L L o ng te rm o ng -te rm Na tura l Ga s Pric e F o re c a st - PDF document

6/7/2013 L L o ng te rm o ng -te rm Na tura l Ga s Pric e F o re c a st June 7 th 2013 1 Dra ft Ag e nda  Welcome and introductions 9:00 to 9:15  Council’s modeling overview and use of forecasts il’ d li i d f f  Northwest Gas Outlook –(NWNGA) 9:15 to 9:45  Shale Gas- alternative scenarios (CEC) 9:45 to 10:15  NAMgas model- (CEC) 10:15 to 10:45  Draft Environmental Costs 10:45 to 11:00  Break Straw man proposal 7 th plan forecast prices  11:10 to 12:00 – Result of fuel price poll Result of fuel price poll – Comparison to other forecasts  Council’s Portfolio Model 12:00 to 12:20  Next steps 12:20 to 12:30 2 1

6/7/2013 Co unc il’ s Po we r Pla nning Pro c e ss Demand Forecasting System Economic & Demographic Forecasts Residential Commercial Industrial Irrigation g Fuel Price Forecasts Total Electricity Use Conservation Programs and Costs Supply - Demand Balance Electricity ( (RPM Model) ) Price Price Generating Resources and Costs Resource Supply (Cost and Amount) 3 Ho w HH pric e fo re c a st is use d  Demand Forecast – Direct Calculation of Retail natural gas Rates  Electricity Price Forecast – Direct Calculation of burner-tip prices for power plants.  Resource Portfolio Selection  Resource Portfolio Selection – Stochastically Used in setting expected values for natural gas market price excursions. 4 2

6/7/2013 Re la tio nship b e twe e n Re ta il Na tura l Ga s Pric e s a nd He nry Hub Pric e s 14.0 12.0 10.0 U MMBT 8.0 He nr y Hub s Pe r ID_COM 6.0 Dollar ID_IND ID_RE S 4.0 2.0 0.0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 He nry Hub pric e fo re c a st sho wn he re is fo r e xa mple , Co unc il’ s na tura l g a s pric e pro je c tio ns will b e upda te d la te r this ye a r. 5 Co mpa riso n o f F o re c a st a nd Ac tua l 2012 (2012$) He nr y Hub Pr ic e PRB Coal Pr ic e s Re fine r s Ac quisition Natur al Gas 2012$/ mmbtu Cost F or e c ast F F or e c ast t 2012$/ B 2012$/ Bar r e l l 2012$/ mmbtu $0.78 Ac tual L o w $2.4 0.79 $85 Me d-L o w $2.5 $0.80 $90 Me dium $2.6 $0.82 $95 Me d-Hig h $2.7 $0.83 $98 $2.66 Ac tual Hig h $2.7 $0.84 $105 $101 Ac tual E xc e pt fo r c o a l, a ll fue l pric e s we re within fo re c a ste d ra ng e 6 3

6/7/2013 2013 NWGA Outlook Overview Natural Gas Advisory Committee June 7, 2013 Portland, OR 1914 Willamette Falls Dr., #255 West Linn, OR 97068 (503) 344-6637 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. FortisBC Energy Intermountain Gas Co. NW Natural P get So nd Energ Puget Sound Energy Kinder Morgan Ruby Pipeline Spectra Energy Transmission TransCanada GTN System Williams NW Pipeline 4

6/7/2013 Supply BC Production Forecast Source: Canada National Energy Board 5

6/7/2013 Rockies Production Forecast Source: Kinder Morgan, US Energy Information Administration Rockies Rig Productivity 30 60 • Gas well drilling efficiency increases – 2011 average rig drilled twice the number of wells per year compared to 2006 25 50 – – Last 3 years average wells productivity increased Last 3 years average wells productivity increased 40% – Rig productivity up by almost 150% from 2006 ells Drilled per rig per year 20 40 MMcf/d/yr/rig 15 30 10 20 We 5 10 0 ‐ 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Rig Productivity Wells Drilled per Rig 6

6/7/2013 Demand Recent Gas Demand 7

6/7/2013 2013 Outlook Demand Forecast Forecast Comparison by End Use Base Case 350 300 250 200 Million Dth 150 100 '13 Res '13 Comm '13 Ind '13 Gen '08 Res '08 Comm '08 Ind '08 Gen 50 0 8

6/7/2013 I-5 Peak Day Demand-Resource Balance '08 Peak Day '13 Peak Day 9 8 7 7 6 Million Dth 5 4 3 2 2 1 0 Capacity Projects Pipelines Kitimat LNG • Southern Crossing Expansion Palomar Palomar • • Sunstone • Blue Bridge (N-MAX) • Ruby • Pacific Connector Pacific Trail • • Oregon LNG • Washington Expansion LNG Terminals Bradwood Landing LNG Bradwood Landing LNG Oregon LNG Kitimat LNG (export) Bradwood Landing Oregon LNG Jordan Cove LNG Jordan Cove LNG Storage Facilities Mist Jackson Prairie 18 9

6/7/2013 1914 Willamette Falls Dr., #255 West Linn, OR 97068 (503) 344-6637 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. FortisBC Energy Intermountain Gas Co. NW Natural Puget Sound Energy P get So nd Energ Kinder Morgan Ruby Pipeline Spectra Energy Transmission TransCanada GTN System Williams NW Pipeline California Energy Commission North American Market Gas North American Market Gas- -Trade Trade (NAMGas) Model: (NAMGas) Model: Updated Common Updated Common Cases Updated Common Cases Updated Common Cases Cases Northwest Power and Conservation Council Northwest Power and Conservation Council Natural Gas Advisory Committee Natural Gas Advisory Committee June 7, 2013 June 7, 2013 Robert V. Kennedy Robert V. Kennedy y Electricity Analysis Office Electricity Analysis Office Electricity Supply Analysis Division Electricity Supply Analysis Division California Energy Commission California Energy Commission rkennedy@energy.ca.gov//916 rkennedy@energy.ca.gov//916- -654 654- -5061 5061 10

6/7/2013 California Energy Commission Work Continuing with Cases __________________________________ • February 19 th I EPR Workshop – NAMGas Model – Leon Brathwaite – I terative Modeling Process – I vin Rhyne – Stakeholders’ comments and suggestions 21 California Energy Commission Work Continuing with Cases (cont.)_______________ I terative Modeling Process Rice University Production North American Costs Gas Model Updated Economic/ CA CA Demand Demographic Transportation Models Assumptions Demand Models WECC Electricity Production Cost Model 22 11

6/7/2013 California Energy Commission Reference Case: Changes Made from February 19 th Assumptions___________ • Coal Fired Generation Retirement: – 30 GW starting in 2014 = > 61 GW starting in 2014 – The Brattle Group - October, 2012 • Renewable Portfolio Standard: – California meets RPS on time, 5 year delay for other states = > California and rest of WECC states meet RPS on time, 5 year delay elsewhere • • Updated I nfrastructure Capacity Addition to Export Updated I nfrastructure Capacity Addition to Export Natural Gas to Mexico • Added Structure to I mprove Performance of the LNG Sector – Conversion from WGTM to NAMGas 23 California Energy Commission High Price/ Low Demand Case: Changes Made from February 19 th Assumptions__________ • Cost Environment: – P50 Line = > P10 Line • Updated I nfrastructure Capacity Addition to Export Natural Gas to Mexico • Added Structure to I mprove Performance of the LNG Sector – Conversion from WGTM to NAMGas 24 12

6/7/2013 California Energy Commission Low Price/ High Demand Case: Changes Made from February 19 th Assumptions__ _ • Cost Environment: – P50 Line = > P90 Line • Coal Fired Generation Retirement: – 1 GW starting in 2014 = > 31 GW starting in 2014 – The Brattle Group - October, 2012 • Updated I nfrastructure Capacity Addition to Export Natural Gas to Mexico • Added Structure to I mprove Performance of the LNG Sector – Conversion from WGTM to NAMGas 25 California Energy Commission North American Market Gas Trade Model: Developing a Cost Environment ______________ Typical Cost Environment (P50): 1975, 1986, and 2003 • Staff must simulate the cost environment for analysis: − Graph shows indexed cost between 1960 and 2010 − High cost environment ~ 1979 – 1984 − Low cost environment ~ 1992 – 2000. Sources: Baker I nstitute . 26 13

6/7/2013 California Energy Commission Common Cases: Supply Balance _______________________ Performance of Cases: Performance of Cases: Lower 48 Lower 48 27 California Energy Commission Common Cases: Price Performance of Cases (Henry Hub) ___ Henry Hub Prices 8.00 7.00 6.00 2010$/Mcf 5.00 4.00 3.00 2.00 1.00 0.00 Prelim II A Hi Case Prelim II A Ref Case Prelim II A Low Case Orig. Hi Case Orig Hi Case Orig Ref Case Orig. Ref Case Orig. Low Case Orig Low Case • I n general, prices behave as expected: − High Price case produced highest prices − Low price case produced lowest prices • Adjusted cases have created a larger “zone of uncertainty” 28 14

6/7/2013 California Energy Commission National Cases: Price Performance of Cases (Differentials) __ Topock - Henry Hub Topock ‐ Henry Hub Price Differential 0.30 0.20 2010$/Mcf 0.10 0.00 ‐ 0.10 ‐ 0.20 Prelim IIA Hi Case P li IIA Hi C Prelim IIA Ref Case P li IIA R f C P Prelim IIA Low Case li IIA L C I n general, differentials turn positive after 2013: • – Resource abundance more evident in the eastern US – Access to shale and ‘tight’ gas resources is re-ordering the supply portfolio, impacting eastern prices more than western. 29 California Energy Commission Common Scenarios Cases: Supply Portfolio of Reference Case (2025)__ Canadian Canadian I mports: 13.3 Bcf/ d • Two main demands: End-use and Exports • Demand satisfied by: − Canadian I mports Lower 48 − L48 Production Production: 74.6 Bcf/ d Demand: 76.9 Bcf/ d − LNG I mports Exports: LNG I mports: 8.2 Bcf/ d 0.24 Bcf/ d 30 15