of Mexico February, 2012 3
Natural Gas Demand and Price 2000 was peak year until 2010 63.9 Bcf/d 65.4 Bcf/d Natural Gas Consumption has been flat and given price volatility that is understandable Why did gas prices rise in starting in 2000 when demand was flat or declining? February, 2012 4
Natural Gas Prices and the Competition 18 16 14 12 10 Avg Coal Price ($/Dt 2009) Avg Wellhead NG Price ($/Dt 2009) Avg Oil Price WTI Cushing ($/Dt 2009) NG has normally floated between coal and oil prices NG Liquids trade closer to crude Oil Prices pulled NG prices along starting in 2000 but since 2005? NGLs 8 6 4 Gulf War FERC 636 Iraq War 2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 February, 2012 5
Natural Gas Supply and Demand 61 Bcf/d 65 Bcf/d 52 Bcf/d 281 Tcf (12 yr. Supply) Gas Supply and Demand 178 Tcf (9 yr. Supply) 176 Tcf (8 yr. Supply) Reserve estimates declined 1990 to 1999 Demand increased about 20% same period Where will gas come from? LNG Rockies Shale EIA Reserve estimate has increased 52% since 00 February, 2012 6
Transitioning from scarcity to abundance Marcellus is likely the world s 2 nd largest gas field. Haynesville/Eagle Ford 3 rd /4 th? I don t have any reason to believe these shale resources are restricted to the US. In a time of abundant supply what determines where gas is produced? February, 2012 7
Sub $4 Breakevens Drive Wet Gas Production High NGL pricing makes rich gas fields top competitors, but remember we need 60+ Bcf/d of production so both rich and dry gas fields are necessary. February, 2012 8
Liquids are Key to most economic plays February, 2012 9
Gas Production Stack What gets produced first? February, 2012 10
Shale Supply and Transco (50% Shale by 2020) Zone 6 195 210 Zone 5 85 Zone 4 Zone 2 Zone 3 Zone 1 Source: Wood Mackenzie H1 2011 Base Case February, 2012 11
Remember this slide? Western Canada TransCanada Tennessee Tetco Mid- Continent Transco Gulf Coast &Gulf of Mexico February, 2012 12
Back to Pipelines - Mid Continent Shale 10+ Bcf/d of pipeline projects were built between the mid-continent Shales and the Central Corridor between 2007 and 2011 including: Carthage to Perryville Mid Continent Express Gulf Crossing/SE Exp. East Texas to MS Fayetteville/Greenville Lateral Tiger SESH Regency But deliveries were largely made by displacing traditional gulf coast production so the interruption to national flow patterns was limited. Zone 5 Northeast markets Mid-Atlantic markets Mid-Continent Shale Barnett, Haynesville, Woodford, Fayetteville Zone 4 85 Unloaded Gulf Coast Pipelines Zone 3 Gulf Coast and Offshore GOM Southeast markets Florida markets February, 2012 13
Back to Pipelines Eagle Ford Shale Wet Eagle Ford gas is considered one of the most economic resource plays, so it likely gets produced no matter what. But remember we still need 60+ Bcf/d! Since Eagle Ford is located near the existing Gulf Coast pipes, it will likely have little effect on the transmission system. Some re-loading of the Gulf coast pipes and debottlenecking projects but probably nothing like East Texas (depends on production levels) Northeast markets Mid-Atlantic markets 85 Eagle Ford Shale Southeast markets Zone 1 Reload Gulf Coast Pipelines Gulf Coast and Offshore GOM Florida markets February, 2012 14
Marcellus is HUGE for Interstate Pipelines Because of attractive production economics and its proximity to Northeast markets, Marcellus MAY largely displace long-haul gas on the T-pipes turning them into header systems. Since backhaul transport is relatively cheap on existing pipes Marcellus gas will be very competitive on transportation to serve incremental loads. Numerous Flow Reversals on existing pipes Already to Canada Already to Central Corridor States Proposed to Gulf Coast/Southeast Not all pipes will be affected equally, last mile access to markets will be important Production levels will determine effects but they are on track to be substantial Unloaded Pipelines? Marcellus Shale Northeast markets Mid-Atlantic markets Mid-Continent Shale Barnett, Haynesville, Woodford, Fayetteville 85 Southeast markets Eagle Ford Shale Gulf Coast and Offshore GOM Florida markets February, 2012 15
Shale Gas and Transco Push Equals Pull Project Name ISD Size 85 North 2010/2011 309 Mdt/d Mobile Bay South 2010 253 Mdt/d Mobile Bay South II 2011 380 Mdt/d Cardinal Expansion 2012 199 Mdt/d Mid-Atlantic Connector 2012 142 Mdt/d Mid-South 2012/2013 225 Mdt/d Availability of supply and lower delivered costs for gas will boost demand in unexpected ways Coal/Gas Switching New Combined Cycle Gas Industrial Loads Export Gas Mid-Continent Shale Barnett, Haynesville, Woodford 85 North 85 Zone 4 Atlanta Zone 6 Mid-Atlantic Connector Zone 5 160 Charlotte Mid-South 195 Cardinal Expansion Compression Mobile Bay South I/II Compression & Modifications February, 2012 16
Questions? Western Canada TransCanada Tennessee Tetco Mid- Continent Transco Gulf Coast &Gulf of Mexico February, 2012 17