Natural Gas Market Conditions Past, Present and Future

1
Natural Gas Market ConditionsPast, Present and
Future

• Rhone Resch
• Director, Energy and Environment

2
There are Vast Domestic Reserves of Natural Gas
(55-70 year supply)
TCF
Excludes Alaska
Excludes Alaska, low technology estimate
3
Market Volatility
Average U.S. Crude Oil RACC Price
Average Henry Hub Spot Natural Gas Price
Source EEA, Inc.
4
Coldest Winter on Record
5
Market is Responding
Natural Gas Rigs Have Almost Tripled
1,260
Oil Rigs
496
Natural Gas Rigs
April 1999
June 2001
6
Natural Gas Working Storage
Bcf
1994-1998 range
2000
2001
Source AGA
7
Long-Term Barriers

• Access to Capital
• Land Access Restrictions
• Decline Rates
• Technological Advancement

8
Required Investment Through 2020
Distribution 99 Billion
Production 658 Billion
Transmission 45 Billion
Storage 6 Billion
9
U.S.Natural Gas Demand By Sector
10
Historical and Projected Capacity Additions
11
Importance of Fuel Diversity for Electricity
Markets
Natural Gas 8
Nuclear 19
Renewables12
Natural Gas 7
Coal 4
Nuclear 10
Renewables 70
Coal 70
Source Electric Power Monthly, EIA
12
New Plant Capacity, 2000-2005
New Plant Capacity in MW Percent of Existing
Capacity
1,569 6
160 3
1,330 12
530 19
1,992 30
385 5
16,056 24
7,130 42
1,432 24
Source Energy Ventures Analysis, Inc.
13
No Relationship Exists Between Power and Natural
Gas Prices
14
California Power and Natural Gas Market are Not
Well Connected
15
CA Interstate Pipeline Mismatch with Intrastate
Pipeline System(MMcf/d)
Interstate
Intrastate
El Paso 3,290
SoCal Gas 2,795
TWPL 1,090
PGE (Firm) 2,543
7,010
6,038
Kern River 700
Kern/Mojave 700
PGE -GTN 1,930
16
Mismatch Still Exists After Pipeline
Expansion(MMcf/d)
Interstate
Intrastate
El Paso 3,520
TWPL 1,240
SoCal Gas 3,230
Kern River 1,735
PGE (Firm) 2,943
PGE -GTN 2,630
10,745
8,408
Sonoran 750
Kern/Mojave 1,735
North Baja 500
Southern Trails 120
Ruby Pipeline 750
17
Variables and Conclusions

• Weather - Summer and Winter
• Economy - slowing of industrial demand and
  industrial switch to oil
• Elasticity response
• Production response
• Perceptions regarding storage
• California and Washington effects

18
BACK UP SLIDES
19
Over 470 Tcf of Natural Gasin the West
Williston Basin 7 Tcf
Overthrust Belt 10 Tcf
Rocky Mountain Foreland 307 Tcf
West Coast Onshore 30 Tcf
West Coast Offshore 17 Tcf
San Juan Basin 25 Tcf
Permian Basin 75 Tcf
20
Producing Basin Pricing
San Juan and Rocky Mountain Basins are the lowest
priced producing basins in North America
21
EIA Projected Natural Gas Spot Prices Who
Knows?
Base Case and 95 Confidence Interval
2001 Est.
2000 Est.
Sources History Natural Gas Week Projections
Short-Term Energy Outlook, February 2001.
22
Removing Price ControlsSave Consumers Money
2000 /Mcf
Order 436 (Removed Price Cap)
Natural Gas Policy Act (Increased Price Cap)
Source EIA
23
Competition Saves Money
24
Demand Up BecauseNatural Gas Relatively Clean
Volatile Organic Compounds (VOCs)
Particulate Matter gt10 Micrometers (PM)
Nitrogen Oxide (NOx)
Sulfur Dioxide (SO2)
Source Oak Ridge National Laboratory
25
Growth in Supply 2000-2010
GULF OF MEXICO 33
ROCKIES 14
S.ARK / N.LA / E.TEXAS
13
NET IMPORTS FROM CANADA 11
ALL OTHER AREAS 23
LNG IMPORTS 6