Natural Gas Markets and EIA’s Information Program NARUC Winter Conference Gas Subcommittee Meeting...
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Transcript of Natural Gas Markets and EIA’s Information Program NARUC Winter Conference Gas Subcommittee Meeting...
Natural Gas Markets and Natural Gas Markets and EIA’s Information ProgramEIA’s Information Program
NARUC Winter ConferenceNARUC Winter ConferenceGas Subcommittee MeetingGas Subcommittee Meeting
March 2000March 2000
Barbara Mariner-Volpe, Barbara Mariner-Volpe, [email protected]@eia.doe.gov Energy Information AdministrationEnergy Information Administration
Presentation Coverage Gas Market Trends Gas Market Outlook Price Volatility Interaction Between Natural Gas/Fuel
Oil Markets: Winter 2000 Redesign of EIA’s Information Program Other Issues on EIA’s Agenda
In 1999 the Gas Market Saw Higher Prices and Little Change in Consumption
Wellhead prices: 25% - 43% higher in 1999 than in 1998, since August
Production: stable but reserve additions < production in 1998
Imports: 13% increase between ‘98 and ‘99 (3.4 Tcf) Storage: 93% full at beginning of heating season Consumption: little change between ‘98 and ‘99 Pipeline expansions: deliverability increased 5.6
Bcf/d Changes in retail markets
Consumer Prices Declined Substantially From 1980’s Peak Prices
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999
19
99
Do
llars
pe
r T
ho
us
an
d C
ub
ic F
ee
t
Residential Commercial
IndustrialElectric Utilities
Wellhead
Wellhead Prices Show Seasonal Variability in Some Years
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Do
lla
rs p
er
Th
ou
san
d C
ub
ic F
ee
t
1996 1997 1998 1999
1998 Gas Reserve Additions Did Not Replace Production For The First Time in 5 Years
38
66 68
88
98
87
125
24
88 8883
104109 107 104
83
0
20
40
60
80
100
120
140
1991 1992 1993 1994 1995 1996 1997 1998
Re
pla
ced
Re
serv
e A
dd
itio
ns
as a
Pe
rce
nt
of
Pro
du
ctio
n
OIL GAS
The Gap Between Crude Prices and Gas Prices Widened During Winter 1999/2000
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
Jan-99 Feb-99Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00
Do
llars
pe
r M
MB
tu
West Texas Intermediate
NYMEX Henry Hub near-month futurescontract closing price
Henry Hub Spot Avg
Temperatures in Four Cities During Winter ’98/’99 and ’99/’00
0
10
20
30
40
50
60
70
1-Nov 15-Nov 29-Nov 13-Dec 27-Dec 10-Jan 24-Jan 7-Feb 21-Feb 7-Mar 21-Mar
De
gre
es F
ah
ren
he
it
1998-99
Normal
1999-00
In the Past Three Years, Working Gas in Storage Has Fallen Within or Exceeded the
Expected Inventory Range
500
1,000
1,500
2,000
2,500
3,000
3,500
October
Novem
ber
Decem
ber
Januar
y
Febru
ary
Mar
chApril
May
June
July
August
Septe
mber
Bil
ion
Cu
bic
Fee
t
1996-97
1997-98
1998-99
1999-2000
Expected Range
Short-Term Projections
0
500
1000
1500
2000
2500
3000
3500
31-Oct
12-Nov
26-Nov
3-Dec
17-Dec
31-Dec
14-Jan
28-Jan
4-Feb
18-Feb
29-Feb
10-Mar
24-Mar
Bill
ion
Cu
bic
Fe
et
AGA Estimate
EIA 1999 Actual
EIA STEO Projections
EIA 5-Year Average, 1995-1999
STEO Projections
Expected Range
End-of-heating Season Stocks Are Approaching the Low End of the Expected Range
Average Pipeline Utilization Varied in 1998
= Less than 100 MMcf/d Capacity
Capacity (in Million Cubic Feet per Day)
9,0006,000
12,00015,000
03,000
33 Pipeline Development Projects Completed in 1999 33 Pipeline Development Projects Completed in 1999 Added 5.6 Bcf/d to National DeliverabilityAdded 5.6 Bcf/d to National Deliverability
Western Central
Southwest
8 Projects - 1,915 Mmcf/d
Midwest
Southeast
Northeast
3 Projects - 319 Mmcf/d 5 Projects - 258 Mmcf/d 9 Projects - 1,080 Mmcf/d
6 Projects - 1,412 Mmcf/d
3 Projects - 829 Mmcf/d
4,030
2,574
6,542
8,460
14,570
5,613
1,875
1,725
6,210
6,350
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Millio
n C
ub
ic F
ee
t p
er
Day
Except for 1994-96, the amount of added Except for 1994-96, the amount of added capacity each year has been above 4 Bcf/dcapacity each year has been above 4 Bcf/d
Source:EIA, Natural Gas Proposed Pipeline Construction Database
Additions to Capacity
(Announced and/or Approved Projects)
Northeast25 Projects - 3.5 Bcf/d
Southeast13 Projects - 3.9 Bcf/d
Midwest 17 Projects - 7.7 Bcf/d
Southwest9 Projects - 2.8 Bcf/d
Western9 Projects - 1.2 Bcf/d
Central 12 Projects - 3.2 Bcf/d
Proposed natural gas pipeline expansionsProposed natural gas pipeline expansions2000-2002 (85 Projects, 22.3 Bcf/d)2000-2002 (85 Projects, 22.3 Bcf/d)
1996 1997 1998 1999 2000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
552
1,397(Preliminary)
2,124
5,176
Mil
lio
ns
of
Do
llar
s
Proposed
(Estimated)
Completed
2,380
Expenditures for pipeline development/expansions Expenditures for pipeline development/expansions could jump to over $5 billion in 2000could jump to over $5 billion in 2000
Most of the proposed interregional expansions reflect Most of the proposed interregional expansions reflect growing Canadian penetration of the Midwest and growing Canadian penetration of the Midwest and
NortheastNortheast
Midwest Western Northeast Southeast Central Southwest Canada Mexico
-40,000
-30,000
-20,000
-10,000
0
10,000
20,000 Net 1999 Capacity
Proposed Additions Through 2002
Mill
ion
Cub
ic F
eet
per
Day
Statewide unbundling - active programs Statewide unbundling - implementation phasePilot programs/partial unbundlingNo unbundling - considering actionNo unbundling
VTNHMARICTNJDEMDDC
U.S. Summary
Status of Retail Unbundling in the US as of February 2000
Total Firm Capacity Under Contract Has Total Firm Capacity Under Contract Has Generally Increased Each QuarterGenerally Increased Each Quarter
0204060
80100120
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Long-Term Short-term1996 1997 1998 1999
90 93 9696 93 9695 95 97104
95 97 99 102 105
Apr Jul Oct Jan
Capacity (TBtu/d)
0
20
40
60
80
100
120
Note: Data are for 60 interstate pipeline companies.
Marketers Have Increased Their Share of the Marketers Have Increased Their Share of the Transportation MarketTransportation Market
July 1, 1999
Electric Utilities 4%
Marketers27%
LDCs52%
Industrials5%
Pipeline Companies
7% Others5%
Total Firm Capacity is 97 trillion Btu per day.
July 1, 1997
Others3%
Pipeline Companies
7%
Industrials5%
LDCs59%
Marketers22%
Electric Utilities4%
Total Firm Capacity is 93 trillion Btu per day.
Marketers Have Increased Their Capacity Marketers Have Increased Their Capacity Commitments, LDCs and Electric Utilities Commitments, LDCs and Electric Utilities
Have DecreasedHave Decreased
0.00
0.50
1.00
1.50
2.00
2.50
Apr-96
Jul-96
Oct-96
Jan-97
Apr-97
Jul-97
Oct-97
Jan-98
Apr-98
Jul-98
Oct-98
Jan-99
Apr-99
Jul-99
Oct-99
Lo
ng
-Te
rm C
apac
ity
(In
de
x)(A
pri
l 199
6 =
1)
Electric Utilities IndustrialsLDCs MarketersOthers Pipeline Companies
Average Contract Length for Contracts With Terms Average Contract Length for Contracts With Terms of 3 Years or More, by Year of 3 Years or More, by Year
Contract Start Year, 1994 - 1999Contract Start Year, 1994 - 1999
11.010.1
8.0
9.5
7.8 7.6
0
2
4
6
8
10
12
1994 1995 1996 1997 1998 1999
Contract Start Year
Average Contract Length (Years)
Note: Data are for a sample of 60 interstate pipeline companies.
Firm Transportation Capacity by Year for Contract Firm Transportation Capacity by Year for Contract Expiration, 1999 - 2025, Expiration, 1999 - 2025,
as of July 1, 1999as of July 1, 1999
Note: Data are for 60 interstate pipeline companies. Data for 1999 are for the last 6 months.
Short term
Long term
0
2
4
6
8
10
12
14
16
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025+
Trillion Btu per Day
Regional Exposure to Firm Capacity Contract Regional Exposure to Firm Capacity Contract Expirations, 1999-2025, as of July 1, 1999Expirations, 1999-2025, as of July 1, 1999
NortheastMidwestCentral
West
Southwest
SoutheastTrillion Btu per Day
2000-20032004-20082009-2025
1999
2.11.5
1.8
5.6
2.7
8.4
9.8
11.8
0.6
4.6
1.1
3.10.7 0.9
0.1
3.8
3.1
7.8
3.5
1.4 3.4
4.6
2.1
12.3
Natural Gas Market Outlook Short-Term (Through 2001)
– Wellhead prices average $2.48 per Mcf in 2000 (March STEO, $2.57 in 2001) compared to last year’s average price of $2.09
– Industrial and electric utility growth continue but slows
Long Term (through 2020)– Continued optimism about market growth (32 Tcf in 2020)– Increasing wellhead prices to $2.81 per Mcf (98$) in 2020 – Declining margins/prices to small customers – Imports increase to 5.1 Tcf in 2020– Rising prices and lower drilling costs increase reserve
additions and production
Average Monthly Wellhead Price
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Do
llars
pe
r M
cf
Nominal Dollars
1999 Dollars
January 1980 - January 2000
Weather Weather
Economic/business Economic/business conditions conditions
Stock levelsStock levels
Pipeline capacityPipeline capacity
Operational difficultiesOperational difficulties
Lack of timely,Lack of timely,reliable informationreliable information
Affects Supply Affects DemandAffects Supply Affects Demand
What Are The Main Drivers Of What Are The Main Drivers Of Short-term Price Volatility?Short-term Price Volatility?
High Prices Do Not Always Coincide With High Volatility
0
20
40
60
80
100
120
140
160
180
200
May
-96
Au
g-9
6N
ov
-96
Fe
b-9
7M
ay-9
7A
ug
-97
No
v-9
7F
eb
-98
May
-98
Au
g-9
8N
ov
-98
Fe
b-9
9M
ay-9
9A
ug
-99
No
v-9
9F
eb
-00
Vo
lati
lity
(Pe
rce
nt)
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
Do
llars
Pe
r M
MB
tu
Monthly Variations in Daily Prices (Volatility Index)
Wholesale gas price in Henry, LA
Winter 1999/2000: Fuel Oil and Gas Market Developments
New England heating oil prices increased $0.78 per gallon (to $1.97) between 1/17 and 2/7
Factors that led to the surge– increases in crude oil prices– cold weather– low fuel oil stocks– refinery outages– transportation problems– natural gas interruptible load switching to distillate
EIA is undertaking 3 studies (with DOE Policy Office) on fuel diversity and natural gas interruptible contracts
Low Distillate Stocks Set Stage for Price Volatility
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00
Th
ou
sa
nd
Ba
rre
ls
U.S. Distillate End-of-Month Stocks
X
Feb 25
U.S. Distillate End-of-Month Stocks
Regional Residential Heating Oil Prices
0
25
50
75
100
125
150
175
200
225
10/4
10/1
1
10/1
8
10/2
5
11/1
11/8
11/1
5
11/2
2
11/2
9
12/6
12/1
3
12/2
0
12/2
7
1/3
1/10
1/17
1/24
1/31 2/7
2/14
2/21
2/28 3/6
Ce
nts
Pe
r G
allo
n
New England
Mid Atlantic
S. Atlantic
Midwest
Feb 28
Retail Diesel Fuel Oil Prices
0
25
50
75
100
125
150
175
200
225
10/18 11/1 11/15 11/29 12/13 12/27 1/10 1/24 2/7 2/21 3/6
Ce
nts
Pe
r G
allo
n
New England
Mid Atlantic
East Coast
U.S.
Feb 28
Spot Distillate & Crude Oil Prices(Prices through March 3, 2000)
0
20
40
60
80
100
120
140
160
180
Jan-98
Apr-98
Jul-98
Oct-98
Jan-99
Apr-99
Jul-99
Oct-99
Jan-00
Cen
ts P
er G
allo
n
Peak $1.77
West Texas Intermediate (WTI)
Gulf Coast (GC) No. 2
New York Harbor (NYH) No. 2
Recovery May Require Holding Stocks Level in February and March
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00
Th
ou
san
d B
arre
ls
x
East Coast Total Distillate Stocks
East CoastActual
Feb 25Normal Range
Algonquin Gas Trans (ALGN)Brooklyn Union Gas (BRKL)CNG Trans Corp (CNGT)Columbia Gas Trans (CGTC)Eastern Shore Natural Gas (ESHR)EnergyNorth Natural Gas (ENNG)Granite State Gas (GRST)Iroquois Pipeline (IROQ)Maritimes\Northeast Pipeline (MNEP)
National Fuel Gas Dist (NAFD)National Fuel Gas Sup (NFGS)Northern Utilities (NUTL)Portland Natural Gas (PORT)St. Lawrence Gas (STLW)Tennessee Gas Pipeline (TENN)Texas Eastern Trans (TETC)Transcontinental Gas (TRAN)Vermont Gas (VERM)
CNGT
TETC TRAN
TENNCGTC
STLW
ENNGIROQ
GRST
BRKL
VERM
Interstate Pipeline Companies Serving the Interstate Pipeline Companies Serving the Northeast Northeast
Next Generation*Natural Gas (NG)2
A New Comprehensive Information Program at EIA
Progress to Date:– Information Requirements Report
– Distribution Charges collected starting in Jan. 2000
– Residential and Commercial: developed respondent strategies
Plans for 2000:– Industrial:
Pilot test of consumer survey (Census Bureau) Assess results, costs
– Residential/Commercial (supplier surveys): Develop survey instrument Initiate data collection in Jan. 2001 Components of price: commodity, distribution charges,
and taxes
– Production Data: Determine options and feasibility
Timeline for (NG)2 Development
1999 2000 2001 2002
End-Use Prices200020012002 End-UsePrices Storage Production Transportation &Distribution Markets
Storage
Production
Transportation and Distribution
Markets
Imports and Exports
Collection of End-Use Quantity and Price Data MayBecome Quite Complex with Regulatory Reform
Producers
Local Distribution Companies (1400)
Consumers
Marketers
Storage Facilities
Importers/Exporters
Market Hubs
sales to others insame category
Billing
Companies
Strategy 1
Strategy 4
Strategy 1: Unified bills
Strategy 2: Components
Strategy 3: State Agencies
Strategy 4: End-user surveys
Residential, Commercial,
and Industrial
Strategy 2
Divergence of Physical and Financial Divergence of Physical and Financial Information CoverageInformation Coverage
0
20
40
60
80
100
1984 1987 1990 1993 1996 1999 2002
Pri
ce
Co
ve
rag
e (
Pe
rce
nt)
Residential Commercial Industrial
Restructuring History Projections
EIA Collection of Residential Quantity and EIA Collection of Residential Quantity and Price Data Will Erode As Retail Markets Price Data Will Erode As Retail Markets
UnbundleUnbundle
Note: Data coverage in the West and Southwest Regions (not shown) remains at 99 percent or higher .
0%
20%
40%
60%
80%
100%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Per
cent
of N
atur
al G
as D
eliv
erie
s w
ith E
IA P
rice
D
ata
Northeast Central Midwest Southeast
Challenges for (NG)2
Maximize utility/accessibility/timeliness Minimize respondent burden and information
costs– Tap alternative sources of information– Evaluate alternatives e.g. estimation strategies
Response encouragement– Reporting of prices by marketers and billing
companies could be key to the success of this effort
Ongoing changes in the industry
DOE EMERCENCY RESPONSE FUNCTIONS Agency-Wide: Office of Emergency Operations, Energy
Information Administration, Fossil Energy, Policy, Energy Efficiency & Renewable Energy, Power Marketing Administrations, Office of Critical Infrastructure Protection
Coordinate diverse emergency response Assess emergency and pre-emergency conditions Rapid deployment of technical experts Industry outreach Liaison with other departmental elements, federal, tribal, state
& local agencies 2000 Hot Topics: electrical supplies in New England and the
Midwest, Petroleum Supplies, Hurricanes, Critical Infrastructure Protection
EIA’s Natural Gas Agenda for 2000
(NG)2 - program redesign Multiple studies assessing natural gas/fuel oil
market Ongoing efforts in transportation, storage
markets, retail restructuring Critical Infrastructure Protection Key Products: Natural Gas Monthly, Natural
Gas Annual, Weekly Market Assessment, market studies, Issues and Trends (2001)