Outlook on Natural Gas and LNG

1
Outlook on Natural Gas and LNG

• Massachusetts Electric Restructuring Roundtable
• November 19, 2004
• Richard Levitan
• Levitan Associates, Inc.
• rll_at_levitan.com

2
Fuel Diversity in New England

• Recent build-out 10,700 MW
• Gas-fired generation ( Total NE GWh)
• 1999 16
• 2003 41
• 2010 49

3
2002 Study Gas-fired Generation (2004/5)
4000
3500
3000
2500
MW
2000
1500
1000
500
0
Algonquin
Iroquois
MN
PNGTS
Tennessee
4
North American Natural Gas Supply
Reserves Total 247.9 Tcf
Resource Base Total 1,789 Tcf
Other
588.1
U.S. Coalbed Methane
169
Reserves
247.9
Mid-Continent
117
Rocky Mountains
175
Atlantic Canada
Gulf Coast
WCSB
(Scotian Shelf)
293
179
20
Sources EIA, CAPP, Potential Gas Committee, NEB
5
Gas Sources and Supplies

• Large resource base in North America (1,789 Tcf)
• Focus on converting resources to reserves and
  production
• Gulf Coast U.S. mid-continent WCSB 75 of
  North American production
• Traditional producing basins experiencing
  depletion effects
• Natural decline in reservoir/field production
• Most fields are facing an onslaught of
  accelerated depletion
• Treadmill effect
• No more low hanging fruit

6
Maturation of Existing Production Basins

• Running hard to maintain production levels
• Gulf Coast
• Onshore and shallow water production flat to
  declining
• Western Canada (WCSB)
• Declining production from shallow wells in the
  east
• Growth from deeper, more expensive wells
• Atlantic Canada
• Long-term potential
• Recent reassessments

7
Drilling v. Production
25000
54
53
20000
52
51
15000
of Wells Drilled
50
Bcf/d
10000
49
48
5000
47
0
46
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source EIA
8
U.S. Natural Gas Production History
Indicates 28 2003 Decline Rate
Source IHS Energy, Petroleum Information
Corporation, EOG Resources
9
EP in Atlantic Canada

• Current Scotian Shelf production relatively small
• Sable Island 0.4-0.5 Bcf/d
• Gulf Coast 26.3 Bcf/d
• Western Canada 16.5 Bcf/d
• High costs, difficult reservoir conditions
• Recent setbacks
• Postponement of Deep Panuke
• Downward revisions of proven reserves
• Lack of new exploration success

10
Sable Island Production
11
Henry Hub Historical Prices and Forwards
10.00
9.00
8.00
7.00
2000
2004 (with NYMEX futures)
6.00
5.00
2003
2002
4.00
3.00
2001
2.00
1.00
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source Bloomberg
12
Spark Spreads During New England Cold Snap
Source ISO-NE
13
The LNG Supply Challenge
Source TransCanada
14
U.S. LNG Imports by Source Country, 1992-2003
Source EIA
15
Quarterly LNG Deliveries
Source EIA, U.S. Natural Gas Imports and
Exports Issues and Trends 2003
16
Major LNG Trade Movements, 2002 (Bcf)
Source EIA, The Global Liquefied Natural Gas
Market Status and Outlook
17
Atlantic Basin Liquefaction Capacity, October 2003
Source EIA, The Global Liquefied Natural Gas
Market Status and Outlook
18
Atlantic Basin LNG Market Dynamics

• Revitalized Atlantic Basin supply locations
• Integration of the LNG supply chain
• Crunch on traditional supply has caused a
  proliferation of new projects
• Trend towards commoditization
• Global market
• Flexibility in charters
• Increased array of transportation options

19
Interstate Pipelines Serving New England
Total Deliverability over 4.0 Bcf/d
20
Distrigas LNG

KeySpan
,
Algonquin
Tennessee
LNG Imports
(158.3 Bcf in 2003)
New Mystic
(272 MMcf/d)
Backup for
Distrigas Everett
New Mystic
LNG Terminal
(150 MMcf/d)
Storage Capacity 3.5 Bcf
Daily Vaporization 1 Bcf
21
Satellite LNG Tanks in the Greater Northeast
Everett Import Facility 3.5 Bcf 1.0 Bcf/d Total
Vaporization Capability 115 MMcfd - Truck
Source EIA, GasTran Gas Transportation System,
LNG Facilities Database
22
Proposed LNG Projects Serving the Northeast
Project Location Deliverability (MMcf/d)
Cacouna Energy Reviere-Du Loup, QC 500
Rabaska Project Quebec City, QC 500
Bear Head Point Tupper, NS 750-1000
Canaport St. John, NB 500-1000
Northeast Gateway Energy Bridge Hubline, MA 400
Weavers Cove Fall River, MA 400
KeySpan LNG Providence, RI 500
Broadwater Energy Long Island, NY 1000