Outlook for Natural Gas

Outlook for Natural Gas for National Conference of State Legislatures (NCSL) Hydraulic fracturing webinar John Staub, Team Lead for Exploration and P...
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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

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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

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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

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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

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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

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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

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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

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There are three main drivers of natural gas production Economics

Geology

John Staub NCSL webinar, December 19, 2012

Technology

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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

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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

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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

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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

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Supplemental slides

John Staub NCSL webinar, December 19, 2012

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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

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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

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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

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