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Winter Energy Market Assessment 2005 – 2006 . Item No.: A-3 October 20, 2005. Tight Supplies Mean Small Changes Can Magnify Price Effects. FERC Staff Will Rigorously Review: Supply Adequacy Trading Infrastructure Electric Markets. Supply Concerns Drive Gas Prices. 35. Futures - PowerPoint PPT Presentation
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Federal Energy Regulatory Commission
Winter Energy Market Winter Energy Market Assessment 2005 – 2006 Assessment 2005 – 2006
Item No.: A-3Item No.: A-3October 20, 2005October 20, 2005
Tight Supplies Tight Supplies Mean Small Changes Mean Small Changes
Can Magnify Can Magnify Price EffectsPrice Effects
FERC Staff WillFERC Staff WillRigorously Review:Rigorously Review:• Supply AdequacySupply Adequacy• TradingTrading• InfrastructureInfrastructure• Electric MarketsElectric Markets
Supply Concerns Supply Concerns Drive Gas PricesDrive Gas Prices
Sources: Staff analyses of 10/18/05 NYMEX futures data, Bloomberg and Platts.
0
5
10
15
20
25
30
35
1/1/03 7/1/03 1/1/04 7/1/04 1/1/05 7/1/05 1/1/06New
Yor
k D
eliv
ered
Pric
es ($
/MM
Btu
)
Natural GasTransco Z6
No. 6 Fuel Oil
No. 2 Fuel Oil
FuturesPrices
10/20/05
Summer Demand Summer Demand and Hurricanes Have and Hurricanes Have Reduced the Storage Reduced the Storage
SurplusSurplus
Source: Staff analysis of Form EIA-912, Weekly Underground Natural Gas Storage Report, data through week ending October 7, 2005.
0
50
100
150
200
250
300
350
4/8 4/22
5/6 5/20
6/3 6/17
7/1 7/15
7/29
8/12
8/26
9/9 9/23
10/7
Exce
ss (
Bcf)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Stor
age
Leve
l (Bc
f)
20055-year Average
Excess Over 5-year Average
Natural Gas Natural Gas Production Outlook is Production Outlook is
UncertainUncertain
Sources: Staff derivation from CERA, Monthly Gas Briefing: A Band of Uncertainty, September 19, 2005; CERA, Here We Go Again: Hurricane Rita Adds to Hurricane Katrina’s Supply Shock, September 23, 2005; EIA Short-Term Energy Outlook, October 12, 2005; Lehman Brothers Q205 Nat Gas Production/Supply Overview, August 31, 2005 and Baker Hughes.
EIA CERA LehmanGas Rig Count
10
12
14
16
18
20
22
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
ly D
ry G
as P
rodu
ctio
n (T
cf)
0
200
400
600
800
1,000
1,200
1,400
Ave
rage
Ann
ual R
otar
y R
ig C
ount
2005 figures are estimates and adjusted for shut-in production
Greater LNGGreater LNGImports ExpectedImports Expected
Projected to increase 0.6 – 1.0 Bcf/d Projected to increase 0.6 – 1.0 Bcf/d over last winter over last winter
Will depend on netbacks, global supplies, and competing demands Will depend on netbacks, global supplies, and competing demands Biggest increases expected at Lake CharlesBiggest increases expected at Lake Charles
Sources: Staff analyses of U.S. Waterborne LNG Report, September 29, 2005 and October 12, 2005; CERA, If the Price is Right: The Potential for Additional U.S. LNG Imports in the Aftermath of Hurricane Katrina, September 20, 2005, Rising U.S. LNG Needs for Winter Heating Season Face Limited Supply Availability, October 11, 2005, North American Natural Gas Outlook, September 20, 2005; and Energy and Environmental Analysis, Natural Gas Domestic Production and Demand Forecast, October, 2005.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan-04
Feb-04
Mar-04
Apr-04
May-04
Jun-04
Jul-0
4
Aug-04
Sep-04
Oct-04
Nov-04
Dec-04
Jan-05
Feb-05
Mar-05
Apr-05
May-05
Jun-05
Jul-0
5
Aug-05
Sep-05
Oct-05
Nov-05
Dec-05
Jan-06
Feb-06
Mar-06U
.S. L
NG
Impo
rts
(Bill
ion
Cub
ic
Feet
per
Day
) Everett
Lake Charles
Elba IslandCove Point
Energy Bridge
Projected LNG ImportsCERA
Waterborne LNG Report
Total Capacity
Anticipated Year-on-Year Anticipated Year-on-Year ChangesChanges
Chart assumes 2 Bcf/d of shut-in supply Chart assumes 2 Bcf/d of shut-in supply this winterthis winter
Colder weather and/or greater supply losses would Colder weather and/or greater supply losses would increase already high prices and further erode demandincrease already high prices and further erode demand
(0.80)
(0.60)
(0.40)
(0.20)
0.00
0.20
0.40
0.60
(Tcf
)
Sources: Staff derivation from CERA, Monthly Gas Briefing: A Band of Uncertainty, September 19, 2005; CERA, Here We Go Again: Hurricane Rita Adds to Hurricane Katrina’s Supply Shock, September 23, 2005 and EIA Short-Term Energy Outlook, October 12, 2005.
Production
Pipeline Imports
LNG Imports
Storage
Total Supply Total
Demand
10% Colder
Demand
10% Warmer Demand
High Northeast High Northeast Prices Expected Prices Expected Due to Capacity Due to Capacity
ConstraintsConstraints
Sources: Staff analyses of 10/18/05 NYMEX futures and data from Platts.
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
Nov Dec Jan Feb Mar
$ / M
MB
tu
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00NY 04-05 NY 05-06 HH 04-05 HH 05-06
Forward Basis to Henry Hub
Electricity Prices are Rising Electricity Prices are Rising With Higher Fuel CostsWith Higher Fuel Costs
Wholesale prices for this winter are about Wholesale prices for this winter are about double last winter’s actual prices. double last winter’s actual prices. • Fraction of electricity from gas in 2004Fraction of electricity from gas in 2004• Contract prices for December 2005, January 2006, and Contract prices for December 2005, January 2006, and
February 2006 as of 9/23/05February 2006 as of 9/23/05• Averages of day-ahead contract prices in past two wintersAverages of day-ahead contract prices in past two winters
Other Electric Winter Other Electric Winter IssuesIssues
Reliability of electric supply under gas Reliability of electric supply under gas scarcity conditions.scarcity conditions.• ISO-NE’s cold-weather proceduresISO-NE’s cold-weather procedures
Behavior of RTO and other markets during Behavior of RTO and other markets during gas price spikesgas price spikes• Scarcity gas price effectsScarcity gas price effects• Penalties when pipelines restrict takesPenalties when pipelines restrict takes
Availability and prices of other fuels Availability and prices of other fuels (coal, oil)(coal, oil)
FERC Staff Will Closely FERC Staff Will Closely Monitor Winter MarketsMonitor Winter Markets
Establish Threshold Price Levels for Establish Threshold Price Levels for Request of Transactional Level DataRequest of Transactional Level Data• PricesPrices• Basis RelationshipsBasis Relationships
Monitor Storage Levels and InformationMonitor Storage Levels and Information
Establish Threshold Price Levels for Establish Threshold Price Levels for Request of Transactional Level DataRequest of Transactional Level Data• PricesPrices• Basis RelationshipsBasis Relationships
Monitor Storage Levels and InformationMonitor Storage Levels and Information Watch Pipeline UtilizationWatch Pipeline Utilization
• Critical NoticesCritical Notices• TolerancesTolerances
Obtain Timely Market and Obtain Timely Market and Operational DataOperational Data
Respond to ComplaintsRespond to Complaints• HotlineHotline• Industry TipsIndustry Tips
This presentation can be This presentation can be found on thefound on the
Calendar of EventsCalendar of Events for today’s for today’s Commission Meeting entry Commission Meeting entry on on www.ferc.govwww.ferc.gov