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PLA NEPA-Permitting Seminar / 2008 Annual Meeting. ENERGY INSECURITY. June 11, 2008 By: John A. Harpole. Part 1: A Perspective on Energy. 3. In real estate, it’s location, location, location. If you want to understand natural gas, think… OIL, OIL and OIL - PowerPoint PPT Presentation
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1
ENERGY INSECURITY
June 11, 2008By:
John A. Harpole
PLA
NEPA-Permitting Seminar /
2008 Annual Meeting
2
Part 1:
A Perspective on Energy
33
4
In real estate, it’s location, location, location.
If you want to understand natural gas, think…
OIL, OIL and OIL
•The world production for oil is approximately 85 million BOPD.
•Consumption is 84 million BOPD
•If a South Korean growth model is applied to future demand in China and India, the world could be short 9 to 12 million BOPD within 12 years.
55
66
Natural Gas Volumes: A Perspective
• 1 MCF is the volume of gas required to fill a 10’x10’x10’ room
• 84 MCF is the volume of gas the avg. US home uses per year
• 1 BCF/Day is the daily volume produced in the Powder River Basin
• 1 BCF is the avg. volume of gas a Piceance Basin well will produce over its lifetime
• 1.8 BCF/Day is the Export Capacity of the Kern River Pipeline
• 1.8 BCF/Day is the peak-day demand behind XCEL Energy
• 3 BCF is the volume of gas contained in 1 LNG Tanker, which is enough to heat approximately 35,000 homes for one year.
77
• 7 BCF is the avg. daily amt. of gas consumed in California
• 11 TCF is the amount of Reserves found in the Jonah Field, located in southwest Wyoming
• 500 TCF is the total reserve estimate for the world’s largest gas field, located in Iran
Natural Gas Volumes: A Perspective (cont’d)
88
A Penny Difference
At current North American production levels, an increase of $0.01 per MMBtu in natural gas prices nationwide is worth $657 million a year.¹
=¹Daily, Matt. Power Marketing Association Online, “Phony U.S. gas trades fan fears of huge lawsuits.” (February 3, 2003).
99
While Summer Power Demand Is Growing, Winter Demand Still
Dominates80.8 Bcf
53.457.4
Dec-Feb July-Aug July-Aug 01-05
Average Daily01-05
Average Daily06
Average Daily
BcfBcf
10
1111
North American Gas Production
12
•Last year – 50% of the natural gas consumed in the US came from wells drilled in the prior 40 months
•2 years ago – 50% of the natural gas consumed in the US came from wells drilled in the prior 48 months
1313
14
Source: National Petroleum Council: Summary of Findings and Recommendations, Volume1, September 2003
1515
0%
5%
10%
15%
20%
25%
30%
35%
40%
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000
Proportion of US Natural Gas Production from Federal Lands
Onset of deepwater GOM oil & gas production
Onset of significant deepwater GOM productionFederal Lands Share
1616
Gas Resources on Federal Lands
“Of the remaining 975 trillion cubic feet (Tcf) of natural gas likely to be found in the U.S., an estimated 59 percent is expected to be found on federal lands.”
Access to Natural Gas Supplies--A Key to Meet Demand: American Petroleum Institute, Factsheet, July 2003.
17
Supply Growth Tilts West and South
17.616.415.8
Western Canada
3.73.53.3
7.99.7
10.8
5.15.14.9
4.24.24.1
4.24.75.0
0.30.40.3
1.41.51.9
2.26.8
12.1
9.012.314.3
4.84.54.1
7.47.66.9
Rockies
San Juan
Mid-Continent
Permian
Mexico
Shale Plays /
Carthage
Appalachia
Eastern Canada
Onshore Gulf
Gulf of Mexico
N.A. LNG Imports
AlaskaMackenzie
??
200720112016
Bcf/d
Source: El Paso Pipeline Group December 2007 Macro
1818
Since 2001, Incremental Rockies Volumes Have Averaged 446 MMcfd
Average446 MMcfd
421455
322
450 441
584
2001 2002 2003 2004 2005 2006
Changes in Gross Withdrawals
1919
US Population Distribution 2000
2020
North American Natural Gas Basins
W e s te r n C anadi anSe di m e ntar y B as i n
G r e e n R i ve r
U i nta/P i c e anc e D e nve rJ ul e s be r g
P e r m i an
Anadar ko
G ul f C o as t
Appal ac hi anSan J uan
P o w de r R i ve r
W i ndR i ve r
2121
North American Gas Pipeline Grid
2222
* Percent change since 2000.Source:Modified from Energy Information Administration, GasTran Gas Transportation Information System, Natural Gas Pipeline State Border Capacity Database.
Out of Rockies 3,677 MMcfd
(+10%)
= Bi-directional
3,0006,0009,000
12,00015,000
0
Capacity (MMcfd)as of December 2002
= Direction of Flow
Northeast
SoutheastSouthwest
Western
Central
Midwest
Into Southern California5,752 MMcfd (+10%*)
Into Northern California2,391 MMcfd (+14%*)
From Canada to Midwest 6,971 MMcfd (0%*)
From Canada to Northwest 4,643 MMcfd (+5%*)
From Canada to New England 1,158 MMcfd (+1%*)
Into the New York Metro Area 3,568 MMcfd (+9%*)
From Gulf Coast Production 25,127 MMcfd (+5%*)
From West Texas/Kansas/Oklahoma to Midwest 7,045 MMcfd (+3%*)
Into the Boston Metro Area 2,247 MMcfd (+2%*)
Into the Chicago Area Hub 11,867 MMcfd (0%*)
Natural Gas Transportation
2323
Western North
American Pipelines
2424
Timely Development
Development Delayedby Uncertainty
Supply Available
Time
Ca
pa
cit
y
Gas Not Available to the Gas Not Available to the National GridNational Grid
Effects of Uncertainty of Gas Supply on Capacity Development
Brian Jeffries. House Task Force on Affordable Natural Gas. Colorado Field Hearing, August 25, 2003.
2525
0
500
1000
1500
2000
2500
3000
1/1/
2005
4/1/
2005
7/1/
2005
10/1
/200
5
1/1/
2006
4/1/
2006
7/1/
2006
10/1
/200
6
1/1/
2007
4/1/
2007
WBI KMI SSC CP CIG TB Capacity
Rockies Pipeline Export Capacity Moving East
Source: Bentek Energy
2626
0.00
500,000.00
1,000,000.00
1,500,000.00
2,000,000.00
2,500,000.00
3,000,000.00
3,500,000.00
1/1/
2005
4/1/
2005
7/1/
2005
10/1
/200
5
1/1/
2006
4/1/
2006
7/1/
2006
10/1
/200
6
1/1/
2007
4/1/
2007
KR TC-SO NW-SO Capacity
Rockies Pipeline Export Capacity Moving Southwest
Source: Bentek Energy
2727
Rockies Pipeline Export Capacity Moving Northwest
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
1/1/
2005
4/1/
2005
7/1/
2005
10/1
/200
5
1/1/
2006
4/1/
2006
7/1/
2006
10/1
/200
6
1/1/
2007
4/1/
2007
NW Flow NW CapSource: Bentek Energy
2828
8
Rockies Express Pipeline Proposed Route
2929
Rockies Natural Gas Historical Prices
CIG Index Basis Differential Nymex
2002 $1.97 ($1.29) $3.26
2003 $4.04 ($1.40) $5.442004 $5.17 ($0.93) $6.092005 $6.95 ($1.60) $8.552006 $5.63 ($1.63) $7.262007 $3.97 ($2.96) $6.932008* $8.05 ($3.31) $11.36
Note: All prices in $/MMBtu. Rockies price based on CIG indices.
*6 months actual prices and 6 months forecast
30
Part 2:
A North American Short-fall
3131Natural Gas Projections from EIA and Six Others: March 28, 2007
Natural Gas Production, Consumption, and Imports
0
5
10
15
20
25
30
1960 1970 1980 1990 2000 2010 2020 2030
(tri
llio
n c
ub
ic f
ee
t)
16%
21%Net ImportsConsumption
ProductionNatural Gas Net Imports, 2005 and 2030
(trillion cubic feet)
3.0
0.60.9
4.5
0
1
2
3
4
5
6
7
Pipeline Liquefied Natural Gas
20052030
Source: Annual Energy Outlook 2007
20.5 Tcf
26.1 Tcf
History Projections
3232
3333
Lake Charles, Louisiana, Terminal
Source: Fairwinds
Constructed in 1981
3434Source: Bentek Energy
7.9 Bcfd of New LNG Facilities Will Come Online in 08 and 09
Golden Pass 09 (2.0 Bcfd)
Freeport 08 (1.5 Bcfd)
Cameron 09 (1.8 Bcfd)
L Charles 08 Liquids
Sabine 08 (2.6 Bcfd)
35
LNG Supply?A month ago, Qatar announced
3 deals
• Qatar/China: $60 Billion 5m tonnes per year - 25 year deal
• Qatar/UK: 7.8m tonnes per year
• Qatar/Poland: 2.5Bcm per year
36
37
3838
Actual LNG Imports to U.S. 2004 - 2006
BCF
652
631
580
2004 2005 2006Year
3939
2007 US LNG Deliveries
53.4
44.1
86.8
98.794.3
86.6
98.3
87.5
41.7
31.9
26.5
20.8
0
20
40
60
80
100
120
Janu
ary
Febru
ary
Mar
chApr
ilM
ayJu
ne July
Augus
t
Septe
mbe
r
Octo
ber
Novem
ber
Decem
ber
Am
ou
nt
(BC
F)
LNG Imports – Dec. 2007 Monthly Report U.S Department of Energy
40
TOTAL LNG IMPORTS (Bcf/day)Month 2007 2008 YOY Change
JAN 1.72 0.82 0.89 -52%
FEB 1.52 0.81 0.71 -46%
MAR 2.8 0.75 2.06 -73%
APR 2.8 0.75 2.06 -73%
MAY (e) 3.04 1.14 1.9 -63%
AVG 2.38 0.85 -1.52 -64%
Source: Waterborne LNG
4141
Part 3:Who Has the Natural Gas?
4242
Greatest Natural Gas Reserves by Country, 2006
Rank Country
Proved Reserves
(trillion cu ft)
1 Russia 1,680
2 Iran 971
3 Qatar 911
4 Saudi Arabia 241
5 United Arab Emirates 214
6 United States 193
7 Nigeria 185
8 Algeria 161
9 Venezuela 151
10 Iraq 112
11 Indonesia 98
4343
182.8
542.9
54.6
82
589.1
64
45.8
85.5
39.2
Gross Gas Production,
Billion Cubic Meters (2004)
8.8
56.6 Canada 15
9.8 186.9 United States 14
53.1 102.4 Turkmenistan 7
55.4 160.4 Algeria 6
81.5 1694.4 Russia 5
105.5 238.4 Saudi Arabia 4
132.3 213.9 United Arab Emirates
3
321.6 970.8 Iran 2
657.7 910.1 Qatar 1
Reserves to Production Ratio
(R/P)*
Proved Reserves, Trillion Cubic Feet
(2004)
Country Rank
World Gas Reserves
44
CountryReserves
(Trillion Cubic Feet)Percent of World Total
World 6,040 100.0Top 20 Countries 5,391 89.3 Russia* 1,680 27.8 Iran* 940 15.6 Qatar 910 15.1 Saudi Arabia 235 3.9 United Arab Emirates 212 3.5 United States 189 3.1 Nigeria 176 2.9 Algeria* 161 2.7 Venezuela* 151 2.5 Iraq 110 1.8 Indonesia 90 1.5 Malaysia 29 0.5 Norway 75 1.2 Turkmenistan 74 1.2 Uzbekistan 71 1.2 Kazakhstan 66 1.1 Netherlands 65 1.1 Canada 62 1.0 Egypt 57 0.9 Ukraine 40 0.7Rest of World 649 10.7
World Natural Gas Reserves by Country as of January 1, 2005
Source: "Worldwide Look at Reserves and Production," Oil & Gas Journal, Vol. 102, No. 47 (December 20, 2004) pp. 22-23
* These 4 countries account for 48.6% of world natural gas reserves.
4545
Let’s discuss your cost of natural gas.
4646
Natural Gas Cartel?
4747
Energy Security?
• By the year 2020, Gazprom will supply nearly 70% of the European Union’s natural gas.
4848
Gazprom’s Near-Monopoly Supply Position
Slovakia 100%Finland 99%Bulgaria 97%Lithuania 84%Hungary 80%Greece 76%Austria 74%Poland 62%Turkey 60%Germany 40%Italy 30%France 25%
% of Supply from Gazprom/Russia
4949
Energy Security Consider European (EU) and Former Soviet State
Supply Options
• Gazprom is the largest Russian company and is the largest extractor of natural gas in the world.
• Gazprom, with a $200 Billion (US) market capitalization, is the world’s 3rd largest corporation.
• Gazprom accounts for 93% of Russian natural gas production and 25% of the world’s natural gas reserves.
• The Kremlin owns a 51% controlling interest in Gazprom.• Gazprom supplies almost all the gas needs of Central Europe,
Eastern Europe, and the former Soviet Union.
5050
Comparative Market Capitalization
TOTAL 200.1
Encana Corporation 37.0
Devon Energy 29.8
Dominion Resources 29.0
Anadarko Petroleum 20.1
XTO Energy, Inc. 17.5
Williams Companies 15.7
EOG Resources 15.5
Noble Energy 8.7
Ultra Petroleum 7.3
Questar Corporation 7.2
Pioneer Natural Resources 4.9
Forest Oil 2.0
Whiting Petroleum 1.7
Berry Petroleum 1.3
Bill Barrett Corporation 1.2
Delta Petroleum 1.2
Gazprom 271.0
CompanyMarket Cap
(US $ Billions) CompanyMarket Cap
(US $ Billions)
5151
Conclusion:Major Energy Issues Looking Forward
Global Economic Impact
• It’s about oil, oil and oil• Current Global Oil Consumption versus
production
5252
Conclusion
• Uncertainty related to coal-fired emissions
• Supreme Court decision on CO2 2 emissions
• Next administration may impose a carbon tax
• Such a “carbon tax” would cause a “gas price explosion” according to Peabody Energy’s CEO Gregory Boyce
5353
Conclusion
What was once considered a fringe opinion, is now a central cultural document.
What type of carbon tax future do we face?
5454
John A. HarpolePresident
Mercator Energy LLC
www.mercatorenergy.com (303) 825-1100 (work)(303) 478-3233 (cell)
Contact Information
55
Analysis of Southeast/Gulf Natural Gas Infrastructure
Premium Southeast
• Transco Station 85
• TETCO M1• FGT Z3
Houston Ship
Channel
Henry
CarthagePerryville
“I” of the Storm
Source: Bentek Energy
56
GS ETX to MS 1.7 Bcf
Enbridge 0.7 Bcf
Trunk ETX to WLA .625 Bcf
NGPL .2 Bcf
GulfSouth SE Exp 1.272 Bcf
ETC 0.6 Bcf ETC
0.6 Bcf
CP .316 Bcf
SESH 1.12 BcfC
GT
to FG
T .18 B
cf
ETC Paris Loop 0.35 Bcf
ETC Cleburne to Carthage .5 Bcf
ET
C S
. Shale 0.6 B
cf
ET
C K
aty 0.4 Bcf
ET
C B
ossier Exp 0.9 B
cfK
M 0.225 B
cf
Gulf Crossing 1.6 Bcf
Enterprise Sherm
an 1.1 Bcf
TGT Fayetteville Shale 0.8 Bcf
TGT Greenville .75 Bcf
ET
C B
ossier Exp 0.4 B
cf
GS ETX to MS 1.7 Bcf
Enbridge 0.7 Bcf
Trunk ETX to WLA .625 Bcf
NGPL .2 Bcf
GulfSouth SE Exp 1.272 Bcf
ETC 0.6 Bcf ETC
0.6 Bcf
CP .316 Bcf
SESH 1.12 BcfC
GT
to FG
T .18 B
cf
ETC Paris Loop 0.35 Bcf
ETC Cleburne to Carthage .5 Bcf
ET
C S
. Shale 0.6 B
cf
ET
C K
aty 0.4 Bcf
ET
C B
ossier Exp 0.9 B
cfK
M 0.225 B
cf
Gulf Crossing 1.6 Bcf
Enterprise Sherm
an 1.1 Bcf
TGT Fayetteville Shale 0.8 Bcf
TGT Greenville .75 Bcf
ET
C B
ossier Exp 0.4 B
cf
Markwest 0.5 Bcf
ETC Paris Loop 0.55 Bcf KM MEP 1.4 Bcf
KM MEP 1.0 BcfTe
nne
ssee 8
00
0.4
Bcf
KM MEP 1.0 Bcf
SONAT Exp .375 Bcf
FGT Phase VIII 0.8 Bcf
34
Transco Station 85 North to Virginia Expansion
0.25 Bcf (open season)
Transco Station 85 North to Virginia Expansion
0.25 Bcf (open season)
35
Williams Perdido Norte PipelineOffshore Gathering to Support Deep H2O GOM - 0.20 Bcf
Williams Perdido Norte PipelineOffshore Gathering to Support Deep H2O GOM - 0.20 Bcf
36
2008 2009 2010 2011
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q2/Q3 Q1/Q2
Source: Bentek Energy
57
Periodically, The SE Gulf Region May Have its Own ‘Rockies Experience’
13 Projects7.4 Bcf/d
7 Projects6.6 Bcf/d
5 Projects4.2 Bcf/d
11 Projects6.3 Bcf/d
4 Projects7.1 Bcf/d
40 Projects31.6 Bcf/d
Henry Hub
REX
D
ispl
acem
ent
Source: Bentek Energy