Gas in North America & the Potential Impact on the International Energy Trade

Gas in North America & the Potential Impact on the International Energy Trade

Analysis of Production History

Remaining ReservesCumulative Production

Reserve Adds

Initial Production & Decline Rates

Field Size Distribution => Yet To Find (YTF) All Content 2003 IHS Energy

North American Gas Reserves - 2000

1200

Original Remaining YTF YTF >300BCF

600USA

Can

Mex

200

400

800

1000

TCF

All Content 2003 IHS Energy

Gas Reserves vs. Production

RemainingProductionRemainingReserves Rate R/P Ratio YTF(tcf) (tcf/yr) (yrs) (tcf)

Canada 71.3 7.5 9.5 169.5

USA 197.9 24.1 8.0 401.2

Mexico 50.0 1.7 29.4 58.2

Note: combined USA & Canada R/P is 7.4 without Alaska and Canadian Frontier


Natural Gas Reserves Added to the System

25

USA & Canada by Region(Avg. Prod. = 31.5 TCF/Y)

1990 2001

30

20

15

10

5

35 Avg. Prod.

TCF


North American Gas in 2000

USA, Canada & Mexico combined

67 BCFD Gas Delivered to Consumers

91 BCFD Raw Gas Production

120 BCFD Pipeline System

3 BCFD LNG Re-gas Capacity

4 TCF Storage(78 BCFD in/out)

14 BCFD Fuel & Extr. Losses

10 BCFD Alaska


Existing InterstatePipeline Network

Largely Unconstrained Year to YearAll Content 2003 IHS Energy

Total US Gas Storage

Little Growth since 1980, Except in Swing Volume

Total Gas in Storage(from EIA)

0

1000

2000

3000

4000

5000

6000

7000

8000

Dec

-73

Dec

-74

Dec

-75

Dec

-76

Dec

-77

Dec

-78

Dec

-79

Dec

-80

Dec

-81

Dec

-82

Dec

-83

Dec

-84

Dec

-85

Dec

-86

Dec

-87

Dec

-88

Dec

-89

Dec

-90

Dec

-91

Dec

-92

Dec

-93

Dec

-94

Dec

-95

Dec

-96

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Time

BC

F

8,241 BCF Total Capacity

Monthly Demand is Variable

Annual Swing can be 40 BCFDAll Content 2003 IHS Energy

US Raw Gas Demand Sensitivity

5 10 15 20 25 30

BCFD

Power

Industrial

ResidentialSevere Weather

Mild Weather

Low Gas Price

High Gas Price

Low Gas Price (relative to Fuel Oil)

High Gas Price (relative to Fuel Oil)

4.0 BCFD

3.3 BCFD

6.0 BCFD

Delta


US Power & Alt. Fuels

Coal 37.2 %

Gas 27.2 %

Nuclear 11.6 %

Hydro 10.6 %

Oil 8.0 %

Other 5.4 %

About 50% of Gas can shift to Oil – for a 150% increase in oil requirements, while 10% of Coal and 40% of Oil can shift to Gas – for a 25% increase in Gas.


Gas Balance by Region

BCFD Pacific(9+12)

Mtn.(8+11)

Canada Mexico W. Cent.(4+7)

GOMOn+Off

E. Cent.(3+6)

Atlantic(1+2+5+10)

Supply + 1.0 + 11.1 + 20.6 + 4.7 + 16.7 + 26.1 +2.7 + 0.0

Demand - 9.5 - 3.9 - 9.4 - 5.6 - 23.0 - 0.0 -15.2 -15.7

Net - 8.5 + 7.2 +11.2 -0.9 - 6.3 + 26.1 - 12.5 -15.7

Canada

Mexico

Data for 2001 – some numbers are roundedAll Content 2003 IHS Energy

Raw Gas Demand

0

20

40

60

80

100

120

140

1990 1995 2000 2005 2010 2015 2020

BC

FD

Mexico

Canada

Atlantic

E. Central

W. Central

Rockies

Pacific


Gas Supply – Current Activity Level

(Note: Alaska gas production shown as pipeline only)

120

100

80

1990 2020

BCFD


Existing YTF Drilling Frontier Dev. LNG Imports Alaska Pipeline

Gas Supply – Maximum Activity Level

(Note: Alaska gas production shown as pipeline only)

120

100

80

1990 2020

BCFD


Existing YTF Drilling Frontier Dev. LNG Imports Alaska Pipeline

Supply DemandAll Content 2003 IHS Energy

Frontier Canada Gas• Reserves (Discovered Undeveloped)

• 8.9 tcf in NWT – Mackenzie Delta• 17.7 tcf in East Coast Canada

• Labrador, Grand Banks, & Scotian Basins

• Depends upon Pipelines for Development• Expect 1-2 BCFD from NWT – Mackenzie Delta• Expect 2-3 BCFD from East Coast Canada

• Economic to Develop in $3 - $4.5 Price Range• Consistently Robust Price is Key to Investment

• Expected Timing – Late in this Decade at Best


Canadian Export PotentialCanada Gas Balance

0

5

10

15

20

25

30

35

1990 1995 2000 2005 2010 2015 2020

Raw

Gas

(B

CF

D)

Gas Supply $5.00

Gas Supply $3.50

$2.00 Demand

$3.50 Demand

$5.00 Demand


Alaska Gas Potential

• 44.1 TCF Remaining Reserves (41.4 on N. Slope)• Almost all Production Currently Re-injected • Gas in Cook Inlet Exported as LNG to Asia

• Gas Pipelines must Traverse Canada• 26.6 TCF Competing Reserves Closer to Market

• Long Term Contracts & Gov’t Support before Investment• Free Trade Issues are Rising Between US & Canada

• Expected Volume & Timing – 2 to 4 BCFD post 2010


Mexican Gas

Mexico Gas Balance

0

2

4

6

8

10

12

14

16

1990 1995 2000 2005 2010 2015 2020

Raw

Gas

(B

CF

D)

$2.00 Demand

$3.50 Demand

$5.00 Demand

Gas Supply


LNG Import Potential

2001 2010

9 BCFD

5 BCFD

LNG valid in $3.50 - $5.00 Price Range

New

Existing

Convert

Expand

1 BCFD

3 BCFD

7 BCFD


World Gas Situation

CanadaUSAMexicoWorld

CanadaUSAMexicoWorld

7% of the World’s Population Consumes 31% of the World’s Gas Production

Population Consumption

Reserves Production

5% of the World’s Gas Reserves Produce 32% of the World’s Gas Production


Gas Price Forecast

• Continental gas supply will be marginally adequate with sustained gas prices @ $3.50/ mcf

• High decline rates make the system unstable at gas prices below $3.00/mcf

• Large supplies of LNG are available at gas prices around $4.50-$5.00/mcf, but normally require longer term agreements


Conclusions• US-Canadian trade relations are critical to continued gas exports to

the USA and future development of frontier gas reserves in Alaska, NWT and the East Coast of Canada

• Mexico must re-invent itself soon or face rising costs for gas imports from either the USA or via LNG or both

• LNG import volumes to the USA will cause a shift in both the world gas trade and the way gas is contracted in the USA (long term contracts similar to European markets)

• Logistical constraints of alternative fuels and steep domestic gas decline rates will strain the traditional gas to oil price linkage


Gas in North America & the Potential Impact on the International Energy Trade

Documents

Gas in North America & the Potential Impact on the International Energy Trade