Natural Gas Market Conditions in New England

Presentation to:

New Hampshire Business & Industry AssociationAnnual Energy Seminar

Stephen LeahyNortheast Gas Association

December 11, 2013Manchester, NH

About NGA

Non-profit trade association

Local gas utilities (LDCs) serving New England, New York, and New Jersey

Several interstate pipeline companies

LNG importers (Distrigas, Repsol) and LNG trucking companies

Over 200 “associate member” companies, from industry suppliers and contractors to electric grid operators

www.northeastgas.org

Continued on NGA web site…

http://www.northeastgas.org/about-nga/antitrust-guidelines

Changing Northeast (and New England) Supply Dynamic

Traditionally, “end of the pipeline”; long-haul transportation from Gulf Coast, western Canada

Changes: Marcellus Shale volumes increasing, displacing

Gulf and other long-haul supplies Lower imports from Canada and LNG Exports from the Northeast U.S. to Canada Off-system “virtual pipeline” developments Higher pipeline utilization and more frequent

“capacity constraints” at “western points”

Source: U.S. EIA, 10-3-13

U.S. Production Levels Remain Robust

Source: Potential Gas Committee, 4-9-13

• 100 years of potential supply• EIA: U.S. in 2013 is largest producer of

natural gas in the world• U.S. monthly production in lower 48-

states hit new record in mid-2013

Commodity Price

Home Heating Expenditures

0

500

1,000

1,500

2,000

2,500

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14Source: U.S. EIA, Oct. 8, 2013. Natural gas data is for Northeast states of CT, ME, MA, NH, NJ, NY,

PA, RI, VT. Heating oil is U.S. average.

Average Consumer Expenditures for Heating Fuels, $, 2007-2013

Natural Gas

Heating Oil

(Forecast)

Northeast Production Continues Growth

Chart: U.S. EIA, October 9, 2013.

Imports from LNG and Canada are Lowering

Source: Distrigas, 12-3-12

*Brunswick Pipeline Flows

LNG IMPORTS, 2009-12

0

10000000

20000000

30000000

40000000

200420052006200720082009201020112012

103m

3

Source: National Energy Board of Canada 

Canadian Natural Gas Exportsto Eastern U.S., 2004‐12

Copyright: Northeast Gas AssociationPrepared by: Coler & Colantonio, Inc.February 2012

M&NEPNGTS

Iroquois

Tennessee

Algonquin

5 InterstatePipelinesServe New England

Northern New England

Growing Regional Interest in System Expansion CT Comprehensive Energy Strategy enacted, utility

expansion plans just approved by regulatory agency

Maine Natural Gas Task Force and June 2013 legislation

MA Department of Energy is conducting study on natural gas expansion

New York City is phasing out #4 and #6 oil in buildings over coming years –natural gas as key alternative option

NYS DPS looking at existing natural gas franchise expansion policy statewide

VT Gas expansion project.

Projects In-Service This Year (all outside New England)

Tennessee’s “Northeast Upgrade”: 636 MMcf/d Tennessee’s “MPP Project”: 240 MMcf/d Millennium’s “Minisink Compressor”: 150 MMcf/d National Fuel Gas’s “Line N”: 30 MMcf/d Transco’s “Northeast Supply Link”: 250 MMcf/d Spectra’s “NJ-NY Expansion”: 800 MMcf/d

Photos courtesy of Spectra Energy.

Prepared by NGA, based on publicly available information. Project locations approximate. As of 11-13.

VERMONT

Spectra/Texas Eastern, “TEAM 2014”

Proposed Pipeline Projects

Empire, “Tioga

County II”

Tennessee, “Rose Lake”

Millennium, “Hancock

Compression Project”

Spectra, “AIM”

National Fuel / Empire,

“Tuscarora Lateral”

Williams, “Rockaway

Lateral/Northeast Connector”Williams &

Cabot, “Constitution

Pipeline”

Tennessee, “NortheastExpansion”

Iroquois, “Wright

Interconnect”

Iroquois, “Eastern Long

Island”

Millennium, North -South Upstate Connector Project”

Columbia, “East Side Expansion

Project”

PNGTS, “C2C”

Spectra, “Expansion to

Maritimes”

Tennessee, “ConnecticutExpansion”

Iroquois, “SoNo

Project”

Capacity Constraints:Example from Last Winter

Source: U.S. EIA, 1-25-13

This Winter?

In October, staff of the Federal Energy Regulatory Commission (FERC) released the “Winter 2013-14 Energy Market Assessment.” Among its observations: “Natural gas and power futures prices for the winter are comparable to last year, except in New England.”

“Natural gas storage is more than adequate for a normal winter, and gas production continues to grow, particularly in the Northeast. We anticipate localized price spikes in New England during periods of high demand, due to ongoing constraints.”

Gas utility customers are basically protected from spot market price fluctuations as utilities have in place long-term supply and storage arrangements.

Securing Pipeline Capacity

The pipelines operate as they are designed on peak days– Facilities are designed to support primary firm obligations

Most generators in region do not have firm contracts back to a liquid supply point– On peak days, only firm services will be assured flow– Absent firm commitments, generators may not have gas supplies to meet electric generation needs

Generators indicate that the regional electric market does not provide incentives for them to enter into firm contract arrangements, or to utilize alternate fuel back-up

Infrastructure counts…– Pipeline investments would ease regional gas constraint points and lower

prices… pending customer commitments

75 Second Avenue, Suite 510Needham, MA 02494-2859

Tel. 781-455-6800

20 Waterview Boulevard, 4th FloorParsippany, NJ 07054

Tel. 973-265-1900

www.northeastgas.org

30.