Trends in the North American Natural Gas Market

GCAGS Annual Meeting

November 1, 2002

Donald A. JuckettOffice of Fossil Energy

U.S. Department of Energy

North American Trends in Natural Gas

• Background – – Historical demand and consuming sectors

• Scope –– Forecast for demand increase– Sector growth– Future supply– Issues and opportunities– Technology impacts

0

5000

10000

15000

20000

25000

3000019

30

1934

1938

1942

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

Source: EIA, www.eia.doe.gov

billio

n cu

bic

feet

(bc

f)

U.S. Gas Consumption & Past Drivers

Natural Gas Act ’38(Great Depression)

Effect of wellhead pricecaps (Phillips ’54)

NGPA ’78(& gas bubble)

Post-war pipelines:Large fields+welding+ econ. growth FERC 436,636

(econ growth)

(EIA Annual Energy Outlook 2002)

Natural Gas Has an Increasing Role in the U.S. Fuel Mix

Gas-Fired Powergen – Recent Additions

Additions to U.S. Electric Generating Capacity (MW)

0

10,000

20,000

30,000

40,000

50,000

1999 2000 2001

meg

awat

ts

natural gas

other

Powergen Is Driving Rising U.S. Gas Use

More than half of the increased gas demand in 2020 is for the power sector

(EIA Annual Energy Outlook 2002)

Future Supply

• Historical Production Areas

• Deep Offshore

• Alaska

• Canadian Imports

• Liquefied Natural Gas (LNG)

Historical Producing Areas

• Access issues• Increased depletion rates• Pace of technology

– Deep water

• Infrastructure• Security• Reserve additions remain strong –

– 2001 Reserves rose to 183.5 TCF

ALASKA NATURAL GAS INTERAGENCY TEAM

Alaska

• Proved resources – 30-35 TCF Prudhoe Bay• Prospective

– 70 – 100 TCF - Prudhoe Bay– 59.7 TCF - NPRA (39 –83 TCF) USGS– ANWR

• Energy Legislation – Pipeline - Status• Canadian response• Cost analysis – Company team

Japan

Trinidad and Tobago

2

23

98

238140

10

158

3763

Natural Gas Imports & Exports, 2001(Billion Cubic Feet)

AustraliaAlgeria

LNG

LNG

66

65

12

Oman

Nigeria

38

Qatar

Canada

• Western Basin/McKenzie (inc. CBM)

• OCS Maritimes

• Canada “first”

• Trade related concerns

• Resource Assessment uncertainties

U.S. LNG imports have grown rapidly in recent years, even when compared to growing global trade.

Index of Growth in Global LNG Trade and U.S. Imports (1993=100)

0

50

100

150

200

250

300

1993 1994 1995 1996 1997 1998 1999 2000

Global LNG trade

US LNG Imports

LNG Is a Growing Part of U.S. Imports •LNG imports more than doubled between 1998 and 2000 (from 85 Bcf to 224 Bcf) and are expected to continue growing.

•LNG imports can play a significant role on a regional basis.

-1

0

1

2

3

4

5

1995 1997 1999 2001 2003 2005 2007 2009

Vo

lum

e (

Tri

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ic F

ee

t)

ProjectionHistory

Canada(Pipeline)

Mexico(Pipeline)

Liquefied Natural Gas

Source: EIA, www.eia.doe.gov

Price Comparison for Everett LNG

$0.00

$2.00

$4.00

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$8.00

$10.00

Jan Apr Jul Oct Jan Apr Jul Oct

1999 - 2000

$/thousand c

ubic

feet

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feet

Everett import vol's (mcf)

NE Pipe Imports

Everett LNG Imports

Citygate gas price (MA)

Price Comparison for Lake Charles LNG

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

Jan Apr Jul Oct Jan Apr Jul Oct

1999 - 2000

$/thousand c

ubic

feet

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6,000

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L. Charles import vol's (Mmcf)

L. Charles LNG ($/Mcf)

IL Citygate gas price ($/Mcf)

Henry Hub (monthly ave.),$/MMBtu

Boston, MAUnited States

Cove Point, MDUnited States

Savannah, GAUnited StatesLake Charles, LA

United States

Proposed TerminalExisting Terminal

Existing and Proposed New Terminals

So What?

• NPC update – 1992 and 1999 Natural Gas Study• EIA about to issue new Long Term Outlook• FERC engaging on series of regulatory issues• Federal Agencies – MOU on expediting pipeline

permits• Alaska Task Force• Federal role in technology development• EPCA – Federal Lands Resource Assessment