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U.S. Energy Market TrendsU.S. Energy Market TrendsLiving in a post Katrina/Rita WorldLiving in a post Katrina/Rita World
Presented toSenate Home Heating Fuels Study Committee
Georgia State LegislatureAtlanta, GA
October 4 , 2005
Terry CiliskeEn*Vantage, Inc
22
Today’s Takeaway’sToday’s Takeaway’s
The energy complex is highly integrated and The energy complex is highly integrated and interdependent across the commodity linesinterdependent across the commodity lines
The recent hurricanes merely exacerbated The recent hurricanes merely exacerbated issues that were already occurringissues that were already occurring
The lack of investment in energy infrastructure, The lack of investment in energy infrastructure, while efficient from a capital perspective, makes while efficient from a capital perspective, makes the national energy picture vulnerable to any the national energy picture vulnerable to any stress on itstress on it
In all of the above these are national issuesIn all of the above these are national issues
33
To address these issues we will cover the To address these issues we will cover the following areas todayfollowing areas today
Oil and Refined Products: Oil and Refined Products: Supply/demand issues pre/post storms. What has changed?Supply/demand issues pre/post storms. What has changed?
Natural Gas: Natural Gas: What were trends prior to storms and what is situation in light of What were trends prior to storms and what is situation in light of
current conditions?current conditions?
LPG:LPG: Near term impact on LPG supplies; implications on prices? Near term impact on LPG supplies; implications on prices?
Electricity: Electricity: Will the storms have a material affect?Will the storms have a material affect?
44
Who is En*Vantage, Inc.?Who is En*Vantage, Inc.?
Located in Houston, TexasLocated in Houston, Texas, En*Vantage, Inc., En*Vantage, Inc. was founded in 1999 was founded in 1999 with the multiple purpose of investing in assets and businesses with the multiple purpose of investing in assets and businesses within the energy and petrochemical industries, and to provide within the energy and petrochemical industries, and to provide strategic, executive management, project development, marketing, strategic, executive management, project development, marketing, trading and risk management advisory services to a wide range of trading and risk management advisory services to a wide range of clients within these same industries.clients within these same industries.
Each of the Each of the En*Vantage'sEn*Vantage's Principals has senior management Principals has senior management experience and combined, possess many decades of combined experience and combined, possess many decades of combined experience from Fortune 500 companies. This experience allows us experience from Fortune 500 companies. This experience allows us to offer energy companies solutions and services that are grounded to offer energy companies solutions and services that are grounded from a practical and fundamental standpoint in a time efficient from a practical and fundamental standpoint in a time efficient manner.manner.
Over the course of the past six years we have advised Over the course of the past six years we have advised approximately 100 public and private clients on a wide range of approximately 100 public and private clients on a wide range of energy related topics.energy related topics.
55
Energy Value ChainEnergy Value Chain
Downstream
PetrochemicalsRefining
Propane Retailing
GasRetailing
GasDistribution
GasStorage
GasTransportation
Gas Gathering
Exploration &Production
Processing& Treating
NGLTransportation
NGLStorage
NGLFractionation
Midstream
Upstream
Oil Gathering &
Transportation
Crude Oil Refining
Product Transportation
ProductTerminals Product
Retailing
Natural Gas
Crude Oil
PowerRetailing
PowerDistribution
PowerGeneration
MiningCoal Rail
Transportation
Nuclear, Hydro and Renewables
66
BackgroundBackground
Over the past few years the U.S. has been generally lulled Over the past few years the U.S. has been generally lulled into a belief that adequate cushion of supplies of energy into a belief that adequate cushion of supplies of energy existed to supply the world economy in all market existed to supply the world economy in all market conditions. conditions.
Fact: World oil production currently has little or no cushion for Fact: World oil production currently has little or no cushion for immediate production increasesimmediate production increases
Fact: Any cushion that might exist in world oil supply is generally of Fact: Any cushion that might exist in world oil supply is generally of poorer quality feedstockpoorer quality feedstock
Fact: World wide upgrading (refining) capacity is tight, specially for Fact: World wide upgrading (refining) capacity is tight, specially for poorer quality crude's. Energy Transportation and Conversion capacity poorer quality crude's. Energy Transportation and Conversion capacity
had reached practical limits without significant new capital investment.had reached practical limits without significant new capital investment.
77
BackgroundBackground
Fact: Natural Gas in North America is trending from Fact: Natural Gas in North America is trending from a continental commodity to a globally based a continental commodity to a globally based commodity.commodity.
Fact: Despite accelerated drilling for natural gas in Fact: Despite accelerated drilling for natural gas in North America, supply growth has been non-North America, supply growth has been non-existent for a number of years.existent for a number of years.
Fact: Natural Gas infrastructure is currently putting artificial Fact: Natural Gas infrastructure is currently putting artificial constraints on managing local supply/demand issues in the U.S.constraints on managing local supply/demand issues in the U.S.
Fact: LPG supply in the U.S., largely a function of natural gas Fact: LPG supply in the U.S., largely a function of natural gas supplies and refinery processing of crude oils, is also a globally supplies and refinery processing of crude oils, is also a globally based commodity.based commodity.
Fact: Electricity demand has been growing substantially in the U.S. Fact: Electricity demand has been growing substantially in the U.S. partially in response to more ‘normal’ weather conditions. Growth in partially in response to more ‘normal’ weather conditions. Growth in electricity supply in the U.S. is marginally produced from natural electricity supply in the U.S. is marginally produced from natural gas.gas.
88
Katrina and Rita Passed through the Heart of the Katrina and Rita Passed through the Heart of the Energy Complex of the U.S. Gulf CoastEnergy Complex of the U.S. Gulf Coast
99
The Storm’s ImpactThe Storm’s Impact
As much as 100% of the Gulf of Mexico oil production As much as 100% of the Gulf of Mexico oil production (1.5 MMBbl/d) and up to 80% of natural gas (8 BCF/d) (1.5 MMBbl/d) and up to 80% of natural gas (8 BCF/d) shut in for weeks.shut in for weeks.
As much as 30% (excess of 5 Million Bbl/d) of U.S. As much as 30% (excess of 5 Million Bbl/d) of U.S. Refining capacity was down following Katrina/Rita, with Refining capacity was down following Katrina/Rita, with 15% having significant damage that will force outages for 15% having significant damage that will force outages for weeks and months. Prior to the storms the U.S. refining weeks and months. Prior to the storms the U.S. refining industry had been running at 92-95% of nameplate industry had been running at 92-95% of nameplate capacity throughout the summer.capacity throughout the summer.
1010
The Storm’s ImpactThe Storm’s Impact
The Gulf Coast Gas Processing Industry suffered an The Gulf Coast Gas Processing Industry suffered an unprecedented blow as numerous processing plants unprecedented blow as numerous processing plants received severe damage. These plants are necessary received severe damage. These plants are necessary both for the conditioning of natural gas prior to delivery both for the conditioning of natural gas prior to delivery into long haul gas transmission pipelines as well as into long haul gas transmission pipelines as well as providing necessary supplies of Natural Gas Liquids for providing necessary supplies of Natural Gas Liquids for the petrochemical and refining industries as well as the petrochemical and refining industries as well as home and commercial heating fuels.home and commercial heating fuels.
Currently there is almost 12 BCF/d of Processing Plant Currently there is almost 12 BCF/d of Processing Plant capacity affected by the two storms which represented capacity affected by the two storms which represented almost 7 BCF/d (about 13% of total U.S. dry gas almost 7 BCF/d (about 13% of total U.S. dry gas production) of actual throughputs prior to the storms.production) of actual throughputs prior to the storms.
1111
The Storm’s ImpactThe Storm’s Impact
LNG imports to the largest U.S. terminal at Lake LNG imports to the largest U.S. terminal at Lake Charles, LA are interrupted (capacity in excess of 1 Charles, LA are interrupted (capacity in excess of 1 BCFD) due to damage at the terminal and shutdown of BCFD) due to damage at the terminal and shutdown of tanker traffic on the Calcasieu River.tanker traffic on the Calcasieu River.
Numerous pipelines (crude, refined products, NGL’s and Numerous pipelines (crude, refined products, NGL’s and natural gas) are shut for short or extended periods of natural gas) are shut for short or extended periods of time. Problems include lack of power for pumping time. Problems include lack of power for pumping stations, lack of feedstock for the pipelines or failure of stations, lack of feedstock for the pipelines or failure of the pipelines due to wave action, mud slides or dragging the pipelines due to wave action, mud slides or dragging anchors from platforms. Many systems will be impacted anchors from platforms. Many systems will be impacted for months.for months.
1212
Oil and Refined ProductsOil and Refined Products
Supply/demand issues pre/post storms. What has Supply/demand issues pre/post storms. What has changed?changed?
1313
World Oil Supply Cushion is GoneWorld Oil Supply Cushion is Gone
Within the last 12 months, Within the last 12 months, OPEC has effectively lost OPEC has effectively lost control of the market as they control of the market as they have little or no surplus have little or no surplus production capacity. production capacity.
Since World War II, world wide Since World War II, world wide crude supply has featured a crude supply has featured a production cushion controlled by a production cushion controlled by a ‘political’ entity‘political’ entity Initially the Texas Railroad Initially the Texas Railroad
Commission controlled the surplus Commission controlled the surplus until 1971 when Texas ceased until 1971 when Texas ceased being the world’s swing producer being the world’s swing producer and proration went to 100% of and proration went to 100% of available productionavailable production
Since 1971, the political entity Since 1971, the political entity known as OPEC has controlled the known as OPEC has controlled the ‘surplus’ production whip.‘surplus’ production whip.
1414
Oil Surplus vs. PriceOil Surplus vs. Price
WTI Price vs Spare OPEC Production CapacityMonthly Averages from Jan '02 thru Aug '05
(Source: EIA and En*Vantage)
R2 = 0.8572
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00
$70.00
0 250 500 750 1,000 1,250 1,500 1,750 2,000 2,250 2,500 2,750 3,000 3,250 3,500 3,750 4,000 4,250 4,500 4,750 5,000 5,250 5,500 5,750 6,000
Spare Production Capacity (1000 Bbls)
WT
I ($
/Bb
l)
1515
Crude Oil prices have been in a consistently Crude Oil prices have been in a consistently upward trend for over 18 months as world demand upward trend for over 18 months as world demand
climbed and the surplus deliverability declinedclimbed and the surplus deliverability declined
Crude Oil (WTI) Cash Prices5/03/2004 thru 9/28/2005
$32
$36
$40
$44
$48
$52
$56
$60
$64
$68
$72
5/3/
04
5/18
/04
6/2/
04
6/17
/04
7/2/
04
7/17
/04
8/1/
04
8/16
/04
8/31
/04
9/15
/04
9/30
/04
10/1
5/04
10/3
0/04
11/1
4/04
11/2
9/04
12/1
4/04
12/2
9/04
1/13
/05
1/28
/05
2/12
/05
2/27
/05
3/14
/05
3/29
/05
4/13
/05
4/28
/05
5/13
/05
5/28
/05
6/12
/05
6/27
/05
7/12
/05
7/27
/05
8/11
/05
8/26
/05
9/10
/05
9/25
/05
$ p
er
Bar
rel
$32
$36
$40
$44
$48
$52
$56
$60
$64
$68
$72
Long term support
Most likely trading range
1616
Hurricanes Katrina and RitaHurricanes Katrina and Rita
OPEC claims that they have as much as two million barrel OPEC claims that they have as much as two million barrel per day of surplus (most of the world doubts this figure, the per day of surplus (most of the world doubts this figure, the EIA estimate as of August, 2005 is 0.9-1.4 million barrels EIA estimate as of August, 2005 is 0.9-1.4 million barrels per day). per day).
The hurricanes have effectively eliminated, in the short run, The hurricanes have effectively eliminated, in the short run, crude production that is equal to or greater than the entire crude production that is equal to or greater than the entire OPEC ‘surplus’ capacityOPEC ‘surplus’ capacity and theoretically puts the world into and theoretically puts the world into a short term deficit condition. Currently this deficit is being a short term deficit condition. Currently this deficit is being cushioned with withdrawals from the Strategic Petroleum cushioned with withdrawals from the Strategic Petroleum Reserve. Realistically this is somewhat of a moot point in Reserve. Realistically this is somewhat of a moot point in that we do not currently have sufficient operable refining that we do not currently have sufficient operable refining capacity to process the pre-storm levels of crude oil.capacity to process the pre-storm levels of crude oil.
1717
Rita’s Impact on Gulf Coast Refining Capacity Rita’s Impact on Gulf Coast Refining Capacity Compounds the Ongoing Impact of KatrinaCompounds the Ongoing Impact of Katrina
Company Location Capacity BPD Thur- 9/22 Tue- 9/27Citgo Lake Charles 324,300 Shutting Down Shut DownConocoPhillips Lake Charles 239,400 Shutting Down Shut DownExxonMobil Beaumont 348,500 Shutting Down Shut DownMotiva Port Arthur 285,000 Shutting Down Shut DownTotal Port Arthur 233,500 Shutting Down Shut DownValero Port Arthur 255,000 Shutting Down Shut Down
1,685,700 1,685,700 1,685,700
Shell Deer Park 333,700 Shutting Down Trying to restartLyondell Citgo Houston 270,200 Shutting Down RestartingAstra Oil Pasadena 100,000 Shutting Down RestartingValero Houston 83,000 Shutting Down RestartingExxonMobil Baytown 557,000 Shutting Down RestartingBP Texas City 437,000 Shutting Down Shut DownValero Texas City 209,950 Shutting Down Trying to restartMarathon Texas City 72,000 Shutting Down RestartingConocoPhillips Sweeny 229,000 Shutting Down Restarting
2,291,850 2,291,850 980,650Flint Hills Corpus Christi 288,126 Reduced Runs Normal OpsCitgo Corpus Christi 156,000 Reduced Runs Normal OpsValero Corpus Christi 252,000 Reduced Runs Normal OpsValero Three Rivers 90,000 Reduced Runs Normal Ops
786,126 393,063 0Total Capacity affected by Rita 4,763,676 4,370,613 2,666,350
884,000 884,000 884,000
Total Capacity Shutdown due to Rita & Katrina 5,254,613 3,550,350Reduction in Crude Runs (BPD) 4,991,882 3,372,833Est. Gaso. Prod. Loss (BPD) 2,845,373 1,922,515Est. Dist. Prod. Loss (BPD) 1,297,889 876,936
Total Capacity affected by Katrina ( 4 refineries)
Affects of Hurricane Rita on Gulf Coast Refineries
1818
Natural Gas generally trades with Crude Oil Prices acting Natural Gas generally trades with Crude Oil Prices acting as a Cap (short term excursions above 100% of crude oil as a Cap (short term excursions above 100% of crude oil
energy equivalent occur from time to time)energy equivalent occur from time to time)
Gas Cash Prices vs NYMEX Spot Month Crude Prices(Based on weekly average of daily prices)
R2 = 0.8436
$5.00$5.50$6.00$6.50$7.00$7.50$8.00$8.50$9.00$9.50
$10.00$10.50$11.00$11.50$12.00$12.50$13.00$13.50$14.00$14.50
$42.00 $44.00 $46.00 $48.00 $50.00 $52.00 $54.00 $56.00 $58.00 $60.00 $62.00 $64.00 $66.00 $68.00 $70.00
WTI $/Bbl
He
nry
Hu
b G
as
$/M
M B
TU
Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05
1919
While Natural Gas Inventories ‘Behaved’ (remain surplus year on year) While Natural Gas Inventories ‘Behaved’ (remain surplus year on year) – prices remained in a band of 75-85% of Crude Prices on a Btu Basis – prices remained in a band of 75-85% of Crude Prices on a Btu Basis
– Elimination of surplus in August leads to rapidly escalating prices – Elimination of surplus in August leads to rapidly escalating prices
compounded by the Hurricanescompounded by the Hurricanes
2005 Gas Price Trend and Price Band
$5
$6
$7
$8
$9
$10
$11
$12
$13
1/3/
05
1/10
/05
1/17
/05
1/24
/05
1/31
/05
2/7/
05
2/14
/05
2/21
/05
2/28
/05
3/7/
05
3/14
/05
3/21
/05
3/28
/05
4/4/
05
4/11
/05
4/18
/05
4/25
/05
5/2/
05
5/9/
05
5/16
/05
5/23
/05
5/30
/05
6/6/
05
6/13
/05
6/20
/05
6/27
/05
7/4/
05
7/11
/05
7/18
/05
7/25
/05
8/1/
05
8/8/
05
8/15
/05
8/22
/05
8/29
/05
9/5/
05
9/12
/05
9/19
/05
$/M
M B
TU
$5
$6
$7
$8
$9
$10
$11
$12
$13
Crude Prices $/MM BTU Actual Gas Prices $/ MM BTU75% of Crude Price 85% of Crude Price
Daily Cash Gas Price @ Henry Hub
Crude Price $/MM Btu
Natural Gas Year on Year Surplus goes Negative for First time since October 2003
2020
Natural Gas IssuesNatural Gas Issues
Inventories in the U.S. were at elevated levels following Inventories in the U.S. were at elevated levels following winter of 2004/2005 that was 7% warmer than normalwinter of 2004/2005 that was 7% warmer than normal Year on year surplus was over 400 BCF during the later part of Year on year surplus was over 400 BCF during the later part of
the winter.the winter. The year on year surplus was eliminated by mid-August of this The year on year surplus was eliminated by mid-August of this
year due to higher than normal cooling demand in the U.S.year due to higher than normal cooling demand in the U.S.
We have been living on lower than normal winter We have been living on lower than normal winter demand for four straight winters; not since the winter of demand for four straight winters; not since the winter of 2000/2001 were we at or above normal for the 2000/2001 were we at or above normal for the seasonally accumulated heating degree days across the seasonally accumulated heating degree days across the U.S.U.S.
2121
U.S. Seasonal Heating and Cooling DemandsU.S. Seasonal Heating and Cooling DemandsPrevious Four Winters have been Milder than Normal, while Summers Previous Four Winters have been Milder than Normal, while Summers
have been more Severe than Normalhave been more Severe than Normal
Seasonal Degree Days(Source: National Weather Service)
0
1000
2000
3000
4000
5000
6000
2001 2002 2003 2004 2005
Heating Degree Days (Gas Wtd) Cooling Degree Days
Normal Heating Degree Days (Gas Wtg) Normal Cooling Degree Days
2222
Is more drilling in the U.S. adding to Natural Gas Is more drilling in the U.S. adding to Natural Gas deliverability or are we merely running in place?deliverability or are we merely running in place?
Gross Gas Production vs Gas Rotary Rig Count
62,000
63,000
64,000
65,000
66,000
67,000
68,000
69,000
70,000
71,000
72,000
Jan-9
5
May
-95
Sep-9
5
Jan-9
6
May
-96
Sep-9
6
Jan-9
7
May
-97
Sep-9
7
Jan-9
8
May
-98
Sep-9
8
Jan-9
9
May
-99
Sep-9
9
Jan-0
0
May
-00
Sep-0
0
Jan-0
1
May
-01
Sep-0
1
Jan-0
2
May
-02
Sep-0
2
Jan-0
3
May
-03
Sep-0
3
Jan-0
4
May
-04
Sep-0
4
Jan-0
5
May
-05
Gro
ss
Ga
s P
rod
uc
tio
n M
illi
on
CF
D
300
400
500
600
700
800
900
1000
1100
1200
1300
Ga
s R
ota
ry R
ig C
ou
nt
- A
vg
Mo
nth
ly
Gross Production
Gas Rotary Rig Count
Linear (Gross Production)
Hurricane Ivan
Most recent production data is usually not that reliable until final data comes in from state agencies
2323
Existing U.S. Natural Gas Regional Pipeline Existing U.S. Natural Gas Regional Pipeline Infrastructure - 2004Infrastructure - 2004
2424
Pipeline Infrastructure is not keeping pace with Pipeline Infrastructure is not keeping pace with Regional Gas Supply and Demand BalancesRegional Gas Supply and Demand Balances
Rockies (OPAL) Gas Price Differential to Henry Hub(Jan '00 thru Sept '05)
-$3.5
-$3.0
-$2.5
-$2.0
-$1.5
-$1.0
-$0.5
$0.0
Jan-0
0
Mar
-00
May
-00
Jul-0
0
Sep-0
0
Nov-00
Jan-0
1
Mar
-01
May
-01
Jul-0
1
Sep-0
1
Nov-01
Jan-0
2
Mar
-02
May
-02
Jul-0
2
Sep-0
2
Nov-02
Jan-0
3
Mar
-03
May
-03
Jul-0
3
Sep-0
3
Nov-03
Jan-0
4
Mar
-04
May
-04
Jul-0
4
Sep-0
4
Nov-04
Jan-0
5
Mar
-05
May
-05
Jul-0
5
Sep-0
5
Bas
is $
/ MM
BT
U
Kern River Pipeline Expansion
2525
North America (including the U.S.) is losing its North America (including the U.S.) is losing its worldwide competitive edge for natural gas worldwide competitive edge for natural gas
intensive industriesintensive industries
2626
Energy Intensive Industrial Plants face closures Energy Intensive Industrial Plants face closures Example: Ammonia Plants Poised for New Example: Ammonia Plants Poised for New
Shutdowns?Shutdowns?
Source: “The Market: Fertilizer News and Analysis”; Sept. 29, 2005
2727
Wholesale Propane Prices have remained low Wholesale Propane Prices have remained low (relatively speaking) from a historical relationship (relatively speaking) from a historical relationship
to crude oil until the hurricanes arrivedto crude oil until the hurricanes arrived
Propane to WTI Crude Price Relationship(On a $/Bbl Basis)
58%
60%
62%
64%
66%
68%
70%
72%
74%
76%
78%
01/0
3/05
01/1
0/05
01/1
7/05
01/2
4/05
01/3
1/05
02/0
7/05
02/1
4/05
02/2
1/05
02/2
8/05
03/0
7/05
03/1
4/05
03/2
1/05
03/2
8/05
04/0
4/05
04/1
1/05
04/1
8/05
04/2
5/05
05/0
2/05
05/0
9/05
05/1
6/05
05/2
3/05
05/3
0/05
06/0
6/05
06/1
3/05
06/2
0/05
06/2
7/05
07/0
4/05
07/1
1/05
07/1
8/05
07/2
5/05
08/0
1/05
08/0
8/05
08/1
5/05
08/2
2/05
08/2
9/05
09/0
5/05
09/1
2/05
09/1
9/05
09/2
6/05
5-year average
2828
Current wholesale U.S. Propane Inventories are not in bad Current wholesale U.S. Propane Inventories are not in bad shape; the question will be what will happen with the loss of shape; the question will be what will happen with the loss of
Gas Processing Capacity and throughput this fall?Gas Processing Capacity and throughput this fall?
Source: EIA/Propane Insider
8/26/2005 9/2/2005 9/9/2005 9/16/2005 9/23/2005 Lst Wk (+/-) Last Year Lst Yr (+/-)US Propane Inventory (MM Bbls) 65,401 64,846 64,241 66,193 67,389 1,196 67,267 122 Propane Imports (MM Bbl/d) 136 81 203 171 171 - 494 (323) Propane Production (MM Bbl/d) 1,070 989 1,011 1,056 905 (151) 1,092 (187) Total Propane Supply 1,206 1,070 1,214 1,227 1,076 (151) 1,586 (510) Propane Demand (MM Bbl/d) 1,189 1,111 1,261 909 866 (43) 1,129 263 Propane Days of Supply 55 58 51 73 78 5 60 18
2929
Offsetting part of the supply loss for NGL’s is the temporary Offsetting part of the supply loss for NGL’s is the temporary shutdown of almost 20% of the ethylene production shutdown of almost 20% of the ethylene production
capacity in the U.S. as a result of Hurricane Ritacapacity in the U.S. as a result of Hurricane Rita
Company LocationCapacity MM lb /yr CrackerType Purity Ethane E/P Propane Butane Naphtha Gasoil
BASF/AtoFina Port Arthur 2,060 Heavy 0 0 0 0 74,467 0ChevronPhillips Port Arthur 1,770 E/P 29,023 0 21,853 0 0 0Dupont Orange 1,500 Purity Ethane 39,041 0 0 0 0 0ExxonMobil Beaumont 1,820 E/P 0 26,079 19,178 12,466 0 0Huntsman Port Arthur 1,370 Flexi 8,914 1,865 4,571 4,457 24,762 0Huntsman Port Neches 425 Flexi 0 11,571 0 0 0 0Sasol NA Lake Charles 950 Purity Ethane 24,726 0 0 0 0 0Westlake Lake Charles #1 1,250 Purity Ethane 32,534 0 0 0 0 0Westlake Lake Charles #2 1,150 E/P 20,653 0 11,896 0 0 0
12,295 154,892 39,515 57,498 16,923 99,229 0
Feedstock Consumption (BPD): Assuming 95% Operating Rate
Ethylene Plants most likely affected by Hurricane Rita
3030
Electrical Generation was already feeling the Electrical Generation was already feeling the affects of higher fuel costs prior to the hurricanesaffects of higher fuel costs prior to the hurricanes
Average Weekly Coal Commodity Spot PricesAverage Weekly Coal Commodity Spot PricesBusiness Week Ended September 23, 2005Business Week Ended September 23, 2005
3131
Since the Hurricanes, Coal Shipments along the Since the Hurricanes, Coal Shipments along the Gulf Coast have been disruptedGulf Coast have been disrupted
Coal is a major commodity transported through the Port Coal is a major commodity transported through the Port of Mobile and New Orleans on the Mississippi River and of Mobile and New Orleans on the Mississippi River and coastwise on the Gulf Intracoastal Waterways System. coastwise on the Gulf Intracoastal Waterways System. Waterborne traffic since Hurricane Katrina has Waterborne traffic since Hurricane Katrina has progressed from totally shut down in some areas to progressed from totally shut down in some areas to partially restored. Coal export facilities and domestic coal partially restored. Coal export facilities and domestic coal shipments through the lower Mississippi River were shipments through the lower Mississippi River were impacted more seriously than coal import capacity. impacted more seriously than coal import capacity.
The two major coal facilities near New Orleans incurred The two major coal facilities near New Orleans incurred damage. damage.
3232
Current NYMEX (eastern) coal prices continue to Current NYMEX (eastern) coal prices continue to put a significant floor price on natural gasput a significant floor price on natural gas
NYMEX Coal Price 56 $/tonDelivery 2.5 $/ton
Delivered Coal Price 58.5 $/tonCoal Heat Content 12,000 Btu/lB
Coal Price 2.4375 $/MbtuSulfur in Coal 1.00 %
SO2 in Coal 1.6667 lb SO2/MbtuSO2 emission allowance cost 893 $/ton EA
Unit SO2 Removal Rate(Scrubber, Natural Attrition, etc.) 5.00 % removalSO2 out the stack 1.58 lb SO2/Mbtu
Adjusted Coal Price (with SO2 adder) 3.14446 $/MbtuAverage heat rate at full load 10,000 Btu/kWhr
NOx out the stack 0.35 lb NOx/MbtuNOx emission allowance cost 2,450 $/ton EA
Coal Cost 24.38 $/MWhrSO2 Cost 7.07 $/MWhrNOx Cost 4.29 $/MWhr
Variable O&M 2.00 $/MWhr
Total production cost (full average) 37.73 $/MWhr
To be Competitive with CoalGas Combined Cycle Heat Rate 7000 Btu/kWhr
Gas Equivalent 5.39$ $/ MMBtu
Gas Conventional Boiler Heat Rate 10500 Btu/kWhrGas Equivalent 3.59$ $/ MMBtu
Alternatively Gas Fired Units on U.S. Gulf Coast using 12.00$ per MMBtuGas Combined Cycle Heat Rate 7000 Btu/kWhr
Gas Break Even Power Price Equivalent 84.00$ $/ MWhr
Gas Conventional Boiler Heat Rate 10500 Btu/kWhrGas Break Even Power Price Equivalent 126.00$ $/ MWhr
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ConclusionsConclusions
It will be difficult to correct the energy issue It will be difficult to correct the energy issue quickly, the near term solution will involve quickly, the near term solution will involve managing demand through conservation and managing demand through conservation and demand destruction. We need to be prepared to demand destruction. We need to be prepared to support those in need as we face the upcoming support those in need as we face the upcoming winter demand.winter demand.
Longer term solutions generally revolve around Longer term solutions generally revolve around additional capital investment on supplies as well additional capital investment on supplies as well as infrastructure while directing focus on efficient as infrastructure while directing focus on efficient use of the resources that are available to us.use of the resources that are available to us.
