north american natural gas market · pdf filenorth american natural gas . market outlook. ......

Darryl RogersFebruary 10, 2010
North American Natural Gas Market Outlook
Energy Trends & Impacts On
Gas Infrastructure
Prepared For:
Gas/Electric Partnership, Conference XVIII

2
Agenda
Introduction to Purvin & Gertz, Inc.
GDP, Crude Oil and Gas Price Outlook
U.S. Gas Supply and Demand Outlook
Implications to U.S. Gas Logistics
Summary and Conclusions

3
Purvin & Gertz - Background
Founded in 1947 in business for over 60 years
Independent firm owned by active consultants
Total employees = 83
Global Presence with offices in:Houston (Headquarters), Los Angeles, Calgary, London,Singapore, Buenos Aires, Moscow and Dubai
Consulting staff of Chemical Engineers/MBAs
44 full-time consultants
Technical, commercial and financial experience
An average of 22 years of industry experience
Strategic Alliance with CMAI since 1992
Serve several industries energy through petrochemicals
Perform work on a project basis (single-client, special projects) and on- going analyses of energy markets (multi-client subscription services)
About Purvin & Gertz

4
Houston
Calgary London
Buenos Aires
Singapore
Moscow
L.A.
Dubai
Our global presence provides worldwide assistance to our clients

5
Industries Served
Crude Oil Market Analysis and Pricing
Petroleum Products Refining and Marketing
NGLs/LPG Gas Processing and Marketing
Natural Gas/LNG Markets and Infrastructure
Petrochemicals Feedstock Markets
About Purvin & Gertz

6 6
MARKET ANALYSIS
Fundamental Industry Analysis:
Supply/Demand/Trade and Pricing
Subscription ServicesShort-termLong-term
Crude/CondensateMarkets and Pricing
Market Studies for downstream projects
Topical Studies Canadian Oil Sands LNG / Nat Gas Markets Petrochemical Feeds World LPG Markets
PROJECT-RELATED ASSIGNMENTS
Mergers/AcquisitionsAsset ValuationsDue Diligence
Independent EngineerTechnical ReviewMarket StudyProject Economics
Profit ImprovementCommercial ReviewPIMS LP AnalysisTechnical/Optimization
Other Special StudiesDefined by our clients and tailored to meet their specific needs
Typical Purvin & Gertz Assignments: Single-client and Subscription Services

7
Agenda
Introduction

8
World Economy Stimulus
The crisis has passed (hopefully!), but
Monetary policy remains expansionary
Interest rates remain at historic lows
Fiscal policy is extremely supportive of economic activity
Money continues to be spent on Keynesian Rescue Packages
High unemployment will pressure governments to continue stimulus
Low commodity prices contributed to stimulus but are starting to rise
Inflation will become a Clear and Present Danger

9
World Economy Bad News & Good News
The Bad News:
The world economy experienced a severe recession it began slow but accelerated rapidly
The recession appears to be over but we remain in a period of high uncertainty
The Good News:
Comparisons to the Great Depression are overblown
Unemployment in the 7% to 10% range is not good, but is manageable
The decline was rapid and severe, the recovery is expected to be rapid, too

10
Global economic growth is expected to resume
-5
0
5
10
15
1995 2000 2005 2010 2015
World ChinaU.S. IndiaMiddle East Europe
GDP Growth, Percent
Forecast

11
-8
-6
-4
-2
0
2
4
6
8
Q105 Q305 Q106 Q306 Q107 Q307 Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311
U.S. GDP Actual U.S. GDP
U.S. GDP % of growth (Quarter-to-Quarter Seasonally Adjusted Constant Terms)
U.S. GDP has increased to 3.6% for 2010; Outlook for 2011 GDP growth is 3.4%; Expecting a new GDP high by 4Q10

12 1212
Energy markets are affected by a variety of issues
http://www.loc.gov/exhibits/911/images/01810r.jpg

13
30
40
50
60
70
80
90
100
110
120
130
140
150
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12
$/Bbl
WTI short term price outlook

14
U.S. drilling rig activity dropped by half due to the collapse in natural gas prices (Low in Mid July)
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
Jan-9
7No
v-97
Sep-9
8Au
g-99
Jun-0
0Ap
r-01
Mar-0
2Ja
n-03
Nov-0
3Oc
t-04
Aug-0
5Ju
n-06
May-0
7Ma
r-08
Jan-0
9
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800USGC Prices, $/MMBtuGas Rigs
Henry Hub Price, $/MMBTUNumber of Gas-Oriented
Drilling Rigs in the U.S.

15
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Five Year RangeMax2010 Forecast20092008
Trillions of Cubic Feet
Natural gas storage levels set a new record high in 2009 and are expected to remain relatively high in 2010 (winter demand continues to be a wildcard)

16
2
3
4
5
6
7
8
9
10
11
12
13
14
$/MMBTU
Henry Hub short term price outlook

17
5
7
9
11
13
15
17
19
21
23
25
WTI Cushing ($/Bbl) / HH ($/MMBTU)
The Crude-To-Gas ratio is trending towards historical norms

18
Gas prices are expected to remain at a discount to residual fuel oil and distillate
2
4
6
8
10
12
14
16
18
20
22
1990 1995 2000 2005 2010
Distillate.3% S ResidNatural Gas
New York Burner Tip - Dollars per Million BTU, Current Dollars

19
Agenda
Introduction
Summary and Conclusions

20
The U.S. natural gas market supplies were economically constrained in the 2000s which stimulated gas supply development (both internationally via LNG and domestically) to serve an expanding U.S. gas market
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
Jan-9
7No
v-97
Sep-9
8Au
g-99
Jun-0
0Ap
r-01
Mar-0
2Ja
n-03
Nov-0
3Oc
t-04
Aug-0
5Ju
n-06
May-0
7Ma
r-08
Jan-0
9De
c-09
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800USGC Prices, $/MMBtuGas Rigs
U.S. Lower 48 Weekly Gas Directed Rig Count

21
The large proportion of liquefaction capacity additions planned in the early 2000s were oriented as Pacific Basin supply projects to support intra-basin demand with some portion of the capacity pointed towards the west (Europe and the U.S.)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Mar
-09
May
-09
Jul-0
9
Sep
-09
Nov
-09
Jan-
10
Mar
-10
May
-10
Jul-1
0
Sep
-10
Nov
-10
Jan-
11
Mar
-11
May
-11
Jul-1
1
Sep
-11
Nov
-11
Liqu
efac
tion
Cap
acity
Add
ition
s (B
cfd)
Russia (Bcfd) Qatar (Bcfd) Indonesia (Bcfd) Yemen (Bcfd) Peru (Bcfd) Australia (Bcfd)

22
Global liquefaction capacity additions will increase considerably over the next few years to meet the expected shortfall between U.S. supply and demand and plans will change and markets will adjust given the surge in U.S. domestic supply
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Mar
-09
May
-09
Jul-0
9
Sep
-09
Nov
-09
Jan-
10
Mar
-10
May
-10
Jul-1
0
Sep
-10
Nov
-10
Jan-
11
Mar
-11
May
-11
Jul-1
1
Sep
-11
Nov
-11
Liqu
efac
tion
Cap
acity
Add
ition
s (B
cfd)
0
2
4
6
8
10
12
Cum
ulat
ive
Cap
acity
Add
ition
s (B
cfd)
Liquefaction Capacity Additions (Bcfd) Cumulative Liquefaction Capacity Additions (Bcfd)
EOY 2008 Liquefaction Capacity ~26 Bcfd and Growing to ~37 Bcfd by EOY 2011
~11 Bcfd or 4,000 Bcf per year

23
0
1,000
2,000
3,000
4,000
5,000
6,000
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008

north american natural gas market · pdf filenorth american natural gas . market outlook. ......

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