Outlook for Natural Gas
for National Conference of State Legislatures (NCSL) Hydraulic fracturing webinar John Staub, Team Lead for Exploration and Production Analysis December 19, 2012
U.S. Energy Information Administration
Independent Statistics & Analysis
www.eia.gov
States pages include EIA datasets and analysis on all fuels and energy infrastructure included in EIA data collection
John Staub NCSL webinar, December 19, 2012
3
EIA updates state level data sets with mapping features and energy infrastructure datasets Interactive map links to state level energy data
John Staub NCSL webinar, December 19, 2012
4
Multiple layers of user selected options are available such as shale gas plays, power plants, pipelines, and transmission lines
John Staub NCSL webinar, December 19, 2012
5
Henry Hub Natural Gas Price dollars per million btu 8 Historical spot price STEO forecast price NYMEX futures price 95% NYMEX futures upper confidence interval 95% NYMEX futures lower confidence interval
7 6 5 4 3 2 1 0 Jan 2011
Jul 2011
Jan 2012
Jul 2012
Jan 2013
Jul 2013
Note: Confidence interval derived from options market information for the 5 trading days ending December 6, 2012. Intervals not calculated for months with sparse trading in near-the-money options contracts.
Source: Short-Term Energy Outlook, December 2012
John Staub NCSL webinar, December 19, 2012
6
U.S. Natural Gas Prices dollars per thousand cubic feet 25 Forecast Residential price Henry Hub spot price
20
Composite wellhead price 15
10
5
0 Jan 2008
Jan 2009
Jan 2010
Jan 2011
Jan 2012
Jan 2013
Source: Short-Term Energy Outlook, December 2012
John Staub NCSL webinar, December 19, 2012
7
U.S. Natural Gas Production and Imports billion cubic feet per day (bcf/d)
annual change (bcf/d)
72 70 68 66 64 62 60 58 56 54 52 50
9 8 7 6 5 4 3 2 1 0 -1 -2 2010
2011
2012
2013
Federal Gulf of Mexico production (right axis)
U.S. non-Gulf of Mexico production (right axis)
U.S. net imports (right axis)
Total marketed production (left axis)
Marketed production forecast (left axis)
Source: Short-Term Energy Outlook, December 2012
John Staub NCSL webinar, December 19, 2012
8
Natural gas prices increase over the outlook Henry Hub Spot Price 2011 dollars per million Btu History 12
Projections
2011
10
8
6
4
2
0 1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
9
Coal regains some competitive advantage relative to natural gas over time on a national average basis Energy prices to the electric power sector
ratio of natural gas price to steam coal price 2011 8
2011 dollars per Btu 10
History
2011
Projections
8 Natural gas 6
6 4 Coal
2
4
0 1990
2000
2010
2020
2030
2040
2 Competitive parity 0 1990
Projections
History 1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
10
Currently, U.S. shale gas production comprises about 35% of total U.S. dry production Shale gas production (dry) trillion cubic feet per year
Shale gas production (dry) billion cubic feet per day 30
11.0 Other U.S. shale gas Bakken (ND and MT) Eagle Ford (TX) Marcellus (PA and WV)
20
7.3
Haynesville (LA and TX) Woodford (OK) Fayetteville (AR) Barnett (TX)
10
0 2000
3.7
Antrim (MI, IN, and OH)
0.0 2002
2004
2006
2008
2010
2012
Sources: LCI Energy Insight gross withdrawal estimates as of November 2012 that are converted to dry production estimates with EIA-calculated average gross-to-dry shrinkage factors by state and/or shale play. John Staub NCSL webinar, December 19, 2012
11
Domestic production grows rapidly over projection period, particularly natural gas and renewables, and liquids in the near term U.S. energy production quadrillion Btu
Shares of total U.S. production
History
120
Projections
2011
100
80
Natural gas
35%
Renewables
14%
Crude oil and natural gas plant liquids
17%
30%
60
12% 40
19%
20
28%
Coal
24%
11%
Nuclear
10%
0 1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
12
U.S. energy use grows slowly over the projection reflecting improving energy efficiency and a slow and extended economic recovery U.S. primary energy consumption quadrillion Btu History
Shares of total U.S. energy
2000
120
Projections
2011
100
28% 24%
26%
6% 8%
8% 8% 1% 20%
80
60
23%
Natural gas Renewables (excluding liquid biofuels) 11% Nuclear Liquid biofuels Coal
19%
Oil and other liquids
32%
40 39%
20
0 1980
1985
1990
1995
2000
36%
2005
2010
2015
9% 2%
2020
2025
2030
2035
2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
13
Domestic natural gas production grows faster than consumption and the U.S. becomes a net exporter of natural gas around 2020 U.S. dry gas trillion cubic feet History
35
Projections
2011
30 25
Consumption
20 Domestic supply 15 10 5 Net imports
0 -5 1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
14
Total natural gas exports nearly quadruple by 2040 in the AEO2013 Reference case U.S. natural gas exports trillion cubic feet 6 5 4
Exports to Mexico
3 Exports to Canada
2
Lower 48 LNG exports 1 Alaska LNG exports 0 2010
2015
2020
2025
2030
2035
2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
15
Shale gas production leads growth in production through 2040 U.S. dry natural gas production trillion cubic feet History
35
Projections
2011
30 25 Shale gas
20 15
Tight gas
Non-associated offshore 10
Alaska Coalbed methane Associated with oil
5 0 1990
Non-associated onshore 1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
16
Natural gas consumption is quite dispersed with electric power, industrial, and transportation use driving future demand growth U.S. dry gas consumption trillion cubic feet History
35
Projections *Includes combined heat-and-power and lease and plant fuel. **Includes pipeline fuel.
30
Electric 32% power
25 31%
20
33%
15
Industrial*
33% 2% 6%
10
Gas to liquids Transportation**
3% 13%
12% Commercial
19%
14% Residential
5 0 2005
2011
2020
2025
2030
2035
2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
17
There are three main drivers of natural gas production Economics
Geology
John Staub NCSL webinar, December 19, 2012
Technology
18
Three drivers impact resource estimation metrics differently Theory
Experiment
Practice
Thermal maturity
Pressure
Formation depth
Recompletions
Drilling costs
Technology
Price of gas
Economics
Gas in Place (GIP)
Technically Recoverable Resources (TRR)
Economically Recoverable Resources (e.g. proved reserves)
Geology
P Q
Well-level data, incl. estimated ultimate recovery (EUR)
John Staub NCSL webinar, December 19, 2012
19
Technically recoverable natural gas resources continue longterm rise U.S. dry gas resources trillion cubic feet 3,000
2,500
2,000
Unproved shale gas Unproved other gas (including Alaska* and offshore) Proved reserves (all types and locations)
2,327
*Alaska resource estimates prior to AEO2009 reflect resources from the North Slope that were not included in previously published documentation.
543
1,500 1,479
1,000
500 304
0 2000
2005
2006
2007
2008
2009
2010
2011
2012
2013
AEO Edition Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
20
Steep decline curves for shale gas plays make the market more responsive to price million cubic feet per year
2,000 Haynesville Eagle Ford Woodford Marcellus Fayetteville
1,500
1,000
Cumulative production
100% 50% 0% 0
5
10
15
20
500
0 0
1
5
10
15
20
Source: EIA, Annual Energy Outlook 2012 John Staub NCSL webinar, December 19, 2012
21
Estimated ultimate recovery (EUR) calculated from historical individual natural gas well data shows most wells are concentrated around mean. Fort Worth Basin – natural gas bcf/well billion cubic feet/well
maximum
75th percentile mean median 25th percentile
Average EUR Number of wells
minimum
Source: EIA analysis, EUR = total projected production over 30 year life of wells
John Staub NCSL webinar, December 19, 2012
22
For more information U.S. Energy Information Administration home page | www.eia.gov Annual Energy Outlook | www.eia.gov/forecasts/aeo Short-Term Energy Outlook | www.eia.gov/forecasts/steo International Energy Outlook | www.eia.gov/forecasts/ieo Today In Energy | www.eia.gov/todayinenergy Natural Gas Weekly Update | http://www.eia.gov/naturalgas/weekly/ States data | http://www.eia.gov/beta/state/ Shale gas | http://www.eia.gov/energy_in_brief/article/about_shale_gas.cfm John Staub NCSL webinar, December 19, 2012
23
Supplemental slides
John Staub NCSL webinar, December 19, 2012
24
Over time the electricity mix gradually shifts to lower-carbon options, led by growth in natural gas and renewable generation U.S. electricity net generation trillion kilowatthours History
1993
6
Projections
2011
5 30% Natural gas
4 25% 3
13% 11%
2
19%
1
53%
16%
Renewables
13% 19%
Nuclear
42%
Coal
17%
35%
Oil and other liquids 4% 0 1990
1% 1995
2000
2005
2010
2015
2020
2025
2030
2035
1% 2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
25
Natural gas and renewables account for the vast majority of capacity additions from 2012 to 2040 U.S. cumulative capacity additions gigawatts 350 300 250
Natural gas
200 150 100 Renewables
50 0 2011
2015
2020
2025
2030
2035
Nuclear Coal 2040
Source: EIA, Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
26
Natural gas, wind and other renewables account for the vast majority of capacity additions from 2011 to 2040 2011 capacity Nuclear 101 (10%) Hydropower* 101 (10%) Other renewables 15 (1%) Wind 45 (4%)
1,055 gigawatts
Capacity additions 2012 to 2040 Nuclear Hydropower* 11 (3%) Coal 2 (1%) 8 (2%) Coal Other renewables End-use coal 315 (30%) 58 (17%) 1 (0.4%) Other 0.4 (0.1%) Wind 339 42 (13%) gigawatts End-use coal 4 (0.4%) Other 59 (6%) Natural gas 215 (64%)
Natural gas 413 (39%)
* Includes pumped storage Source: EIA, Annual Energy Review 2011 and Annual Energy Outlook 2013 Early Release John Staub NCSL webinar, December 19, 2012
27