U.S. Natural Gas Outlook

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U.S. Natural Gas Outlook

• Presented to
• SAIS/ESAI Seminar
• October 24, 2003
• Presented by
• Guy Caruso, Administrator
• Energy Information Administration (EIA)

www.eia.doe.gov
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Short-Term Outlook for Natural Gas

• WELLHEAD PRICE 4.88 per Mcf in 2003, 3.97 in
  2004
• CONSUMER PRICES higher this winter v. last
• 
  expect relief starting in 2Q 2004
• CONSUMPTION Little change in totals for 2003,
  2004
• SUPPLY Cautious Optimism because of the
  following
• Production increases in 03 (result of improved
  drilling activity)
• Net imports (including LNG) increase in 2004
• Storage adequate at start winter 2003 (3 Tcf)
• CAVEAT Extremes in market or weather conditions
  could change this outlook.

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Monthly Consumption, Production and Net Imports
Consumption
Net Imports
Production
Projection
Source EIA, Short-Term Energy Outlook, October
2003
4
Natural Gas Spot Prices Are Expected to Average
4.50-5.00 This Winter(Base Case and 95
Confidence Interval)
10.0
9.0
Average Spot Price about 5.30 /Mcf in
2003 about 4.40 /Mcf in 2004
8.0
7.0
6.0
5.0
Dollars per Thousand Cubic Feet
4.0
3.0
2.0
1.0
0.0
Jul-01
Jul-02
Jul-03
Jul-04
Jan-01
Jan-02
Sep-02
Nov-02
Jan-03
Sep-03
Nov-03
Jan-04
Sep-04
Nov-04
Mar-01
Sep-01
Nov-01
Mar-02
Mar-03
Mar-04
May-01
May-02
May-03
May-04
Monthly
The confidence intervals show /- 2 standard
errors based on the properties of the model. The
ranges do not include the effects of major supply
disruptions. Sources History EIA
Projections Short-Term Energy Outlook, October
2003.
5
Households Are Expected to Pay More For Gas
Service This Winter
Notes Consumption based on typical per household
use for the Midwest, and New England New
York. Sources History EIA Projections
Short-Term Energy Outlook October, 2003.
6
Lower 48 Natural Gas Wellhead Prices, 1970-2025
(2001 dollars per thousand cubic feet)
7.16
Reference case (nominal dollars)
1.54
1995
2025
3.95
History
Projections
Source EIA
7
Total Natural Gas Demand Is Expected to Remain
Flat For the Next Two Years
12
90
10
80
8
70
6
60
4
50
Billion Cubic Feet per Day
Percent Change
2
40
0
30
-2
20
-4
10
-6
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Percent Change (Left Axis)
Total (Right Axis)
Sources History EIA Projections Short-Term
Energy Outlook, October 2003.
8
U.S. Natural Gas Consumption by Sector,
1990-2025(trillion cubic feet)
History
Projections
Industrial
Electric generators
Residential
Commercial
CNG vehicles
Source EIA
9
Working Gas in Underground Storage Compared with
5-Year Range
3500
End-of-Month-Stocks
3000
2500
2000
Billion Cubic Feet
1500
1000
5-Yr Min/Max
Range
Projection
500
0
Jan-02
Sep-02
Jan-03
Sep-03
Jan-04
Sep-04
May-02
May-03
May-04
Monthly
Sources EIA, Short-Term Energy Outlook, October
2003
10
U.S. Gas Production Is Expected to Increase in
2003 and Taper in 2004
Sources EIA, Short-Term Energy Outlook, October
2003
11
Gas Rigs Tend To Follow Spot Prices With A Lag
Source Natural Gas Intelligence Weekly Gas Price
Index, Baker-Hughes Weekly US Rig Report.
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U.S. Dry Natural Gas Production, 1990 - 2025
(trillion cubic feet)
History
Projections
Onshore Unconventional
Nonassociated Onshore Conventional
Nonassociated Offshore
Associated/Dissolved
Alaska
Source EIA
13
Both Imports and Exports Are Expected To
Increase Through 2004
Notes Includes LNG. Net Imports equal imports
minus exports. Sources EIA, Short-Term Energy
Outlook, October 2003
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Natural Gas Import Sources
LNG Imports 2002 229 Bcf 2003 540 Bcf 2004
640 Bcf
Sources History EIA Projections Short-Term
Energy Outlook October, 2003.
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Natural Gas Production, Consumption, and Imports,
1970 - 2025 (trillion cubic feet)
History
Projections
Net Imports
Consumption
Natural Gas Net Imports, 2001 and 2025
(trillion cubic feet)
Production
2025
2001
Source EIA
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Contiguous U.S. LNG Import Terminals
Everett Import Facility - Massachusetts 3.5
Billion Cubic Feet Storage Capacity 715 Million
Cubic Feet per day Vapor. 100 Million Cubic Feet
per day by Truck
Cove Point LNG Facility - Maryland 5.0 Billion
Cubic Feet Storage Capacity 750 Million Cubic
Feet per day Vaporization (Imports began again in
July, expansion underway)
Elba Island LNG Import Facility - Georgia 4.1
Billion Cubic Feet Storage Capacity 460 Million
Cubic Feet per day Vaporization (Expansion
underway)
Lake Charles LNG Import Facility - Louisiana 6.3
Billion Cubic Feet Capacity 630 Million Cubic
Feet per day Vaporization (Expansion underway)
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U.S. LNG Imports (1992-2003)
LNG imports for 2003 are from the Short-term
Energy Outlook. This level of LNG imports (540
Bcf) far exceeds the record level of 253 Bcf in
1979. Source Energy Information Administration
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U.S. Import Terminal Capacity
Billion Cubic Feet per Day
Source Energy Information Administration
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Proposed North American Terminals
Canada (Irving, Access Energy Northeast, St.
John LNG, TransCanada/ Gaz Metro)
Existing Terminal Proposed Terminal
U.S. East Coast (Somerset, Weavers Cove,
Fairwinds LNG)
West Coast (Mitsubishi, Calpine, BHP, Crystal)
Everett, MA (Distrigas)
Lake Charles, LA (Southern Union)
Cove Point (Dominion)
Gulf Coast Onshore (Freeport, Cheniere, Exxon
Mobil, Cameron)
Elba Island (El Paso)
Bahamas (El Paso, AES, Tractebel)
Baja, Mexico (ConocoPhillips, Sempra, Shell,
Marathon, ChevronTexaco)
Offshore GOM (El Paso, ChevronTexaco, Shell,
Main Pass)
Lazaro Cardenas, Mexico (Tractebel)
Altamira, Mexico (Shell)
Source Energy Information Administration
from industry trade press, company Internet
sites, and other sources (August 2003).
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Long-Term LNG Activity

• Expect expansions of 1.02 Bcf/d for current
  terminals by 2006
• At least a dozen proposals to build new terminals
  in the next 10 years
• Companies have announced plans to bring LNG from
  Norway, Qatar, Indonesia, and Equatorial New
  Guinea, as well as other countries

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Net U.S. Imports of Natural Gas,
1970-2025(trillion cubic feet)
History
Projections
Canada
LNG
Mexico
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Comparison of Net LNG Import Forecasts (trillion
cubic feet)
Projections
History
PIRA
EEA
GII
EEA (N/A)
EIA
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Summary

• Wellhead prices remain high and vulnerable to
  spikes resulting from developments like severe
  weather or disruptions in supplies.
• Storage is expected to be near the 5-year average
  level by Nov 1.
• LNG holds significant potential as a supply
  source.
• Consumers will pay more for gas this winter v.
  last. Rate reductions expected in 2004.
• A substantial boost in supplies from production
  or imports will take time and may require
  additional infrastructure.

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