U.S. Natural Gas Outlook The 3rd London Gas & LNG Forum September 26 and 27, 2016 The Rag Army & Navy Club London

Transcription

1 U.S. Natural Gas Outlook The 3rd London Gas & LNG Forum September 26 and 27, 216 The Rag Army & Navy Club London Lucian Pugliaresi Energy Policy Research Foundation, Inc. Washington, DC 1

2 About EPRINC! Founded 1944! Not-for-profit organization Studies intersection of petroleum economics and public policy Provides independent and technical analyses for distribution to the public Funded largely by the private sector, foundations and U.S. government Supports USG projects, e.g. Quadrennial Energy Review, DoD strategic outlook 2

3 EPRINC Embassy Series!! Engagement with Washington s energy policy community Collaboration among diplomatic community provides interesting venue and constructive policy discussion Series!offers!opportunity!to! gain!greater!understanding! of!u.s.!energy!policy! in an era of!expanding! U.S.!supplies!of oil and gas

4 Main Themes A Quick Comment on the Law of Diminishing Returns We Have Lots of Gas and its Very Inexpensive Implications of New Environmental Regulations on Exploration & Development, i.e. what are the regulatory threats to supply Most important: What things cost is critical!! (actually a repeat of point one) 4

5 First, a few words about THE LAW OF DIMINISHING RETURNS 5

6 A Comment on Environmental Regulation How Much Should We Pay for the Last 1 Yards? Grams of GHGs per Mile 1, Grams of Greenhouse Gases vs Miles Per Gallon (MPG) Miles per Gallon - Increasing Efficiency ---> Analysis Based on EPA data GHG/Mile You are here EPRINC Annual fuel consumption per vehicle (assuming 12, miles per year) 1,2 1, Miles per Gallon - Increasing Efficiency Analysis Based on EIA Annual fuel cost per vehicle (under two price scenarios) $4, $3, $2, $1, $ EPRINC Source: Pugliaresi, L. and Max Pyziur, CAFE, Gasoline Prices and the Law of Diminishing Returns, March 216, EPRINC 6

7 This is not a Defense of VW s Clean Diesel violation, but Fuel economy is better than advertised for 2.-liter diesel, averaging 45 miles per gallon on highway and 3 in city Output of GHG emissions, averaged at 5 percent or more below federal standards, but VW Violated the NOx standard, at a level of at least 15 times the standard But the average gasoline-powered pickup truck puts more NOx pollution than the typical Volkswagen diesel and there are more than 1 million such trucks on the road Security delays on vehicles waiting to enter San Diego from Mexico produce 157 tons of extra NOx pollution VW s entire violation (for California) is approximately 9 tons of Nox Next year, the average new car will have cut pollution by 99.4 percent compared to 1963 models 7

8 The Resilience of the U.S. Natural Gas Resource 8

9 Understanding American Political Comments vs. Reality So by the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place. Hillary Clinton, March 6, 216 The Marcellus Shale, the nation's largest play, will yield in March 216 nearly 2 bcf/d more than EIA forecast just 3 days ago. New production from Pennsylvania caused the change from improvements in productivity and pipeline capacity. Josef Lieskovsky (EIA), March 9, 216 9

10 WESTERN INTERIOR SEAWAY Stanley, Steven M. (1999). Earth System History. New York: W.H. Freeman and Company. 1

11 Shale Gas Play Map Source: EIA 11

12 Changes in Proved Reserves of the United States, (trillions of cubic feet of natural gas) trillion cubic feet (tcf) Net revisions & adjustments Extensions New fields New reservoirs Production Net acquisitions & sales Net reserves changes Source: EIA Data 12

13 U.S. Natural Gas and Shale Gas Production with Henry Hub Prices 9 16 bcf/d $/mcf Jan-2 Jul-2 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jan-26 Jul-26 Jan-27 Jul-27 Jan-28 Jul-28 Jan-29 Jul-29 Jan-21 Jul-21 Jan-211 Jul-211 Jan-212 Jul-212 Jan-213 Jul-213 Jan-214 Jul-214 Jan-215 Jul-215 Jan-216 US Natural Gas Production - Marketed - bcf/d (left axis) US Shale Gas Production Share of Total Production - bcf/d (left axis) Henry Hub Natural Gas Spot Price - $/mcf (right axis) Source: EIA Data, EPRINC/PetroNerds Calculations

14 Gas Production by Major Shale Play bcf/d Antrim (MI, IN, & OH) Bakken (ND) Woodford (OK) Barnett (TX) Fayetteville (AR) Eagle Ford (TX) Haynesville (LA & TX) Marcellus (PA,WV,OH & NY) Utica (OH, PA & WV) Rest of US 'shale' Source: EIA data, PetroNerds calculations 14

15 U.S. Gas Rig Count by Basin # of Rigs Barnett Gas Eagle Ford Gas Fayetteville Gas Haynesville Gas Marcellus Gas Permian Gas Utica Gas Wiliston Gas Source: EPRINC Report Shale Gas; The Road Ahead (August 216) 15

16 Marcellus Gas Type Curves mcf/d months in production Source: EPRINC REPORT, Shale Gas: The Road Ahead (August 216) 16

17 Base Case Shale Gas Forecast by Play 9 8 bcf/d Rest of US Shale Marcellus Utica W-B-F Williston Haynesville Eagle Ford Bakken (ND) Bakken (Williston) - New Woodford (OK) Barnett (TX) Fayetteville (AR) Woodford-Barnett-Fayetteville New Eagle Ford (TX) Eagle Ford - New Haynesville (LA & TX) Haynesville - New Marcellus (PA,WV,OH & NY) Marcellus - New Utica (OH, PA & WV) Utica - New Rest of US 'shale' Rest of US - New Source: EPRINC Report Shale Gas:The Road Ahead (August 216) 17

18 Shale Gas Production Under Two Scenarios bcf/d Total - Base Case Total - Reduced Activity Source: EPRINC REPORT, Shale Gas: The Road Ahead (August 216) 18

19 CAN US LNG EXPORTS REMAIN COMPETITIVE IN LOW PRICE ENVIRONMENT? Substantial number of facilities with relatively low development costs still exist (i.e., capital investments were made at sites for LNG import terminals) Most projects in planning are large train (5 million metric tons/yr), but have capability for cost-effective downsizing. In general, US has low inflation and low currency volatility risks Pending methane regulations could reduce supply and leave it in the ground movement also poses risks (Keystone Pipeline & Dakota Access Pipeline Syndromes) 19