Natural Gas Prices: Past Trends and Future Projections · 2016-12-08 · – pipelines – imports...
Transcript of Natural Gas Prices: Past Trends and Future Projections · 2016-12-08 · – pipelines – imports...
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
Natural Gas Prices: Past Trends and Future Projections
Presented by:Douglas J. Gotham
Di tDirectorState Utility Forecasting Group
Presented to:Vectren Energy Delivery Trade Ally Meeting
September 22, 2009
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
Natural Gas Prices• Natural gas prices tend to be very
volatilevolatile• Relatively constant prices with
occasional extremesoccasional extremes• Very difficult to predict future prices
– we do not project natural gas prices, but they are a factor in electricity use and prices so we do look at the projections ofprices, so we do look at the projections of others
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
Factors Affecting Prices• Demand
– economic factors• Supply
– drilling– weather– electricity sector
g– pipelines– imports
• Storage • Prices of other fuels– oil– coal
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
I di N t l GIndiana Natural Gas Consumption by Sector (Bcf)Co su p o by Sec o ( c )
500
600
400
Total
200
300 Residential
Commercial
Industrial
Electricity
100
01997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
2008 U S Natural Gas Imports2008 U.S. Natural Gas Imports & Exports (Bcf)p ( )
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
I di N t l G S l iIndiana Natural Gas Supply in 2007 (Bcf)00 ( c )
• Production 3.6• Imported 2 432• Imported 2,432• Exported 1,874
77 % of the gas that entered the state (from the south and west) passed through and left the state (to the north and east)
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
N t l G N tNatural Gas Near-term Futures Prices ($/mmBtu)u u es ces ($/ u)
141618
81012
246
0
ep 0
9, 1
994
ep 0
9, 1
995
ep 0
9, 1
996
ep 0
9, 1
997
ep 0
9, 1
998
ep 0
9, 1
999
ep 0
9, 2
000
ep 0
9, 2
001
ep 0
9, 2
002
ep 0
9, 2
003
ep 0
9, 2
004
ep 0
9, 2
005
ep 0
9, 2
006
ep 0
9, 2
007
ep 0
9, 2
008
ep 0
9, 2
009
Se Se Se Se Se Se Se Se Se Se Se Se Se Se Se Se
Data source: Energy Information Administration (EIA)
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
What’s changed• About 10 years ago, the amount of gas
produced per new well started droppingproduced per new well started dropping– the best gas locations were becoming
played outplayed out• Also, large amounts of new gas-fired
electricity generators were builtelectricity generators were built• As prices increased, new wells were
drilled but total production stayed flatdrilled, but total production stayed flat
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
Since Then• Price spikes have become more
pronouncedpronounced• The “normal” price of gas has increased
from around $2 to the $4 6 rangefrom around $2 to the $4-6 range• Prolonged high prices in the fall of 2005
d t l di ti ftwere due to supply disruptions after Hurricanes Katrina & Rita
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
More Recently• Production of gas from “unconventional”
sources, such as shale gas• High prices in 2008 were largely a result
of infrastructure issues– Pipeline system had to catch up to new
wells• New pipelines came into place around
the same time as the demand droppedthe same time as the demand dropped due to the economy
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
C t N t l GCurrent Natural Gas ConsumptionCo su p o
• EIA estimates gas consumption will fall by 2 4 % in 2009by 2.4 % in 2009– 12 % in industrial sector
• The price decrease makes gas more• The price decrease makes gas more attractive for electricity generation
b l t i it t t d t– gas use by electricity sector expected to increase by 4.3 % despite 3 % drop in electricity saleselectricity sales
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
C t N t l GCurrent Natural Gas Productionoduc o
• Low price has curtailed drilling activities• Total working rigs in U S down by 45 %• Total working rigs in U.S. down by 45 %
since start of the yearEIA t 2009 U S d ti t b• EIA expects 2009 U.S. production to be 0.9 % higher than 2008 and 2010
d ti t b 3 5 % lproduction to be 3.5 % lower.
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
Current Natural Gas Storage• As of the end of August 28, working gas
storage was 3 323 Bcfstorage was 3,323 Bcf– 501 Bcf above the 5-year average
489 Bcf above the year before– 489 Bcf above the year before• EIA projects it to reach 3,840 Bcf by end
of October beating the previous recordof October, beating the previous record– 3,565 Bcf in 2007
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
EIA’ Sh t t O tl kEIA’s Short-term Outlook (September 2009)(Sep e be 009)
• Prices will remain low for the rest of 2009 averaging $3 65/thousand cubic2009, averaging $3.65/thousand cubic feet for entire year– resilient production– resilient production– high storage levels
low demand– low demand– possible increase in imports
P i ill b d h t i 2010• Prices will rebound somewhat in 2010, averaging $4.78/thousand cubic feet
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
EIA’ L t P j tiEIA’s Long-term Projection (March 2009)( a c 009)
• Real (inflation adjusted) prices stay relatively flat until early 2020s then riserelatively flat until early 2020s then rise as more expensive resources are developeddeveloped
• Prices vary depending on technology and economic growth assumptionsand economic growth assumptions
ENERGY CENTERState Utility Forecasting Group (SUFG)
ENERGY CENTERState Utility Forecasting Group (SUFG)
I di R l R id ti l N t lIndiana Real Residential Natural Gas Prices (2007 $/mmBtu)( )
14
16History EIA projections
8
10
12
4
6
8
0
2
970
972
974
976
978
980
982
984
986
988
990
992
994
996
998
000
002
004
006
008
010
012
014
016
018
020
022
024
026
028
030
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Data source: EIA