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Natural Gas and the Convergence of Change Spring Accounting Conference May 2017 Richard Meyer, Director Energy Analysis and Standards American Gas Association
Transcript of Natural Gas and the Convergence of ChangeEIA estimates that energy-related emissions of carbon...
Natural Gas and the Convergence of Change
Spring Accounting ConferenceMay 2017
Richard Meyer, DirectorEnergy Analysis and StandardsAmerican Gas Association
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Energy in the US ischanging
Record year for natural gas consumption, storage, & power generation.
US energy exports are on the rise.
Record year for US solar installations.
Carbon dioxide emissions down to a 25-year low.
Consumers are spending less of their incomes on energy than ever.
This kids book light bulb is energy efficient.
Even our perceptions of energy are changing in subtle ways.
(Still not an LED though)
We’re getting more sophisticated looking for, producing, and
distributing new energy sources.
Presenter
Presentation Notes
Christopher uses TAMI — tactical analysis mapping integration — to track data across PG&E's gas system. Employees in PG&E's gas control system monitor gas flows and pipe pressures, among other things. https://www.snl.com/web/client?auth=inherit#news/article?id=38905042&keyproductlinktype=6
The rest of the world is looking to the US for new supplies of hydrocarbons, especially natural gas.
Sabine Pass, Image from Bechtel
However, there are different visions for domestic energy policy
“It is very clear that we cannot afford to expand infrastructure and reliance on fossil fuels, including gas.”
“At the same time, we do need to ensure that coal energy is not backfilled with gas.”
SNL Interview, Daily Gas Report, Lena Moffitt, Beyond Dirty Fuels Campaign Director, Sierra Club, August 19, 2016.
Natural gas market
Presenter
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Stunning new image taken with the new GOES-16 weather satellite that was just launched.
Natural gas prices continue right down the fairway.
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Dollars per Million BTU
Daily Natural Gas Prompt Month Futures Price at Henry Hub
Price Range2009-20122017
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Poll Title: What will be the average price of natural gas at Henry Hub for 2017?https://www.polleverywhere.com/multiple_choice_polls/C2nxDgk9X42MRiG Average so far is $3.10
EIA Expects Natural Gas Prices to be Higher in 2017-2018 than in
2016
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Inflation Adjusted Prices to Commercial Customers the Lowest since the Ford Administration
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10121416
1967 1974 1981 1988 1995 2002 2009 2016
Natural Gas Prices to Commercial CustomersReal (Dec 2016$) Forecast
EIA STEO
$7.42lowest
since 1976.
Source: Energy Information Administration, Short-Term Energy Outlook (Dec. 2016)
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An average commercial natural gas customer’s utility bill was $400 in 2015 – the lowest since records began in 2003.
Strong exports & power generation offsets lower heating loads in 2016.
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Source: Bentek Energy LLC
(1.5) (1.0) (0.5)
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US Natural Gas Demand Change 2015-16 (Bcfd)
Natural gas production steady, flat
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What’s next for natural gas? Rig counts are again on the rise.
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Oil Rigs +121%
Source: Baker Hughes
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U.S. Oil & Natural Gas Rig Count
OilGas
Gas Rigs +111%
Significant new takeaway capacity anticipated late 2017 into 2018.
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Existing App Basin takeaway capacity
Additional planned takeaway capacity
Appalachian basin takeaway capacity, Bcfd
BNEF
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The Appalachian region of Ohio, Pennsylvania and West Virginia are home to the Utica and Marcellus shale plays. These three states currently produce 22.2 billion cubic feet (Bcf) of gas per day, filling the 22.5Bcfd of takeaway pipeline capacity out of the region. To ease this constraint, many pipeline projects are underway to move gas out of this region and into markets. This report outlines the projects that plan to come online in the next few years. These will allow an additional 16Bcfd of gas to flow out of the region by the end of 2018.
Sabine Pass Export Breakdown by Country 2016 (Bcf)
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Source: Bloomberg NEF.
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184 Bcf total in 2016. Already in two months, through February, 103 Bcf was shipped. Argentina Brazil Chile China Mexico India
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How much US LNG can the global market absorb?Maybe not much .… for now.
Global LNG Supply and Demand Balance (MMTPA)
Source: Bloomberg New Energy Finance, Poten & Partners
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OtherNorth AmericaRussiaEast AfricaWest AfricaAustraliaNorth AmericaAustraliaOtherRussiaWest AfricaNorth AfricaIndonesiaMalaysiaQatarDemand
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Looking towards 50 Bcfd of global LNG supply Nearly 40 of demand. Becomes a story of east Asian demand. Japan. China. Will the growth materialize. And questions: Does economic growth in Asia spur more natural gas demand? Will environmental concerns and a push towards switching to natural gas create new demand? Some 133MMtpa of new supply capacity will be online during 2017-20, which will lead to an oversupply that peaks in 2020, when supply exceeds demand by 131MMtpa. This, coupled with low oil prices (despite the recent OPEC deal), have continued to force the world’s oil and gas majors to shelve their plans on developing new LNG export projects. Less than 40MMtpa of capacity is expected to receive FIDs before 2020. Meanwhile, some old projects will retire in the period. These will lead to little growth or even a marginal decline in the world’s LNG export capacity in this period. The global LNG demand will grow 62%, or a CAGR of 3.5%, to reach 422MMtpa by 2030. The LNG export project developers will need to make sufficient FIDs by 2020 to prevent a supply shortage which may start with 24MMtpa in 2026 and rise to 52MMtpa by 2030.
United States – Net Energy Exporter?
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US Electricity Sector Fuel Mix
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Coal-776
TWh/yr
Power Demand
-78 TWh/y
Gas 484 TWh/y
Renewables 257 TWh/y
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Source: EIA
Natural Gas-Fired Generating Capacity Expected to Increase in 2017-2018
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Numerous solar and wind generation projectsadded in 2017.
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Source: Energy Information Administration and Bloomberg New Energy Finance.
Presenter
Presentation Notes
According to EIA data, ~5.5 GW of new solar capacity will have come online between November 2016 and September 2017. Most of the new solar capacity will be in California, North Carolina, Texas, Arizona, Florida and Nevada. These states will contain 75% of the expected new solar capacity. To estimate the gas displacement figure from solar new-builds, we: 1) analyzed recent monthly solar generation and capacity factors in these states (from EIA-923 and EIA-860M); and 2) applied estimated forward heat rates from CFVL <GO> on the terminal. We expect the increase in new solar output alone will displace an average of 409Mmcfd of gas during the 2017 injections season. On a monthly basis, the forward heat-rates indicate that incremental solar capacity will displace an average of 553Mmcfd of gas-based generation in July and August across the Lower-48. According to EIA data, ~5GW of new wind capacity will have come online between November 2016 and September 2017. We excluded some of the states where gas generation is a small percentage of overall generation so little or no gas displacement is expected Most of the new wind capacity will be located in the Texas panhandle and in Oklahoma. Texas will increase new wind capacity by ~2.3GW (45.3%) of total new wind projects’ capacity, while Oklahoma will have 573MW (11.4%). We expect that the increase in new wind generation alone will displace an average of 414Mmcfd of gas during the 2017 injection season. Using CFVL <GO>’s forward heat-rates, we estimate the new wind capacity alone will displace an average of 506Mmcfd of gas-based generation from July-August across the Lower-48.
Renewables replace significant volumes of natural gas for power generation in 2017.
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Source: Bloomberg New Energy Finance.
Estimated year-on-year gas burn displacement from stronger renewable output MMcfd
Is there other trouble on the horizon?
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Presenter
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“Natural gas-fired power plant closures should not be viewed in isolation from sales of naturalgas-fired assets in organized electricity markets. Bankruptcies in California and power plant sales elsewhere in the country should not be viewed in isolation. While the product of dynamics in different organized markets, both developments reflect a prevailing view that market design problems for gas-fired generators are beginning to manifest. “
Energy-related CO2 emissions fall below 5.2 billion metric tons in 2016 year, lowest since 1992.
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US Carbon Dioxide Emissions from Energy Consumption(Million Metric Tons)
2016 emissions were lowest since 1992
EIA Monthly Energy Review
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EIA estimates that energy-related emissions of carbon dioxide decreased by 2.7% in 2015. Emissions are decreased by 1.6% in 2016. These forecasts are sensitive to assumptions about weather and economic growth.
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Poll Title: Relative to 2016, US energy-related carbon dioxide emissions in 2017 will:https://www.polleverywhere.com/multiple_choice_polls/dYChJNlDcL73ogn
EIA sees a 0.7% Decline in 2017 (Stays Flat)
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US Carbon Dioxide Emissions from Energy Consumption(Million Metric Tons)
EIA sees a 0.7% decline
in CO2 emissions in
EIA Monthly Energy Review
Presenter
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EIA estimates that energy-related emissions of carbon dioxide decreased by 2.7% in 2015. Emissions are forecast to decrease by 1.5% in 2016 and then increase by 0.8% in 2017. These forecasts are sensitive to assumptions about weather and economic growth.
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