Natural Gas The Natural Choice Now for Louisiana Louisiana Public Service Commission Baton Rouge, LA April 20, 2011 James Tramuto Southwestern Energy Company Vice President Governmental & Regulatory Strategies
ANGA Members
ABUNDANT and AFFORDABLE
The Shale Gas Revolution Cody Bakken Gammon Mowry Antrim Baxter-Mancos Marcellus/ Niobrara Devonian/Utica 515 TCF Mancos Pierre Mulky New Albany Increase In Potential U.S. Lewis Fayetteville Resource Base Woodford From 2006 Barnett- Floyd-Neal Woodford Barnett Haynesville 39% INCREASE Eagle Ford Source: NPC 2003, PGC 2009, EIA, INGAA, others
A New Age of Nat Gas Abundance Technically Recoverable Natural Gas (trillion cubic feet) 2,750 2,552 2,500 Recoverable Shale Gas Other Recoverable Gas 2,250 Proved Reserves 827 2,552 TCF 2,000 Estimated Future Supply 1,750 1,500 1,250 100+ YEARS 1,481 1,000 Supply Here in the US 750 500 250 245 2000 2005 2006 2007 2008 2009 2010 2011 Source: EIA Annual Energy Outlook 2011
By Mid-2008, Onshore Production Had Replaced Offshore US Dry Gas Production Source: EIA Data, Adjusted to Net Dry 60 58 Katrina 56 and Rita Bcf per Day, dry 54 52 July 50 08 Pre-Katrina Average 48 Gustav 46 and Ike 44 42 40 Source: Navigant Consulting, Inc .
A Recent MIT Gas Study Shows Sustained Rates of Increase Potential Production Rates from Major Shale Plays (Using January 2010 Drilling Rates and Mean Resource Estimates) 35.0 30.0 Marcellus 25.0 Haynesville Woodford 20.0 Fayetteville BCF per Day Barnett 15.0 10.0 5.0 0.0 2000 2005 2006 2007 2008 2009 2010 2015 2020 2025 2030 Source: MIT "The Future of Natural Gas" Interim Report, July 2010; Navigant Consulting, Inc
Pipeline Additions 1998 – 2008 1998 20,000 MILES Of New Transmission Pipeline 97 BCFD Capacity Added in US in the Last 10 Years Growth Driven By The Need To: ACCESS NEW SUPPLIES 2008 • Expanding Production From New Fields • Imports From Canada MEET INCREASED DEMAND From New Gas-Fired Power Plants
Stable Supplies = Stable Prices • U.S. natural gas reserves have increased by more than 70% • Price volatility has declined sharply, even though still at an early stage of developing new sources of supply, due to: – Prolific on-shore production of gas from shale – Vastly expanded pipeline distribution system U.S. NG Production at 100 Years Natural Gas Futures (NYMEX) (Dollars/Mil. BTUs) Source: NPC 2003, PGC 2009, EIA, INGAA, others
Reducing Volatility Through Greater Supply Source: EIA, Bloomberg Gas Production – BCF per Day 30 35 40 45 50 55 60 65 Jan-00 May-00 Sep-00 Jan-01 NYMEX FUTURES PRICES May-01 Sep-01 GULF OF MEXICO Jan-02 Price Spike from Katrina and Rita May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 OTHER US PRODUCTION No Spike from Ike May-06 Oil Price Spike Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 2 4 6 8 10 12 14 16 Dollars Per Million BTU
How We Use Natural Gas How Natural Gas is Used Today 3% Transportation 30% Electric Power 14% Commercial 32% Industrial 21% Residential Source: EIA, Natural Gas Year In Rev iew, 2009
POWER GENERATION
Ready Now Utilization of Electric Generation Capability (net generation as a percentage of net summer capacity) 397 GW 313 GW 64% Utilized 26 % Utilized Natural Gas Coal Source: EIA, 2009 Electric Power Annual
Louisiana’s Electricity Mix Net Generation Existing Capacity (MWh) (MW) Other Other 1,152 (4%) Hydro 5,904,847 (7%) 192 (1%) Nuclear Hydro 2,236 (7%) 1,236,351 (1%) Coal Nuclear 3,764 (12%) 16,782,077 (18%) Coal 23,067,137 (26%) Natural Gas Natural Gas 44,003,265 (49%) 22,773 (77%) Source: EIA-906, EIA-920, EIA-923, EIA-860
Cleaner for Power Generation Natural Gas = Fewer Emissions (tons per thousand MWH/year) Coal Natural Gas CO 2 891 338 CO 2 w/Capture 93.8 33.8 Carbon Monoxide 0.55 0.15 NOx 0.3 < 0.0 SO 2 0.5 < 0.0 Particulates 0.1 none Mercury < 0.0 none VOCs < 0.0 none Source: R.W. Beck, Comparison of Fuels Used for Electric Generation in the U.S, February 2009 (Prepared for NGSA)
2016 Expected Costs Levelized Cost of New Generating Technologies - 2016 Capacity Total System Plant Type Factor Levelized Cost (%) (¢ per KWH) Natural Gas – Combined Cycle 87 6.31 Natural Gas – Conventional 87 6.61 Natural Gas – Combined Cycle with CCS 87 8.93 Coal – Conventional 85 9.48 Coal – Advanced 85 10.94 Coal – Advanced with CCS 85 13.62 Wind – Onshore 34 9.70 Wind – Offshore 34 24.32 Solar – PV 25 21.07 Solar – Thermal 18 31.18 Biomass 83 11.25 Nuclear 90 11.39 Source: Institute for Energy Research, using data from EIA Annual Energy Outlook 2011.
TRANSPORTATION
Our Dependence on Foreign Oil • How much do we use? – 4,250,000,000 barrels imported in 2010 • How much does it cost? – $337,000,000 on imported oil in 2010 – $1,091 for each person in America – In 2009, energy imports made up nearly 60% of our trade deficit • Where does the money go? – Among the top countries we import from: Venezuela, Saudi Arabia, Nigeria, Russia, Algeria, Angola and Iraq.
Cleaner for Vehicles • Compared to gasoline or diesel, NGVs: 20-30% Reduce CO 2 emissions 70-90% Reduce CO emissions 75-95% Reduce NOx emissions 90% Reduce Particulate Matter emissions 89% Reduce VOC emissions
Savings On the Road and at the Pump Average U.S. Retail Fuel Prices Per Gasoline Gallon Equivalent (GGE) $5.00 $4.50 $4.00 $3.50 Cost per GGE $3.00 Gasoline $2.50 Diesel CNG $2.00 $1.50 $1.00 $0.50 $0.00 Source: DOE, Alternative Fuels and Advanced Vehicles Data Center
Nat Gas vs. Conventional Gasoline On average, CNG costs 44% less than gasoline Seattle CNG - $1.75 Bismarck Gas - $3.78 CNG - $1.95 Gas - $3.51 San Francisco New York CNG - $2.39 CNG - $2.63 Gas - $4.08 Detroit Gas - $3.80 CNG - $2.00 Salt Lake Denver Gas - $3.57 CNG - $2.30 City Los Angeles Wash., DC Gas - $3.37 CNG - $1.29 CNG - $2.15 CNG - $2.40 Gas - $3.43 Nashville Gas - $4.04 Gas - $3.74 CNG - $1.65 Gas - $3.46 San Diego Atlanta CNG - $2.80 CNG - $2.19 Gas - $4.02 Dallas Gas - $3.47 CNG - $2.29 Gas - $3.49 Ft. Lauderdale CNG - $1.99 Gas - $3.66 Source: CNG prices captured in March 2011 by CNGPrices.com Gas prices reflect city average on March 28 from GasBuddy.com
Benefits: What We Can Do Converting just one heavy-duty Replacing 3.5 million medium- and waste truck from diesel to natural heavy-duty trucks and buses with gas offers the emissions reduction CNG-powered counterparts by 2035 equivalent of taking 325 cars off would save at least 1.2 million barrels the road. of oil per day.
Texas Clean Transportation Triangle • Establish fueling infrastructure at regular intervals on interstate exists along I-35, I-10, and I-45 to service long-haul transportation vehicles • Anchor stations proximal to urban settings to act as hubs for more localized traffic • 15 stations offering public LNG and CNG located at current retail facilities along the interstates • Cooperative effort between natural gas producers, fleet customers and retail partners
Corridor Opportunities Public CNG stations Private CNG stations
PRODUCTION
Horizontal Drilling Horizontal Drilling Traditional Wells
The Power of Progress • Smaller surface impact. – The average well-site today is just 30% of the size of its 1970s counterpart —and today’s wells can access over 60 times more below - ground area. • Fewer wells, more clean energy. – Half as many wells are needed to produce the same amount of clean energy as 20 years ago. • Less waste. – We can retrieve the same amount of gas while producing 30% less waste than a decade ago. • Fewer air emissions. – More efficient operations also means less energy consumption, and thus less air emissions, per unit of natural gas produced.
Fracture Stimulation and Gas Production are Completely Isolated from Fresh Water Groundwater aquifers Multiple protective layers extend Private well, about 500 feet deep from surface to below aquifers. Public well, about 1,000 feet deep Several layers of steel tubes encased in cement protect groundwater supplies Protective steel casing encased in cement extends to shale depth Shale Fractures Depth from surface is typically more than a mile
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