1 2 M ID - STREAM NATURAL ECONOMICS , European - - PowerPoint PPT Presentation

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• MID-STREAM NATURAL ECONOMICS,

RATES, COMMODITY RISKS, CONTRACTING.

• GAS MARKET RESEARCH & TRAINING
• INDEX & CONTRACT NEGOTIATION
• FUEL RISKS/DUE DILIGENCE
• LITIGATION SUPPORT/RATE CASES.
• 600+ ASSIGNMENTS IN 28 COUNTRIES

SINCE MARCH ‘84.

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Clients: Energy traders, power generators, pipelines, utilities, banks, governments, universities.

Power generators Lenders Pipelines/traders LNG projects Regulators Expert testimony European pipelines GdF Suez, Repsol, BG Eastern Europe West African pipeline Sonatrach (Bechtel) Japan gas utilities Mitsubishi Philippine NPC

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100 200 300 400 500 600 700 800 900 1,000 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 BCM

US Shales and Other Gas Production

Appalachian Permian Eagle Ford Haynesville Niobrara Bakken Anadarko Other Gas

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Source: BSA 2018, from EIA Drilling Productivity Report; Yamal data from Gazprom, http://www.gazprom.com/about/production/projects/mega- yamal/, incl. explored and provisionally estimated; Qatar data from BP 2017 statistical review, reflects proved reserves.

Natural Gas Supplies (Dry) Production, Bcfd Est. Recoverable (Tcf) Russia’s Yamal Region (Arctic) 34.8 (potential in 32 fields by 2030) 935 …of which, Bovanenkovo 21.0 (potential by 2030) 173 Appalachia (incl. Marcellus- Utica) 26.8 (2/2018) 472 Qatar 17.5 (actual in 2016) 858

…Supply & drilling

From EIA’s ‘Today in Energy’ – January 18, 2018….. …Supply & drilling

2012-13 2013-14 2014-15 2015-16 Peak day $15.15 $31.98 $13.83 $8.00 Peak 5 Days $12.32 $30.45 $12.65 $6.07 Peak 10 Days $9.67 $29.06 $11.67 $5.47 Peak Month (Index) $10.10 $35.15 $13.88 $6.83 Prior Off-Peak (8 mo.) $3.02 $5.04 $5.58 $3.44 $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00

$/MMBtu

$- $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 $160.00 $180.00 $200.00 2-Jan 3-Jan 4-Jan 5-Jan 6-Jan 7-Jan 8-Jan 9-Jan 10-Jan 11-Jan 12-Jan 13-Jan 14-Jan 15-Jan 16-Jan 17-Jan 18-Jan

NGI Daily Northeast Spot Gas Price Range

Low End High End

Source: right, BSA 2018, Platts AGT Citygate prices; left: NGI.

Most rigs. 40% of all US rigs are looking for

• il in the

Permian Basin of West Texas. Most gas production growth. 48% of gas supply growth is in Marcellus- Utica Basins

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Appalachia.

…Supply & drilling

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Source: BSA 2015, from FracFocus.com; EPA testimony before US House Subcommittee on Energy and Environment (February 1, 2012), Siemens data; EIA Natural Gas Issues and Trends (1998); Jenner & Lamadrid, Energy Policy 53 (2013) 442-453.

E&P, Gathering, Processing Pipeline Transport LNG Liquefaction, Shipping, Regasificatio n Local Gas Distribution Utilities End Uses Residential Commercial Industrial

• Elec. Gen.

Also, financing, pricing, trading – all complicated by units of measure!

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…Supply & drilling

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Source: BSA 2017, from 2015 American Chemical Society survey, US FERC LNG project info at 1 May 2017,

72 53 48 20 18 15 24 Gulf Coast Marcellus Region Midwest/Old Rust Belt Bakken & Northern Plains Southeast Auto Mfg All The Rest Not Specified

9.3 Bcfd of approved LNG export capacity now in service or in construction; another 6.6 Bcfd approved/awaiting FID.

A ‘second wave’ of US LNG export projects totaling more than 12 Bcf/d? Will depend on prices and

• ther LNG

market conditions.

AND GLOBAL LNG EXPORT CAPACITY.

$110 bn toward 250 new chemical, petrochemical, steel and other manufacturing, # plants by region

…Creating gas demand: industry & exports

$- $1 $2 $3 $4 $5 $6 $7 $8 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17

$/MMBty, delivered

Gas and coal prices compete closely…

Coal Natural Gas

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0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2010 2011 2012 2013 2014 2015 2016 TWh x 1000

Gas, wind & solar for elec-gen are all rising.

Coal Gas Nuclear Hydro Wind/solar

…but the US coal fleet is aging & inefficient (GW).

45.4 53.5 43.6 19.0

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40 60 50 years or

• lder, 28%

40-50 years, 33% 30-40 years, 27% Newer than 30 yrs, 12%

1000 1200 1400 1600 1800 2000 2200 2005 2007 2009 2011 2013 2015 2017TTD Mn tonnes

US elec-gen CO2 emissions are falling. Source: BSA 2017; data from EIA and Statistics Canada.

…Creating gas demand: coal replacement

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500 1000 1500 2000 2500 3000 3500 4000 4500 5000 MW

LNG Regas in Spain Hourly Wind Production in TX, MW

Sources: BSA 2017, from Enagas, 2012; K. Forbes 2010, ERCOT data for 7/2009; Baltimore Gas & Electric Co..

104 LNG Storage Plants in US …Creating gas demand: renewables

…And there’s Chrysler’s “flat tank” CNG Dodge Charger that never was… Since 2014, all muni buses in Los Angeles run on natural gas. Westport Cummins LNG semi will travel up to 800 miles.

…Creating gas demand in vehicles

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Source: Schlesinger.

…Creating gas demand in vehicles, but not as much!

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$3 $4 $5 $6 $7 $8 $9 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 $/MMBtu

Comparison of HH Spot Price Forecasts,

Actuals NYMEX HH 4Oct2017 Settlement AEO17 High O&G Resource & Tech World Bank 17Jan2017

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…Prices

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And global solar PV costs are decreasing as fast... The same pattern is now underway for Li-Ion batteries.

Source: BSA 2016, EIA data; graphs from JB Straubel, before EIA Annual Conference, Washington, DC, July 2015.

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10 15 20 25

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40 60 80 100 120 140 160 Jan-12 Aug-12 Mar-13 Oct-13 May-14 Dec-14 Jul-15 Feb-16 Utica Marcellus Rigs Needed to Produce One Bcf/day

Example: US shale drilling productivity rose dramatically…

…Competition on the horizon

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0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Capacity Use (Load Factor) Natural Gas Fired Combustion Turbine Petroleum Liquids Fired Combustion Turbine Internal Combustion Engine

Source: BSA 2015, from EIA. Capacity Factors for Utility Scale Peaking Generators Primarily Using Fossil Fuels, January 2014-July 2015

…Competition on the horizon

Rising use

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energy… Intensifies the evening power supply ramp-up require- ment… Forces fast and extensive demand for gas- fired gens.… Stresses the region’s gas infrastruc- ture… Especially Socal Gas’s Aliso Canyon (largest UGS west

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Missis- sippi)

12.2 13.9 15.6 18.5 20.3 103.3

2015 California Net Power Generation, TWh

Wind Hydro Solar Nuclear Geothermal/Biomass Natural gas

…Competition on the horizon

Major leakage forced closure

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Canyon in 2015 LA region’s electric utilities are facing peak shortage … This has forced an urgent turn to batteries … Giga- factories are now ramping up to meet growing battery demands … This is already lowering costs to produce batteries …

…Competition on the horizon

50 100 150 200 250 300 350 400 450 500 Combined US Combined CA '11 Combined CA '10-'11 Regn CAISO Regn USA Regn NYISO Arb CA '11 Arb CA '10-'11 Arb CA '03 Arb US Arb NYS Arb NYC Arb PJM

Source: BSA 2017, BSA $/kwh estimates; other info from NREL, 2013; “Arb” value reflects peak-offpeak basis; “Regn” refers to load regulation.

2012 Tesla Model S 2016 Tesla and 2018 Ampera Tesla Model 3, Maybe ‘20 VW?

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…Competition on the horizon

• 20,000,000

40,000,000 60,000,000 80,000,000 100,000,000 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970

US Horse and Car Population, 1870-1970

Horses Cars

Source: BSA 2016, interpolated from USDA, USDOE Oak Ridge National Lab data.

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…Competition on the horizon

…Competition on the horizon

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…Summary

CNG VEHICLES, 1989-1996 BIODIESEL, 2006-2009 BATTERY EV’S, 2012-