energy supply and demand: the broad picture · 2017. 4. 11. · the broad picture presentation...

© LSU Center for Energy Studies

David E. DismukesCenter for Energy StudiesLouisiana State University

Energy Supply and Demand:The Broad PicturePresentation before the National Conference of State Legislatures

Energy SummitNashville, TennesseeAugust 14, 2006


Summary Outlook

Significant uncertainty in energy markets.

Not all price movements are speculation (“profiteering”) driven. Speculation is not market manipulation. Big storage positions have been building all year. Strong domestic and global economy – strong demand. Continued production challenges

Domestically and internationally Short run and long run

This summer will be a significant transition period.

Weather will be significant determinant Heat will drive power which will drive natural gas Tropical activity will drive everything

Geopolitical strife is unparalleled: in short run will trump all fundamentals.


Hurricanes and Energy Production, Processing, and Transportation



Summary on Impacts of Hurricanes

Hurricanes were incredibly destructive to energy business – effects felt for some time. Was a shining moment for all in the industry.

Hurricanes clearly showed the interrelationship of all types of energy infrastructure in the Gulf – the “4 Ps” – production, processing, pipes, and power.

Hurricanes impacts were felt nationally and internationally – drives home importance of Gulf coast and critical energy infrastructure.

Amazing recovery but still lingering challenges and uncertainties.

This year’s tropical season will be the biggest challenge ever and could serve to be the catalyst for significant movement in prices.



Platforms/Structures Impacted by 2005 Hurricanes



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Landfall 20 14 34 54 74 94 114 134 154 174 194 214

Lost

Pro

duct

ion

perc

ent o

f tot

al G

OM

Ivan - Crude OilIvan - Natural GasKatrina/Rita - Crude OilKatrina/Rita - Natural Gas

Note: Shut-in statistics for Ivan were no longer reported after 150 days. The last shut-in statistics for Katrina and Rita were published on May 3, 2006 (the 221st day after Katrina made landfall).Source: Minerals Management Service

Estimated Return of Existing Crude Oiland Natural Gas Production

As of May 3, 2006 shut in crude oil production was 324,445 barrels per day, or 21.6 percent of daily GOM production. Shut-in gas production was 1.295 bcf per day,

or 13.0 percent of daily GOM production



Total Immediate Refinery Impact

LA/MS/AL Gulf Coast Refiners(reduced runs and shutdowns)

2,528 mbbl/day15% of US operating capacity

Port Arthur/Lake Charles(reduced runs and

supply loss)775 mbbl/day

5% of US operatingcapacity

Total Refinery Impact4,931 mbbl/day

30% of US operating capacity

Remaining US Operating Capacity


Source: Energy Information Administration, Department of Energy

Midwest(reduced runs –

supplied by Capline Pipeline)1,628 mbbl/day


Port Arthur/Lake Charles(shutdowns and damaged facilities)

1,715 mbbl/day10% of US operating capacity Houston/Texas City

(shutdowns and damaged facilities)

2,292 mbbl/d13.5% of US

operating capacity

Corpus Christi(shutdown andreduced runs)706 mbbl/day


Midwest(reduced runs from


2% of USoperating capacity





Hurricane Katrina Hurricane Rita


© LSU Center for Energy StudiesSource: American Petroleum Institute

Gasoline Price IncreasesAugust 30, 2005 to September 6, 2005

20

25

20

18

45

35

38

33

32

42

38

40

45

20

52

45

4935

49

50

3536

36 42 40

4246

5666

58

58 6161

61 60

56

5855

42

5254

< 25

25-50

> 50Colonial / Plantation Pipeline Systems

60.154.9

5146.9

39.5 38.5

25.3

44.7

0

10

20

30

40

50

60

70

Mid

-Atla

ntic

Nor

thea

st

Sout

h A

tlant

ic

Mid

wes

t

Sout

h

Mou

ntai

n

Wes

t

US

Regional Changes in Gasoline Prices(cents per gallon)

35

4244

44

24

24



Number of Natural Gas Processing Facilities Out

Source: Oil and Gas Journal; Energy Information Administration, Department of Energy

Outages at gas processing facilities throughout all of south Louisiana was one of the more unique aspects of the combined hurricanes.


GasState/Company Facility Capacity

(MMcf/d)Alabama

Duke Energy Field Services Mobile Bay 600.0 Shell Western E P Inc Yellowhammer 200.0

LouisianaEast Louisiana PlantsVenice Energy Services Co LLC Venice 1,300.0 Enterprise Products Operating LP Toca 1,100.0 Dynegy Midstream Services LP Yscloskey 1,850.0

West Louisiana PlantsDynegy Midstream Services LP Barracuda 225.0 Dynegy Midstream Services LP Stingray 305.0 BP PLC Grand Chenier 600.0 Williams Cos Johnson Bayou 425.0 Gulf Terra Energy Partners LP Sabine Pass 300.0

Central Louisiana PlantsAmerada Hess Corp Sea Robin 900.0 Duke Energy Field Services Patterson II Gas Plant 500.0 Dynegy Midstream Services LP Lowry 300.0 Enterprise Products Operating LP Calumet 1,600.0 Enterprise Products Operating LP Neptune 650.0 Gulf Terra Energy Partners LP Cow Island 500.0 Gulf Terra Energy Partners LP Pelican 325.0 Marathon Oil Co Burns Point 200.0 Norcen Explorer Patterson 600.0

MississippiBP PLC Pascagoula 1,000.0

TOTAL 13,480.0TOTAL GOM CAPACITY 20,285.0PERCENT OF TOTAL GOM 66.5%


Power Outages From Hurricanes

Source: Entergy Corp.

Damage to power infrastructure (transmission) extensive. Restoration was monumental and impressive, but still created “nervous” moments for other energy infrastructure.


0

200

400

600

800

1,000

1,200

LF 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46

Katrina LandfallRita Landfall

85% Restored*

Day 14 Day 38

Return to Service CustomersExtended Outage Customers

Day 47

Landfall

Oct. 15


Examples of Energy Infrastructure Damage



Shell Mars Tension Leg Platform

Source: Shell.com© LSU Center for Energy Studies


Ocean WarwickDauphin Island, AL


Source: Rigzone.com


Semi-Sub Stuck Under BridgeNorth Mobile Bay


Source: Rigzone.com


Venice Port, Supply & Crew Bases


Source: LIOGA


Chevron RefineryPascagoula, MS


Source: Chevron


Air Products Facility – Normal DayNew Orleans, Louisiana (Intracoastal Drive)


Source: Air Products


Air Products Facility –During Hurricane KatrinaNew Orleans, Louisiana




Air Products Facility –Post Hurricane Katrina

New Orleans, Louisiana




Power OutagesGenerating Stations – Entergy Patterson

Source: Entergy


Power OutagesSubstation Damage

Source: Entergy


Then,Along Comes Rita



Henry Hub, September 25, 2005

Source: LIOGA© LSU Center for Energy Studies


Entergy Transmission

Source: Entergy.com© LSU Center for Energy Studies


Citgo Refinery – Storage TankLake Charles, Louisiana

Post-Rita

© LSU Center for Energy StudiesSource: Citgo


Citgo Refinery – Onsite DockLake Charles, Louisiana

Post-Rita


Source: Citgo


Citgo Refinery – Cooling TowerLake Charles, Louisiana

Post-Rita


Source: Citgo


Citgo Refinery – Tent CityLake Charles, Louisiana

Post-Rita


Source: Citgo

Facility rental of $3.5 million for 3 weeks – for 250 employees – roughly $156 per day per person


Natural Gas Pipeline Leak

Source: MMS© LSU Center for Energy Studies


Chevron Typhoon TLP


Source: Chevron, Rigzone.com


Post Hurricane Markets


Post-Hurricane Market Concerns

• Massive outages would not be repaired.

• Industrial demand would be destroyed by high prices.

• Cold winter would create interruptions.

• Unprecedented restoration has occurred.

• Industrial activity remains strong.

• Mild winter resulted in record storage positions.

Post-Hurricane Fears Post-Hurricane Reality


Natural Gas -- Demand


Historic and Forecasted Winter Season Industrial Gas Usage

24.022.6

21.5 21.3 21.5 21.220.4

18.5

0

5

10

15

20

25

30

1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006Forecast

2005/2006Actual

bcf/d

Forecast

Source: Natural Gas Supply Association, Prepared by Energy Ventures Analysis, Inc.; and Energy Information Administration

Consensus forecast is that industrial demand will be down by close to 1.0 Bcf/d due to “demand destruction.” What is the true source of the destruction?

Actual


Historic and Forecasted Winter Season Electric Power Gas Usage

13.0

11.9

12.2

11.911.7

12.212.3

11.6

10

11

11

12

12

13

13

14

1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006Forecast

2005/2006Actual

bcf/d

Forecast

Actual

Source: Natural Gas Supply Association, Prepared by Energy Ventures Analysis, Inc.; and Energy Information Administration

Winter use for gas-fired generation well off expectations – weather.


80

85

90

95

100

105

110

Jan-

00

May

-00

Sep

-00

Jan-

01

May

-01

Sep

-01

Jan-

02

May

-02

Sep

-02

Jan-

03

May

-03

Sep

-03

Jan-

04

May

-04

Sep

-04

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

ChemicalPetroleum Refining

Chemical and Refinery IndustrialProduction Indices

Hurricane-related or price related demand destruction?

Source: Federal Reserve Statistical Release


90

95

100

105

110

115

Jan-

00

May

-00

Sep

-00

Jan-

01

May

-01

Sep

-01

Jan-

02

May

-02

Sep

-02

Jan-

03

May

-03

Sep

-03

Jan-

04

May

-04

Sep

-04

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

$0

$2

$4

$6

$8

$10

$12

$14Industrial Production IndexNatural Gas Price (Henry Hub)

Industrial Production Index

After 2000-2001 correction, industry (overall) has been increasing despite increases in natural gas prices since 2002.

Source: Federal Reserve Statistical Release

Inde

x (S

easo

nally

Adj

uste

d)

Gas

Pric

e ($

/Mcf

)


0

100

200

300

400

500

600

700

800

900

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

200120022003200420052006

Power Generation Natural Gas Usage

The first challenge to current favorable gas storage positions will be the summer demand for natural gas-fired generation


Will we hit a new peak with hot

summer in 2006?

Con

sum

ptio

n (B

cf)


Summer Temperature Forecast

Summer Season (June through August)

Summer 2005 Actual Summer 2006 Forecast

Source: Natural Gas Supply Association


Crude Oil


World Oil Demand Growth

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1991-1999Avg.

2000 2001 2002 2003 2004 2005 2006 2007

70

72

74

76

78

80

82

84

86

88

90

Other GrowthUS GrowthChina GrowthWorld Oil Demand

Projections

World oil demand growth currently surging at relatively high ratesand continues to be strong through 2007

Oil

dem

and

grow

th,

mill

ion

bbl/d

Wor

ld o

il de

man

d,

mill

ion

bbl/d

Source: Energy Information Administration, US Department of Energy


World Oil Spare Production Capacity

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1991-1997

Average

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Projections

Spare capacity hit its lowest level in 30 years in 2005 and remains low relative to demand growth

Mill

ion

Bar

rels

per

Day



Rank Order of World’s Largest Oil Producers2004

0 2 4 6 8 10 12

Brazil

Iraq

UK

Nigeria

Kuwait

UAE

Canada

Norway

China

Mexico

Iran

United States

Russia

Saudi Arabia

Million Barrels per Day


The US is still a formidable crude oil producer, but….


World Oil Reserves by CountryAs of January 1, 2004

0 50 100 150 200 250 300

Rest of WorldOmanIndia

AzerbaijanNorway

KazakhstanBrazil

AlgeriaMexico

QatarChina

United StatesNigeria

LibyaRussia

VenezuelaUAE

KuwaitIraqIran

CanadaSaudi Arabia

Billion Barrels

World Total:1,292 Billion Barrels

Source: Oil and Gas Journal estimate published by Energy Information Administration, US Department of Energy

….remaining reserves are much lower than other places in the world.


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800D

ec-9

6Ap

r-97

Aug-

97

Dec

-97

Apr-

98

Aug-

98D

ec-9

8

Apr-

99

Aug-

99

Dec

-99

Apr-

00Au

g-00

Dec

-00

Apr-

01

Aug-

01

Dec

-01

Apr-

02Au

g-02

Dec

-02

Apr-

03

Aug-

03

Dec

-03

Apr-

04

Aug-

04

Dec

-04

Apr-

05

Aug-

05D

ec-0

5

Apr-

06

62

63

63

64

64

65

65

66

66

67

67

68

Rig Count

Production

U.S. Natural Gas Production andMonthly Rig Count (1997-Present)

Source: Energy Information Administration, Department of Energy; and Baker-Hughes Inc.

3 percent increasein production

(Aug-99 to Sep-01)

113 percent increase in rigs

(Apr-02 to Apr-06)

Num

ber o

f Ope

ratin

g R

igs

12-M

onth

Mov

ing

Aver

age

(Bcf

/d)

158 percent increase in rigs

(Apr-99 to Jul-01)

© LSU Center for Energy StudiesSource: Natural Gas: Can We Produce Enough?” Independent Petroleum Association of America, website: http://www.ipaa.org/govtrelations/factsheets/NaturalGasProdEnough.asp.

ANWR = 3.5 TCF

ANS = 35 TCF

Resource Estimates – Restricted AreasEstimated Percentage Restricted

Many high-yield areas exist, but are unavailable due to drilling restrictions.


Total Immediate Refinery Impact from2005 Hurricanes

LA/MS/AL Gulf Coast Refiners(reduced runs and shutdowns)


Port Arthur/Lake Charles(reduced runs and


5% of US operatingcapacity






Midwest(reduced runs –

supplied by Capline Pipeline)1,628 mbbl/day


Port Arthur/Lake Charles(shutdowns and damaged facilities)

1,715 mbbl/day10% of US operating capacity Houston/Texas City

(shutdowns and damaged facilities)

2,292 mbbl/d13.5% of US

operating capacity

Corpus Christi(shutdown andreduced runs)706 mbbl/day


Midwest(reduced runs from


2% of USoperating capacity





Hurricane Katrina Hurricane Rita


400

420

440

460

480

500

520

540

560

580

600

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

5-Year Average (2000-2004) 2005 2006

US Refinery Production

Source: Energy Information Administration, Department of Energy.

There are still considerable refinery constraints.

Shortfalls due to overdue maintenance

at facilities and reduced runs at other

facilities

Mill

ion

barr

els


US Gasoline Demand and Retail Pump Prices

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-060

50

100

150

200

250

300

Gasoline Sales

Retail Pump Price


Despite high prices, gasoline demand is still relatively strong.

Gas

olin

e S

ales

(mill

ion

bbls

/day

)

Gas

olin

e P

rice

(cen

ts p

er g

allo

n)


8.4

8.6

8.8

9.0

9.2

9.4

9.6

9.8

10.0Gasoline Demand 5-Year Average

US Weekly Gasoline DemandRelative to 5-year Average

Mill

ion

Bar

rels

per

Day


Dec-04 Mar-05 May-05 Jul-05 Seo-05 Nov-05 Jan-06 Mar-06 May-06

Recent weeks have seen new gasoline demand records set.


Future Outlook


Weekly Natural Gas InjectionsRelative to 5-Year Average


-250

-200

-150

-100

-50

0

50

100

150

bcf

Net Injection

5-Year Average Net Injection

Dec-04 Mar-05 Apr-05 Jun-05 Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Jun-06

Natural gas storage at record levels, injections keeping pace.

Unusual summer withdraw of natural gas from storage.


Projected Gas Demandfor April through October 2006


Average AverageSector Bcf Bcf/d Bcf Bcf/d

Residential 1,362 6.4 1,349 6.3 Commercial 1,125 5.3 1,119 5.2 Industrial 3,739 17.5 3,693 17.3 Electric 3,849 18.0 3,940 18.4 Lease, Plant & Pipeline 896 4.1 898 4.2

Subtotal 10,971 51.3 10,999 51.4

Net Storage Injection 1,825 8.5 1,980 9.3

2006 2005

Electric demand forecasted to decrease despite past summer trends

Power plant and industrial demand will be the swing factors to watch for during the summer.


Industrial Sector Gas Demand

20.821.2

19.2

19.9

18.618.9

17.3 17.5

15

16

17

18

19

20

21

22

1999 2000 2001 2002 2003 2004 2005 2006

Bcf

/d

Forecast


Small increase in industrial demand project, despite strong anticipated production (financial) performance in the sector.


Electric Sector Gas Demand

12.9

14.8

15.716.3

16.9

17.9

15.8

16.8

18.418

10

11

12

13

14

15

16

17

18

19

20

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Bcf

/d

Forecast


Decrease in power generation use, despite trends.


0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06

(Bcf

)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Working Gas in Storage 5-Year Average 5-Year Range


Working Gas in Underground Storage


Working gas in storage is currently 14 percent higher than the 5-year average and 5 percent higher than the maximum bound of the 5-year average


200

220

240

260

280

300

320

340

360

380

400

Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06200

220

240

260

280

300

320

340

360

380

400

Crude Oil Stocks 5-Year Average 5-Year Range


US Crude Oil Stocks


Crude oil stocks are currently 11 percent higher than the 5-year average and 5 percent higher than the maximum bound of the 5-year average

Mill

ion

Bar

rels


Impact of Shut-in Production Worldwide

Total of Potential from Shut-in Production: 2.7 MMBbl/dForecast World Consumption Growth for 2006: 1.6 MMBbl/dForecast World Consumption Growth for 2007: 1.8 MMBbl/d

Venezuela600 MBbl/day

Iraq post-warinsurgency

Nigerian civil strifeVenezuelan instability

Nigeria500 MBbl/day

Iraq1 MMBbl/day

Gulf of Mexico180 MBbl/day

2005 Hurricanes

Alaska400 MBbl/day


US Energy Expendituresas a Percent of GDP (1970-2000)

Source: Energy Information Administration; and Bureau of Economic Analysis, US Department of Commerce

US economy uses less energy per unit of income – more efficient and wealthier than past energy crisis. Could explain demand resiliency.

0%

2%

4%

6%

8%

10%

12%

14%

16%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Per

cent

Forecast


Dr. William Gray’s December HurricaneForecasts - Colorado State University

The 2006 Original Forecast includes the highest forecasted number of storms and “major” hurricanes this decade.

Source: Klotzbach and Gray, Colorado State University, Final April 2006 Forecast; MSNBC.com; and Accuweather.com

April Named Total 'Major'"First" Forecast Storms Hurricanes Hurricanes

2001 9 5 22002 13 8 42003 12 8 32004 13 7 32005 11 6 52006 17 9 5

NOAA 2006 13-16 8-10 4-6Accuweather 2006 5 3


CSU 2006 Revised Forecast has reduced named storms to 15 with 7 total hurricanes and 3 major.


Current Tropical Trends

Actual 2006 activity has been very limited, and conditions very unfavorable (to date) for development. However, still early in the season.

Source: Accuweather.com © LSU Center for Energy Studies


Historic Tropical Trends

Most activity in August and September.

Source: Accuweather.com © LSU Center for Energy Studies


• Intermediate Term Impacts: (6 months and beyond)•Markets have the opportunity to bounce in two different directions.

•Large storage levels in crude and natural gas would point to potential softening of energy prices.

• However, there is CONSIDERABLE uncertainty:•Tropical activity could be concern (cyclical shift in weather trends).

•Geopolitical tensions will continue to drive movements in crude.

• Longer run, high prices can (should) have impact:•High prices are bad for energy sensitive industries – will eventually show up in trade deficit numbers (chemicals, refining, and paper and pulp).

•Imports for energy (crude, natural gas) will pick up and have impacts on trade deficit.

Market Outlook


Questions, Comments, & Discussion

[email protected]

www.enrg.lsu.edu

energy supply and demand: the broad picture · 2017. 4. 11. · the broad picture presentation...

Documents