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

1

• • • • • • • 2

• M ID - STREAM NATURAL ECONOMICS , European pipelines RATES , COMMODITY RISKS , GdF Suez, Repsol, BG Power generators CONTRACTING . Eastern Europe Lenders West African pipeline Pipelines/traders G AS MARKET RESEARCH & TRAINING • Sonatrach (Bechtel) LNG projects I NDEX & CONTRACT NEGOTIATION • Regulators F UEL RISKS / DUE DILIGENCE • Expert testimony Japan gas utilities L ITIGATION SUPPORT / RATE CASES . • Mitsubishi Philippine NPC • 600+ ASSIGNMENTS IN 28 COUNTRIES SINCE M ARCH ‘84. Clients: Energy traders, power generators, pipelines, utilities, banks, governments, universities. 3

• • • • 4

…Supply & drilling US Shales and Other Gas Production Est. Natural Gas Production, Bcfd Recoverable 1,000 Supplies (Dry) (Tcf) 900 800 Appalachian Russia’s Yamal 34.8 (potential in 700 935 Permian Region (Arctic) 32 fields by 2030) 600 Eagle Ford BCM 500 …of which, 21.0 (potential by Haynesville 173 400 Bovanenkovo 2030) Niobrara 300 Bakken 200 Appalachia (incl. 26.8 472 Anadarko Marcellus- Utica) (2/2018) 100 Other Gas 0 17.5 (actual in Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Qatar 858 2016) 5 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.

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

$40.00 NGI Daily Northeast Spot Gas $35.00 Price Range $30.00 $200.00 $180.00 $25.00 $/MMBtu $160.00 $20.00 $140.00 $15.00 $120.00 $100.00 $10.00 $80.00 $5.00 $60.00 $- $40.00 2012-13 2013-14 2014-15 2015-16 $20.00 Peak day $15.15 $31.98 $13.83 $8.00 $- Peak 5 Days $12.32 $30.45 $12.65 $6.07 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 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 Low End High End Source : right, BSA 2018, Platts AGT Citygate prices; left: NGI.

…Supply & drilling Most gas production Most rigs. growth. 40% of all US 48% of gas rigs are supply looking for growth is in oil in the Marcellus- Permian Utica Basins Basin of of West Texas. Appalachia.

• • • • • • 9 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.

…Supply & drilling Pipeline Transport End Uses E&P, Local Gas Residential Gathering, Distribution Commercial Processing Utilities Industrial LNG Elec. Gen. Liquefaction, Shipping, Regasificatio n Also, financing, pricing, trading – all complicated by units of measure! 10

…Creating gas demand: industry & exports AND GLOBAL LNG EXPORT CAPACITY. $110 bn toward 250 new chemical, petrochemical, 9.3 Bcfd of approved LNG export capacity now in service or in steel and other manufacturing, # plants by region construction; another 6.6 Bcfd approved/awaiting FID. 24 A ‘second 15 72 wave’ of US 18 LNG export projects 20 totaling more than 12 Bcf/d? Will depend on 53 48 prices and other LNG Gulf Coast Marcellus Region market Midwest/Old Rust Belt Bakken & Northern Plains conditions. Southeast Auto Mfg All The Rest Not Specified 11 Source : BSA 2017, from 2015 American Chemical Society survey, US FERC LNG project info at 1 May 2017,

…Creating gas demand: coal replacement …but the US coal fleet is US elec-gen CO2 Gas and coal prices Gas, wind & solar for aging & inefficient (GW). emissions are falling. compete closely… elec-gen are all rising. 2200 2.0 $8 1.8 Newer than 30 $7 19.0 2000 yrs, 12% 1.6 $/MMBty, delivered $6 1.4 1800 TWh x 1000 1.2 $5 Mn tonnes 30-40 years, 43.6 1.0 27% 1600 $4 0.8 $3 0.6 1400 40-50 years, 53.5 0.4 $2 33% 0.2 1200 $1 - 50 years or 1000 2010 2011 2012 2013 2014 2015 2016 $- 45.4 older, 28% 2005 2007 2009 2011 2013 2015 2017TTD 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 Coal Gas Nuclear Hydro - 20 40 60 Coal Natural Gas Wind/solar Source : BSA 2017; data from EIA and Statistics Canada.

…Creating gas demand: renewables Hourly Wind Production in TX, MW LNG Regas in Spain 104 LNG Storage Plants in US 5000 4500 4000 3500 3000 MW 2500 2000 1500 1000 500 0 13 Sources: BSA 2017, from Enagas, 2012; K. Forbes 2010, ERCOT data for 7/2009; Baltimore Gas & Electric Co..

…Creating gas demand in vehicles …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, but not as much! • 15 Source: Schlesinger.

…Prices Comparison of HH Spot Price Forecasts, • $9 $8 • Actuals NYMEX HH 4Oct2017 Settlement • $7 AEO17 High O&G Resource & Tech $/MMBtu $6 • World Bank 17Jan2017 $5 • $4 $3 • $2 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 16

17

…Competition on the horizon Example: US shale drilling And global solar PV costs are The same pattern is now productivity rose dramatically… decreasing as fast... underway for Li-Ion batteries. 160 25 Rigs Needed 140 to Produce 20 120 One Bcf/day 100 15 80 10 60 40 5 20 - - Jan-12 Aug-12 Mar-13 Oct-13 May-14 Dec-14 Jul-15 Feb-16 Utica Marcellus 18 Source: BSA 2016, EIA data; graphs from JB Straubel, before EIA Annual Conference, Washington, DC, July 2015.

…Competition on the horizon 12.0% Capacity Use (Load Factor) 10.0% 8.0% Natural Gas Fired Combustion Turbine 6.0% Petroleum Liquids Fired 4.0% Combustion Turbine Internal Combustion 2.0% Engine 0.0% 19 Source: BSA 2015, from EIA. Capacity Factors for Utility Scale Peaking Generators Primarily Using Fossil Fuels, January 2014-July 2015

…Competition on the horizon 2015 California Net Power Generation, TWh Especially 0 12.2 Intensifies Socal 13.9 Forces the Stresses Gas’s 15.6 fast and evening the Aliso Rising use extensive 103.3 18.5 power region’s Canyon of solar demand supply gas (largest 20.3 energy… for gas- ramp-up infrastruc- UGS west fired require- ture … of the gens.… ment … Missis- Wind sippi) Hydro Solar Nuclear Geothermal/Biomass Natural gas

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

…Competition on the horizon Tesla Model 3, 2016 Tesla and 2012 Tesla Maybe ‘20 VW? 2018 Ampera Model S Arb PJM Arb NYC Arb NYS Arb US Arb CA '03 Arb CA '10-'11 Arb CA '11 Regn NYISO Regn USA Regn CAISO Combined CA '10-'11 Combined CA '11 Combined US 0 50 100 150 200 250 300 350 400 450 500 Source: BSA 2017, BSA $/kwh estimates; other info from NREL, 2013; “Arb” value reflects peak -offpeak basis; “ Regn ” refers to load regulation. 22

…Competition on the horizon US Horse and Car Population, • 1870-1970 • 100,000,000 80,000,000 • 60,000,000 • 40,000,000 • • 20,000,000 - • 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 • Horses Cars 23 Source: BSA 2016, interpolated from USDA, USDOE Oak Ridge National Lab data.

…Competition on the horizon

…Summary • • • • • • 25

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