The Honorable Suedeen G. Kelly Commissioner, Federal Energy Regulatory Commission
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Transcript of The Honorable Suedeen G. Kelly Commissioner, Federal Energy Regulatory Commission
1
The Honorable Suedeen G. Kelly
Commissioner, Federal Energy Regulatory Commission
IPAA 2004 Mid-Year Meeting
June 14, 2004
“A FERC Perspective on Natural Gas Issues”
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Henry Hub Gas Prices ($/MMBtu)
Nu
mb
er o
f G
as R
igs
Rig Count Responds to Higher
Prices
Sources: OMOI analysis, Baker Hughes, Platts Gas Daily, some underlying data from Banc of America Securities
Rig Count versus Gas Price
U.S. Gas Drilling and Gas prices, 6-Month Lag
• The rig count levels off at around 1,000 rigs with a muted response to higher prices.
• Although utilization is at 75% to 80%, additional drilling will be limited by the quality of prospects.
• Much of the drilling is lower risk- development versus exploration.
Exploration as a Percentage of Total Drilling Capital
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1991 1993 1995 1997 1999 2001 2003
Pri
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MB
tu)
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1,200
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er of U
.S. R
igs
U.S. Rigs Drilling for Natural Gas
Henry Hub Average Weekly Price
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1993 1995 1997 1999 2001 2003
Per
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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
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eser
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Reserves R
eplacem
ent R
ate (%)
% PUD Independents% PUD MajorsIndependents Reserves ReplacementMajors Reserves Replacement
• Reserves added per well have declined since 2000.
• 3-D seismic contributed to growth in proved reserves per well during the 1990s. Similar growth rates may be difficult to repeat in the near-term.
• Proven Undeveloped Reserves (PUDs) have increased. – Converting PUDs to proved developed
producing reserves (PDPs) requires capital and typically one to two years.
– Represent a backlog of prospects but also entail higher risk. Reportedly, 75% of El Paso’s revisions involved PUDs.
Supply Is Not Rebounding; The Nature of Proven Reserves May Be Changing
Sources: OMOI analysis, EIA, some underlying data from Banc of America Securities
Drop in Proved Reserves Added
Domestic PUD and Replacement Percentages
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0.5
1.0
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1993 1995 1997 1999 2001 2003
Res
erve
s A
dd
itio
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(Bcf
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Super Majors Majors Independents
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• Returns are lower for independents with neither downstream nor international operations and for majors too big to grow domestically and unable to compete internationally with the super majors. May lead to more consolidation.
• Only the super majors, on average, earn attractive returns given risk. The majors and independents have difficulty recovering their cost of capital.
• The domestic industry is struggling with balancing financial returns and production growth.
Higher Prices Have Improved Financial Returns but Sustainable Domestic Investment is Limited
Sources: OMOI analysis, percentage return on capital data from CERA (1993-2002) and Bloomberg, L.P. (2003)
Percentage Return on Capital
Each bar represents one year from 1993–20041993–2003 Average
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Traditional vs. NEPA Pre-Filing Process
AnnounceOpen
Season
AnnounceOpen
Season
Develop
StudyCorrido
r
DevelopStudy
Corridor
Conduct
Scoping
Conduct
Scoping
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Review DraftResource Reports& Prepare DEIS
IssueDraftEIS
IssueDraftEIS
FileAt
FERC
IssueOrder
IssueOrder
FileAt
FERC
Prepare ResourceReports
Prepare ResourceReports
IssueFinalEIS
IssueFinalEIS
(months)
Traditional - Applicant
Traditional - FERC
NEPA Pre-Filing - Applicant
NEPA Pre-Filing - FERC
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Kern River Expansion Project
• 716 miles of pipeline looping through CA, NV, UT, WY
• 3 New Compressors• $1.2 Billion • 885.6 MMcf/day of additional
capacity– Doubles Kern River’s
capacity from 845.5 MMcf/day to 1.7 Bcf/day
Map is Non-Public Internet
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Cheyenne Plains Pipeline Project
Map is Non-Public Internet
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How Much Natural Gas Is Out There?
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• LNG supply growing• Multiple LNG supply proposals announced• Long term LNG supply outlook robust
Global LNG Supply
WORLD PROVEDRESERVES 2002:
6,270 TCF
NORTH AMERICARESERVES4%
Source: Cedigaz, NPC
ExistingUnder ConstructionProposed
Global LNG Supply Facilities
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Existing Terminals with Approved ExpansionsA. Everett, MA : 1.035 Bcfd (Tractebel – DOMAC)B. Cove Point, MD : 1.0 Bcfd (Dominion – Cove Point LNG)C. Elba Island, GA : 1.2 Bcfd (El Paso – Southern LNG)D. Lake Charles, LA : 1.2 Bcfd (Southern Union – Trunkline LNG)
Approved Terminals1. Hackberry, LA : 1.5 Bcfd, (Sempra Energy)2. Port Pelican: 1.6 Bcfd, (Chevron Texaco)3. Bahamas : 0.84 Bcfd, (AES Ocean Express)*4. Gulf of Mexico: 0.5 Bcfd, (El Paso Energy Bridge GOM, LLC)5. Bahamas : 0.83 Bcfd, (Calypso Tractebel)*
Proposed Terminals and Expansions – FERC6. Freeport, TX : 1.5 Bcfd, (Cheniere / Freeport LNG Dev.)7. Fall River, MA : 0.8 Bcfd, (Weaver's Cove Energy/Hess LNG)8. Long Beach, CA : 0.7 Bcfd, (SES/Mitsubishi)9. Corpus Christi, TX : 2.6 Bcfd, (Cheniere LNG Partners)10. Sabine, LA : 2.6 Bcfd (Cheniere LNG)11. Corpus Christi, TX : 1.0 Bcfd (Vista Del Sol/ExxonMobil)12. Sabine, TX : 1.0 Bcfd (Golden Pass/ExxonMobil)13. Logan Township, NJ : 1.2 Bcfd (Crown Landing LNG – BP)14. Lake Charles, LA: 0.6 Bcfd (Southern Union – Trunkline LNG)15. Bahamas : 0.5 Bcfd, (Seafarer - El Paso/FPL )16. Corpus Christi, TX: 1.0 Bcfd (Occidental Energy Ventures)17. Providence, RI : 0.5 Bcfd (Keyspan & BG LNG) 18. Port Arthur, TX: 1.5 Bcfd (Sempra)
Proposed Terminals – Coast Guard19. California Offshore: 1.5 Bcfd, (Cabrillo Port – BHP Billiton)20. Louisiana Offshore : 1.0 Bcfd (Gulf Landing – Shell)21. So. California Offshore : 0.5 Bcfd, (Crystal Energy)22. Louisiana Offshore : 1.0 Bcfd (McMoRan Exp.)23. Gulf of Mexico: n/a (Compass Port - ConocoPhillips)
Planned Terminals and Expansions24. Brownsville, TX : n/a, (Cheniere LNG Partners)25. Mobile Bay, AL: 1.0 Bcfd, (ExxonMobil)26. Somerset, MA : 0.65 Bcfd (Somerset LNG)27. Belmar, NJ Offshore : n/a (El Paso Global)28. Altamira, Tamulipas : 1.12 Bcfd, (Shell)29. Baja California, MX : 1.0 Bcfd, (Sempra & Shell) 30. Baja California - Offshore : 1.4 Bcfd, (Chevron Texaco)31. California - Offshore : 0.5 Bcfd, (Chevron Texaco)32. St. John, NB : 0.5 Bcfd, (Canaport – Irving Oil)33. Point Tupper, NS 1.0 Bcf/d (Bear Head LNG - Access Northeast Energy)34. Pleasant Point, ME : 0.5 Bcf/d (Quoddy Bay, LLC)35. St. Lawrence, QC : n/a (TCPL and/or Gaz Met)36. Lázaro Cárdenas, MX : 0.5 Bcfd (Tractebel/Repsol)37. Gulf of Mexico : 1.0 Bcfd (ExxonMobil)38. Mobile Bay, AL: 1.0 Bcfd (Cheniere LNG Partners)39. Cherry Point, WA: 0.5 Bcfd (Cherry Point Energy LLC)40. Cove Point, MD : 0.8 Bcfd (Dominion)41. Puerto Libertad, MX: 1.3 Bcfd (Sonora Pacific LNG)42. Offshore Boston, MA: 0.8 Bcfd (Northeast Gateway – Excelerate Energy)*US pipeline approved; LNG terminal pending in Bahamas
Existing and Proposed North AmericanLNG Terminals
June 2004
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3125
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3823
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US Jurisdiction
FERC
US Coast Guard
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Years (beginning in 2000)
Vo
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ay
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Total Production Canada
Existing Terminals Approved Terminals (FERC & Coast Guard)
Proposed and Planned Terminals (FERC & Coast Guard) Net Exports to Mexico
Alaska (to Lower 48) Demand - US
US Natural Gas Balance