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Presented by:
Melissa Whitten
La Capra Associates, Inc.
Presented to:
Wh t is
What
i Shale
Sh l Gas:
G
P
Pervasive
i
2
2
R
Recoverable
bl Reserves
R
equivalent
i l t tto 10 to
t 100 yrs consumption
ti
http://www.eia.gov/neic/speeches/howard12102010.pdf
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The Rise of Shale Gas: EIA doubles forecast of pproduction byy 2035
from 6 Tcf to 12 Tcf, accounts for almost half of total production
EIA2011 AEO EarlyRelease ReferenceCase
EIAAEO2010ReferenceCase:Naturalgasproduction
bysource,1990 2035(trillioncubicfeet,similartofig.73,p.72)
bysource,1990
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Projection
History
Projections
25
25
Net Imports
Alaska
20
20
Shale Gas
ShaleGas
CoalbedMethane
15
15
Coal BedMethane
NonAssocOffshore
NonAssoc Offshore
AssocOnshore
10
Alaska
10
NetImports
Tight Gas
TightGas
NonAssocConventional
Associated Gas
NonAssoc Convential
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1994
1992
1990
1996
1990
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5
$5.85
$ $4.52
4.52
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6
Kern River Gas Transmission Company Customer Meeting, October 19, 2010
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7
Kern River Gas Transmission Company Customer Meeting, October 19, 2010
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8
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2011
10
10
Columbia Gas
Columbia Gulf
Dominion
TETCO
Transco
REX--NEX
11
11
REX Competitive
C
titi Rate
R t E
Economics
i bbased
d on $10 gas iin 2008
REX(NEX)
(1): volumes ramp up over 3 to 5 year period w/max capacity 1.8 Bcfd
Source: IOGA Annual Meeting, May 2008, www.rexpipeline.com
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Wh are the
What
h Ri
Risks
k to the
h FForecast ?
Risk=Opportunity+Challenge
Opportunities:
Readilyavailablesupplyforpreviouslyconstrainedmarkets
enhancesdiversity&reliabilitytomeetpeakandloadgrowth
possiblelowerpricevolatility longterm
environmentaladvantageofgasvs
environmental advantage of gas vs coaloroil
coal or oil
Challenges:
Scope
Scale
Timing
Environment
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Challenges in detail:
Scope
Scale
Ti i
Timing
Environment
28.
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10
10
$ 4.52
2
2008
2009
2
2010
2
2011
2
2012
2
2013
2
2014
2
2015
2
2016
2
2017
2
2018
2
2019
2
2020
2
2021
2
2022
2
2023
2
2024
2
2025
2
2026
2
2027
2
2028
2
2029
2
2030
2
2031
2
2032
2
2033
2
2034
2
2035
2
200
09$permmB
Btu
EIA2011AnnualEnergyOutlook USAverage
N t l G P i D li
NaturalGasPriceDeliveredtoElectricGeneration
d t El t i G
ti
HighRecoverableReserves
LowRecoverableReserves
HighRecRsv+HighEURperwell
LowRecRsv+LowEURperwell
REFERENCE
HenryHub REF
RecoverableReserves includesTotalUnprovedTechnicallyRecoverableShaleGasResources
Presentation to NASUCA Mid-Year Meeting
Shalegasproductiongrowstoaccountforalmost50%oftotalproductionby2035
By: M. Whitten June 28, 2011
PriceRangesbetween$5and$9permmBtuby2035 inRealTerms
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Historic dominant
source of gas supply
Conventional wells
TX, LA
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Problem: How to move incremental 2.8 Bcf/d from the middle of long-haul
g
design
g system
y
?
Solution: Strategic Incrementally priced expansions & back hauls
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Back Haul agreements to maintain value off capacity, but physical limit:
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T
Tennessee
Gas
G Pipeline
Pi li (TGP) General
G
l Rate
R t Case
C
FERCDocketNo.RP111566:filed11/30/2010(Previous:1994/1996)
Strategy:
Alignrateswith
Align rates with current
currentconditions
conditions
Rollinmarketareaexpansions
Correctcostunderrecovery
Negativesalvageandaccelerateddepreciation
ReasonableROItomaintainaccesstocapitalmarkets(FitchRatingBBB)
Costofserviceexcludesrevenuefromdiscountednegotiatedrateservice
BackhaulratesEFVdesign
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$billions
Existing Proposed
RP95112 RP111566 %change
RateBase
Rate
Base
CostofService(*)
TotalRevenueRequirement:
1.5
0.7
0.8
2.6
1.06
1.05
MaximumRateBillingDeterminantsMMDth/day
Maximum
Rate Billing Determinants MMDth/day
Reservation 4.2 3.9
Usage:
4.7
Including Discounted Capacity:
IncludingDiscountedCapacity:
7.9 7.2
78%
51%
24%
5.9%
8.9%
8.9%
(*)w/oincreaseddeprec&negsalvagecosts=$0.956bilorapprox35%increase
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Existing
Proposed
RP95112
%ofTotal
Debt(+)
notpartof
settlement
48%
3.3%
Equity(*)
12.71%
52%
6.6%
100%
9.9%
g
g
WgtdAverage:
wgtdavg RP111566
%ofTotal
wgtdavg
7.81%
45%
3.55%
13.50%
55%
7.36%
100%
10.91%
(*)RP95112costofequityperwitnessC.Oblitas,capitalstructurenotpartofsettlement
(+)notpartofRP95112settlement,estimatedfrompretaxrateofreturn15.3%
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RESULT R
RESULT:
Rate
t Sh
Shock,
k C
Complex
l S
Settlement
ttl
tN
Negotiations
ti ti
Short Haul Zone 4 to 6
Marcellus to Boston citygate
SFV
EFV
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25
R C t ti Risk
Re-Contracting
Ri k Not
N tU
Unique
i
to
t TGP
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26
Algonquin
Iroquois
q
Gas
Tennessee
TETCO
Transco
REX--NEX
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27
T
Texas
Eastern
E t Transmission
T
i i (TETCO):
(TETCO) NY
NY-NJ
NJ Expansion
E
i
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28
S t / Algonquin
Spectra
Al
i IIncremental
t lM
Market
k t (AIM) project
j t:
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D i i TTransmission:
Dominion
i i
Appalachian
A l hi Gateway
G t
Project
P j t
- Interconnects with
TETCO at Oakford , PA
http://www.dom.com/business/gas-transmission/appalachian-gateway/index.jsp
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R ki P
Rockies
Production
d ti Growth
G th Impacts
I
t M
More than
th REX
REX-East
E t
RUBY PIPELINE
Kern River Gas Transmission Company Customer Meeting, October 19, 2010
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31
R ki Production
Rockies
P d ti Growth:
G th Redirects
R di t Western
W t
Market
M k t Flows
Fl
May reduce gas flow from Opal on Kern / Questar,
More liquidity at SoCal border from other pipelines
Provides incentive for backhauls on Kern?
Opal
Kern River Gas Transmission Company Customer Meeting, October 19, 2010
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B kk Shale
Bakken
Sh l Region:
R i
Both
B th Oil & G
Gas Shale
Sh l Pl
Play
Substantial Infrastructure Issue:
Oil shale production considered
economic when Crude Oil > $60 per bbl
Today Insufficient pipeline take-away
capacity
Shipping excess production by:
Rail
Truck
Impact on roads becoming a huge
issue for local governments
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~ $4 - $5 per mmBtu
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or Public
P bli ?
BesidesTrade&BroadsheetPress
Besidesadvocacygroups(bothsides)&corporatewebsites
PA DEP Well Production Data
PADEPWellProductionData
http://www.dep.state.pa.us/dep/deputate/minres/oilgas/new_forms/marcellus/marcellus.htm
FracFocus.org
FracTracker.org
PennState(GeologyandAgriculture)
EPADraftHydraulicFracturingStudyPlan
http://water.epa.gov/type/groundwater/uic/class2/hydraulicfracturing/upload/HFStudyPlanDraft_SAB_020711.pdf
Presentation to NASUCA Mid-Year Meeting
By: M. Whitten June 28, 2011
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QUESTIONS ?
Thanks!
Contact Information:
Melissa Whitten
La Capra Associates
One Washington Mall
Mall, 9th Floor
Boston, MA 02108
Tel: 617-778-5515
acochis@lacapra.com
mwhitten@lacapra com
mwhitten@lacapra.com
Presentation to NASUCA Mid-Year Meeting
By: M. Whitten June 28, 2011
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