Natural Gas Supply/Demand Outlook By: John Harpole November 14, 2018 Presentation to: The Fertilizer Outlook and Technology Conference Jacksonville, Florida
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Natural Gas Supply/Demand Outlook
By:John Harpole
November 14, 2018
Presentation to: The Fertilizer Outlook and Technology Conference
Jacksonville, Florida
Fertilizer Industry vs. Natural Gas Industry
Source: http://www.search.com/reference/Lucy_van_Pelt
3
$0
$1
$2
$3
$4
$5
$6
$7
11/1
/201
02/
1/20
115/
1/20
118/
1/20
1111
/1/2
011
2/1/
2012
5/1/
2012
8/1/
2012
11/1
/201
22/
1/20
135/
1/20
138/
1/20
1311
/1/2
013
2/1/
2014
5/1/
2014
8/1/
2014
11/1
/201
42/
1/20
155/
1/20
158/
1/20
1511
/1/2
015
$/M
MB
tu
BENTEK Est.
*Forecast from my 2010 speech:BENTEK Expects The Forward Curve To Fall Further
NYMEX
Source: BENTEK 4
What will impact natural gas prices during the next 5 years?
• Shale gas/productivity gains (We aren’t exploring, we are manufacturing gas.)
• Lower EPA Air Standards (demand increase)• Renewable Portfolio Standards (in an inexpensive
gas environment?)• Coal to gas conversion (demand increase)• Demand in Mexico (potential demand increase)• LNG exports from North America (China is waiting)
5
Circa 2010
Natural Gas Outlook
By:John Harpole
Presentation to:2013 Fertilizer Outlook
& Technology ConferenceTampa, Florida
November 20, 2013
Conclusions from November 20, 2013
• U.S. continues to produce more gas, shale gas revolution was too successful, end-users will benefit
• During the next 3 years, supply will likely exceed demand
• Prices will remain in the $3.50 to $4.75 range, with short period above and below that band during adjustments
• Long term prices depend on demand growth. Without demand growth, supply will continue to be long and prices relatively low.
• A significant demand response can’t occur for at least 3-5 years
7
The End of Scarcity?
Natural Gas Outlook
By:John Harpole
Presentation to:The Fertilizer Outlook and Technology Conference
Jacksonville, FL
November 11, 2015
The Big Three Issues to Watch
1. Global Oil Price Recovery2. Marcellus and Utica Shale Production3. U.S. LNG Exports
9
Circa 2015
10Source: Kinder Morgan, 2015 Business Meeting: West Region Gas Pipelines, November 2, 2015
1990-2013: Wellhead total data from DI Desktop2014-2025: Kinder Morgan forecast
11Source: Kinder Morgan, 2015 Business Meeting: West Region Gas Pipelines, November 2, 2015
NYMEX Historical and Future Forecast
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.0019
96
1997
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2001
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2005
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2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
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Per M
MBt
u
NYMEX – 1996- Nov 2018 - Average last 3 days of close as reported in Platts Gas Daily Report, Publication 2019-2021 Future Forecast as of 11/07/2018 reported by MarketView Software
12
It is not a scarce resource anymore
13
US RIG COUNTS: Aug 2018 vs Aug 2016
5/+1
61/+34
15/+9
32/+24
2/-2
2/+1
6/+2
12/+5
19/+17
122/+68
35/+21
1/+1
96/+57
5/+2
4/+4
25/+7
10/+0
2/+0
Active rig count: Aug 3, 2018 / Change in rig count from Aug 5, 2016
Rig Increases Dry Gas Focused Areas
Rig Increases Liquids-Rich/Oil Focused Areas
Rig Declines Source: S&P Global, Aug 2018
1/-1
45/+3
23/+12
18/+9
15/-1
1/+046/+11
471/+290
33/+21
8/+5PICEANCE
CALIFORNIA
MICHIGAN
POWDER RIVER
GREEN RIVER
WIND RIVER
OTHER ROCKIESWILLISTON
SAN JUAN
UINTA
OTHER APPALACHIAN
D-J
MARCELLUS WET
MARCELLUS DRY
UTICA
ILLINOIS
ARK FAYETTEVILLE
ARK WOODFORD
OFFSHORE
TX GULFEAGLE FORD
PERMIAN
ANADARKO
FT WORTH
AL-MS-FL
LA GULF
ARKLA
OTHER MIDCONTINENT
TX GULF
EASTTX
25/+1
RATON0/+0
TOTAL
1144
CHANGE+610
10/+8
14Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
60
65
70
75
80
85Bcf/d U.S. Dry Gas Production
2013 2014 2015 20162017 2018 Forecast
US supply growing again; largest year-over-year gain in history
Source: S&P Global Platts Analytics
Y-O-Y2013/2014+4.0 Bcf/d
Y-O-Y2014/2015+3.4 Bcf/d
Y-O-Y (Forecast)2017/2018+7.0 Bcf/dY-O-Y (YTD)2017/2018+5.0 Bcf/d
17Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
19Source: www.eia.gov/dnav/ng/hist/n9132mx2m.thm accessed 08/20/2018
Major delays on Mexico’s interior gas pipelines
Source: SENER, S&P Global Platts Analytics
• 4.7 Bcf/d delayed downstream of West Texas
• 4.9 Bcf/d delayed downstream of South Texas
• Average delay over 400 days• Most new capacity delayed past 2018 • US pipeline exports will remain
capacity constrained until 2019
Pipeline Import Corridor Capacity MMcf/d Original ISD Estimated Start 6/1/2018 Days DelayedEl Encino - La Laguna West Texas 1,500 Apr-17 Mar-18 334 El Encino - Topolobampo West Texas 670 Oct-16 Jun-18 608 Nueva Era South Texas 504 Jun-17 Dec-18 548 Tula - Villa de Reyes South Texas 886 Dec-17 Jul-18 212 La Laguna - Aguascalientes West Texas 1,189 Dec-17 Nov-18 335 Villa de Reyes - Aguas. - Guadalajara West Texas 886 Dec-17 Nov-18 335 Samalayuca - Sasabe West Texas 472 Jun-17 Nov-18 518 Sur de Texas - Tuxpan South Texas 2,600 Jun-18 Oct-18 122 Tuxpan - Tula South Texas 886 Mar-17 Dec-19 1,005 Average Delay 460
Mexican Pipeline Construction TrackerProject Details Start Date Tracker
20Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
Downstream constraints alleviated in 2019
0
5
10
15
2017 2018 2019
MEXICO IMPORT CAPACITY CONSTRAINTS (BCF/D)
Imports Border Capacity Estimated Downstream Constraint
Imports peak at ~4.9 Bcf/d in Oct-18 Imports peak at ~6.2 Bcf/d in Jul-19
Source: S&P Global Platts Analytics
21Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
High Utilization of US LNG Expected to Persist
0
2
4
6
8
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12
Bcf
/d
US LNG Feedgas Capacity and ForecastElba Island T7-10Elba Island T1-6Corpus Christi T2Corpus Christi T1Cove Point T1Cameron LNG T3Cameron LNG T2Cameron LNG T1Freeport LNG T3Freeport LNG T2Freeport LNG T1Sabine Pass T5Sabine Pass T4Sabine Pass T3Sabine Pass T2Sabine Pass T1LNG Export ForecastLNG Feedgas Forecast
Source: S&P Global Platts Analytics
25Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
Latin America and Asia main markets US LNG
Source: S&P Global Platts Analytics
1,240 BCF US LNG exports shipped to 27 countries
MEXICO275 Bcf
DOMINICAN REPUBLIC
15 Bcf
BRAZIL45 Bcf
ARGENTINA46 BcfCHILE
68 Bcf
PORTUGAL23 Bcf
SPAIN27 Bcf
ITALY7 Bcf
SABINE PASS and COVE POINT LNG TERMINALS
TURKEY29 Bcf
JORDAN65 BcfMALTA
5 Bcf
EGYPT17 Bcf
PAKISTAN13 Bcf
KUWAIT30 Bcf
UAE17 Bcf
CHINA163 Bcf
INDIA65 Bcf
THAILAND3 Bcf
SOUTH KOREA151 Bcf
JAPAN87 Bcf
TAIWAN12 Bcf
UK9 Bcf POLAND
3 Bcf
36% to Asia37%to
Americas
17% to India and Middle-East
10%to
Europe
Lithuania3 Bcf
Netherlands6 Bcf
*Numbers may not add up to 100% due to rounding
Colombia2 Bcf
Israel3 Bcf
26Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
0
10
20
30
40
50
60Bcf/d LNG Demand By Region
Asia Demand Europe Demand ME DemandAmericas Demand Other Demand
Asia Clearly Driving LNG Demand
LNG Demand in Asia expected to account for roughly 50% of the total LNG demand growth 2023 v 2018
Source: S&P Global Platts Analytics
27Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
China almost 30% of growth in global LNG demand (2018 to 2023)
0%2%4%6%8%10%12%14%16%18%
0
10
20
30
40
50
60
Bcf/d
China All Others China % of Total
Source: S&P Global Platts Analytics
28Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
29Source: Greg Ruben, KinderMorgan, Colorado Oil and Gas Association Trade presentation, August 21, 2018
30Source: Greg Ruben, KinderMorgan, Colorado Oil and Gas Association Trade presentation, August 21, 2018
0
10
20
30
40
50
60Bcf/d LNG Supply By Region
Other Supply Qatar SupplyUS Supply Australian Supply
Global Supply Concentrate to Three Players
US follows ramp in Australian volumes; +60% of total liquefaction capacity increase 2023 v 2018
Source: S&P Global Platts Analytics
31Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
32
Source: Antero Resources Company Presentation, November 2018 35
Source: Antero Resources Company Presentation, November 2018 36
Source: Antero Resources Company Presentation, November 2018 37
Source: Antero Resources Company Presentation, November 2018 38
Source: Antero Resources Company Presentation, November 2018 39
Source: Antero Resources Company Presentation, November 2018 40
Source: Antero Resources Company Presentation, November 2018 41
Source: Antero Resources Company Presentation, November 2018 42
Source: Antero Resources Company Presentation, November 2018 43
Source: Antero Resources Company Presentation, November 2018 44
Source: Antero Resources Company Presentation, November 2018 45
4646
Source: Midstream to Markets: Oil Markets: Out of the Woods?, RBN Energy, The Energy Summit, August 23, 2017
Key Takeaways from 2010• Shale gas/productivity gains (We aren’t exploring, we are
manufacturing gas.)• Demand in Mexico (potential demand increase)• LNG exports from North America (China is waiting)
47
Key Takeaways from 2015The Big Three Issues to Watch:• Global Oil Price• Marcellus and Utica Shale Production• U.S. LNG Exports
Key Takeaways• Forecasted NorAm production growth is highly
dependent on global export markets; more exports to Mexico and LNG (10.3 Bcf/d) than organic demand growth in Canada and US (5.7 Bcf/d); reductions in exports forecasted are balanced by reductions in production growth
• Global demand for LNG continues growing; expect a “second wave” of LNG liquefaction capacity
• Gas infrastructure development is required to connect supply centers with emerging demand
• You have heard “it’s about location, location, location.” Production is about efficiency, efficiency, efficiency.
48Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018
The New “Metaphor” by Maytag
49
John HarpolePresident
Mercator Energy26 W. Dry Creek Circle, Suite 410
Littleton, CO [email protected]
(303) 825-1100 (work)(303) 478-3233 (cell)
Contact Information
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NYMEX Historical and Future Forecast
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.0019
96
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2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Per M
MBt
u
NYMEX – 1996- Nov 2018 - Average last 3 days of close as reported in Platts Gas Daily Report, Publication 2019-2021 Future Forecast as of 11/07/2018 reported by MarketView Software
51
Source: Oilprice.com, The Saudi Arabian Oil Conspiracy and What it Might Mean for Your Portfolio, The Motley Fool, Adam Galas, January 18, 2015
Survival of the Fittest?
*Circa 2014: Saudis have staying power; $750 billion in foreign country reserves
53
Nation Oil price per barrel required to break even or balance budget
US producers $38-$77
Qatar $58
Kuwait $59
UAE $90
Saudi Arabia $92
Angola $94
Russia $101
Iraq $116
Venezuela $117
Algeria $119
Ecuador $122
Nigeria $124
Iran $136
Source: Reuters, The Saudi Arabian Oil Conspiracy and What it Might Mean for Your Portfolio, The Motley Fool, Adam Galas, January 18, 2015
Survival of fittest as oil tumbles below $65, Bloomberg News, December 1, 2014
A Game of Chicken?
According to data compiled by Bloomberg, “prices have dropped below the level needed by at least 9 OPEC member states to balance their budgets.”
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