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Natural Gas Supply/Demand Outlook
By:
John Harpole
November 14, 2018
Presentation to:
The Fertilizer Outlook and Technology Conference
Jacksonville, Florida
Fertilizer Industry vs. Natural Gas Industry
Source: http://www.search.com/reference/Lucy_van_Pelt
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/1/2
010
2/1
/2011
5/1
/2011
8/1
/2011
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/1/2
011
2/1
/2012
5/1
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8/1
/2012
11
/1/2
012
2/1
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5/1
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2/1
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/2015
8/1
/2015
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$/M
MB
tu
BENTEK Est.
*Forecast from my 2010 speech: BENTEK Expects The Forward Curve To Fall Further
NYMEX
Source: BENTEK 4
What will impact natural gas prices during
the next 5 years?
• Shale gas/productivity gains (We aren’t exploring,
we are manufacturing gas.)
• Lower EPA Air Standards (demand increase)
• Renewable Portfolio Standards (in an inexpensive
gas environment?)
• Coal to gas conversion (demand increase)
• Demand in Mexico (potential demand increase)
• LNG exports from North America (China is waiting)
5
Circa 2010
Natural Gas Outlook
By:
John Harpole
Presentation to:
2013 Fertilizer Outlook
& Technology Conference
Tampa, Florida
November 20, 2013
Conclusions from November 20, 2013
• U.S. continues to produce more gas, shale gas revolution was too successful, end-users will benefit
• During the next 3 years, supply will likely exceed demand
• Prices will remain in the $3.50 to $4.75 range, with short period above and below that band during adjustments
• Long term prices depend on demand growth. Without demand growth, supply will continue to be long and prices relatively low.
• A significant demand response can’t occur for at least 3-5 years
7
The End of Scarcity?
Natural Gas Outlook
By:
John Harpole
Presentation to:
The Fertilizer Outlook and Technology Conference
Jacksonville, FL
November 11, 2015
The Big Three Issues to Watch
1. Global Oil Price Recovery
2. Marcellus and Utica Shale Production
3. U.S. LNG Exports
9
Circa 2015
10 Source: Kinder Morgan, 2015 Business Meeting: West Region Gas Pipelines, November 2, 2015
1990-2013: Wellhead total data from DI Desktop
2014-2025: Kinder Morgan forecast
11 Source: Kinder Morgan, 2015 Business Meeting: West Region Gas Pipelines, November 2, 2015
NYMEX Historical and Future Forecast
$0.00
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$2.00
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Per
MM
Btu
NYMEX – 1996- Nov 2018 - Average last 3 days of close as reported in Platts Gas Daily Report, Publication 2019-2021 Future Forecast as
of 11/07/2018 reported by MarketView Software
12
It is not a scarce resource anymore
13
US RIG COUNTS: Aug 2018 vs Aug 2016
5/+1
61/+34
15/+9
32/+24
2/-2
2/+1
6/+2
12/+5
19/+17
122/+68
35/+21
1/+1
96/+57
5/+2
4/+4
25/+7
10/+0
2/+0
Active rig count: Aug 3, 2018 / Change in rig count from Aug 5, 2016
Rig Increases Dry Gas Focused Areas Rig Increases Liquids-Rich/Oil Focused Areas Rig Declines Source: S&P Global, Aug 2018
1/-1
45/+3
23/+12
18/+9
15/-1
1/+0 46/+11
471/+290
33/+21
8/+5 PICEANCE
CALIFORNIA
MICHIGAN
POWDER RIVER
GREEN RIVER
WIND RIVER
OTHER ROCKIES
WILLISTON
SAN
JUAN
UINTA
OTHER
APPALACHIAN
D-J
MARCELLUS WET
MARCELLUS
DRY
UTICA
ILLINOIS
ARK FAYETTEVILLE
ARK WOODFORD
OFFSHORE
TX GULF
EAGLE FORD
PERMIAN
ANADARKO
FT
WORTH
AL-MS-FL
LA GULF
ARKLA
OTHER
MIDCONTINENT
TX GULF
EAST
TX
25/+1
RATON
0/+0
TOTAL
1144
CHANGE +610
10/+8
14 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
60
65
70
75
80
85
Bcf/d U.S. Dry Gas Production
2013 2014 2015 2016
2017 2018 Forecast
US supply growing again; largest year-over-year gain in history
Source: S&P Global Platts Analytics
Y-O-Y
2013/2014
+4.0 Bcf/d
Y-O-Y
2014/2015
+3.4 Bcf/d
Y-O-Y
(Forecast)
2017/2018
+7.0 Bcf/d
Y-O-Y (YTD)
2017/2018
+5.0 Bcf/d
17 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
19 Source: www.eia.gov/dnav/ng/hist/n9132mx2m.thm accessed 08/20/2018
Major delays on Mexico’s interior gas pipelines
Source: SENER, S&P Global Platts Analytics
• 4.7 Bcf/d delayed downstream of West
Texas
• 4.9 Bcf/d delayed downstream of
South Texas
• Average delay over 400 days
• Most new capacity delayed past 2018
• US pipeline exports will remain
capacity constrained until 2019
Pipeline Import Corridor Capacity MMcf/d Original ISD Estimated Start 6/1/2018 Days Delayed
El Encino - La Laguna West Texas 1,500 Apr-17 Mar-18 334
El Encino - Topolobampo West Texas 670 Oct-16 Jun-18 608
Nueva Era South Texas 504 Jun-17 Dec-18 548
Tula - Villa de Reyes South Texas 886 Dec-17 Jul-18 212
La Laguna - Aguascalientes West Texas 1,189 Dec-17 Nov-18 335
Villa de Reyes - Aguas. - Guadalajara West Texas 886 Dec-17 Nov-18 335
Samalayuca - Sasabe West Texas 472 Jun-17 Nov-18 518
Sur de Texas - Tuxpan South Texas 2,600 Jun-18 Oct-18 122
Tuxpan - Tula South Texas 886 Mar-17 Dec-19 1,005
Average Delay 460
Mexican Pipeline Construction Tracker
Project Details Start Date Tracker
20 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
Downstream constraints alleviated in 2019
0
5
10
15
2017 2018 2019
MEXICO IMPORT CAPACITY CONSTRAINTS (BCF/D)
Imports Border Capacity Estimated Downstream Constraint
Imports peak at ~4.9 Bcf/d in Oct-18 Imports peak at ~6.2 Bcf/d in Jul-19
Source: S&P Global Platts Analytics
21 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
High Utilization of US LNG Expected to Persist
0
2
4
6
8
10
12
Bcf/
d
US LNG Feedgas Capacity and Forecast Elba Island T7-10
Elba Island T1-6
Corpus Christi T2
Corpus Christi T1
Cove Point T1
Cameron LNG T3
Cameron LNG T2
Cameron LNG T1
Freeport LNG T3
Freeport LNG T2
Freeport LNG T1
Sabine Pass T5
Sabine Pass T4
Sabine Pass T3
Sabine Pass T2
Sabine Pass T1
LNG Export Forecast
LNG Feedgas Forecast
Source: S&P Global Platts Analytics
25 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
Latin America and Asia main markets US LNG
Source: S&P Global Platts Analytics
1,240 BCF US LNG exports shipped to 27 countries
MEXICO
275 Bcf
DOMINICAN
REPUBLIC
15 Bcf
BRAZIL
45 Bcf
ARGENTINA
46 Bcf CHILE
68 Bcf
PORTUGAL
23 Bcf
SPAIN
27 Bcf
ITALY
7 Bcf SABINE PASS and COVE
POINT LNG TERMINALS
TURKEY
29 Bcf
JORDAN
65 Bcf MALTA
5 Bcf
EGYPT
17 Bcf
PAKISTAN
13 Bcf
KUWAIT
30 Bcf
UAE
17 Bcf
CHINA
163 Bcf
INDIA
65 Bcf
THAILAND
3 Bcf
SOUTH
KOREA
151 Bcf
JAPAN
87 Bcf
TAIWAN
12 Bcf
UK
9 Bcf POLAND
3 Bcf
36% to Asia 37%
to
Americas
17% to India and Middle-East
10%
to
Europe
Lithuania
3 Bcf
Netherlands
6 Bcf
*Numbers may not add up to 100% due to rounding
Colombia
2 Bcf
Israel
3 Bcf
26 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
0
10
20
30
40
50
60
Bcf/d LNG Demand By Region
Asia Demand Europe Demand ME Demand
Americas Demand Other Demand
Asia Clearly Driving LNG Demand
LNG Demand in Asia expected to
account for roughly 50% of the total
LNG demand growth 2023 v 2018
Source: S&P Global Platts Analytics
27 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
China almost 30% of growth in global LNG demand (2018 to 2023)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0
10
20
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40
50
60
Bcf/d
China All Others China % of Total
Source: S&P Global Platts Analytics
28 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
29 Source: Greg Ruben, KinderMorgan, Colorado Oil and Gas Association Trade presentation, August 21, 2018
30 Source: Greg Ruben, KinderMorgan, Colorado Oil and Gas Association Trade presentation, August 21, 2018
0
10
20
30
40
50
60
Bcf/d LNG Supply By Region
Other Supply Qatar Supply
US Supply Australian Supply
Global Supply Concentrate to Three Players
US follows ramp in Australian
volumes; +60% of total liquefaction
capacity increase 2023 v 2018
Source: S&P Global Platts Analytics
31 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
32
Source: Antero Resources Company Presentation, November 2018 35
Source: Antero Resources Company Presentation, November 2018 36
Source: Antero Resources Company Presentation, November 2018 37
Source: Antero Resources Company Presentation, November 2018 38
Source: Antero Resources Company Presentation, November 2018 39
Source: Antero Resources Company Presentation, November 2018 40
Source: Antero Resources Company Presentation, November 2018 41
Source: Antero Resources Company Presentation, November 2018 42
Source: Antero Resources Company Presentation, November 2018 43
Source: Antero Resources Company Presentation, November 2018 44
Source: Antero Resources Company Presentation, November 2018 45
46 46
Source: Midstream to Markets: Oil Markets: Out of the Woods?, RBN Energy, The Energy Summit, August 23, 2017
Key Takeaways from 2010
• Shale gas/productivity gains (We aren’t exploring, we are manufacturing gas.)
• Demand in Mexico (potential demand increase)
• LNG exports from North America (China is waiting)
47
Key Takeaways from 2015
The Big Three Issues to Watch:
• Global Oil Price
• Marcellus and Utica Shale Production
• U.S. LNG Exports
Key Takeaways
• Forecasted NorAm production growth is highly dependent on global export markets; more exports to Mexico and LNG (10.3 Bcf/d) than organic demand growth in Canada and US (5.7 Bcf/d); reductions in exports forecasted are balanced by reductions in production growth
• Global demand for LNG continues growing; expect a “second wave” of LNG liquefaction capacity
• Gas infrastructure development is required to connect supply centers with emerging demand
• You have heard “it’s about location, location, location.” Production is about efficiency, efficiency, efficiency.
48 Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
The New “Metaphor” by Maytag
49
John Harpole President
Mercator Energy
26 W. Dry Creek Circle, Suite 410
Littleton, CO 80120
(303) 825-1100 (work)
(303) 478-3233 (cell)
Contact Information
50
NYMEX Historical and Future Forecast
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Per
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Btu
NYMEX – 1996- Nov 2018 - Average last 3 days of close as reported in Platts Gas Daily Report, Publication 2019-2021 Future Forecast as
of 11/07/2018 reported by MarketView Software
51
Source: Oilprice.com, The Saudi Arabian Oil Conspiracy and What it Might Mean for Your Portfolio, The Motley Fool, Adam Galas, January 18, 2015
Survival of the Fittest?
*Circa 2014: Saudis have staying power; $750 billion in foreign country reserves
53
Nation Oil price per barrel required to
break even or balance budget
US producers $38-$77
Qatar $58
Kuwait $59
UAE $90
Saudi Arabia $92
Angola $94
Russia $101
Iraq $116
Venezuela $117
Algeria $119
Ecuador $122
Nigeria $124
Iran $136
Source: Reuters, The Saudi Arabian Oil Conspiracy and What it Might Mean for Your Portfolio, The Motley Fool, Adam Galas, January 18, 2015
Survival of fittest as oil tumbles below $65, Bloomberg News, December 1, 2014
A Game of Chicken?
According to data compiled by Bloomberg, “prices have dropped below the level needed by at least 9 OPEC member states to balance their budgets.”
54
