# Presentation: 700606

## Prepared for
EIA Energy Outlook, Modeling and Data Conference
Renaissance Hotel
Washington, D.C.

**EIA Energy Outlook, Modeling and Data Conference**
- Renaissance Hotel
- Washington, D.C.

- Prepared by
**Energy Ventures Analysis, Inc.**
- 1901 N. Moore Street, Suite 1200
- Arlington, VA   22209-1706
- (703) 276-8900
- March 28, 2007

**Comparison of Views On The Outlook****For Natural Gas Markets **

## Outline

**Compare EIA and EVA Forecasts for Natural Gas**
- Where do they differ and why
**Demand**
- Electric Sector
**Supply**
- LNG
**Prices**

## Total Natural Gas Demand

_**2005 to 2020**_**:  Amazingly Close in Projections**
- Difference for 2005 reflects recent revisions in historical data
_**2025**_**:  Distinct Difference Emerges:  Difference equals 6.8 BCFD**

**Comparison Of Total Natural Gas Demand Projections**

## Natural Gas Demand By Sector

**While Outlook For Total Demand Is Close, There Are Differences For Individual Sectors**
- Key concern is the potential impact of EIA being correct on Resid, Comm and Ind Sectors and EVA being correct on the Elect Sector
- Equates to a 2.5 to 9.3 BCFD increase, depending upon one’s reference point.

**Comparison Of 2025 Natural Gas Demand By Sector**

## Observations Concerning Sectors

## Residential Sector

**High Gas Prices Have Resulted In Both Structural And Behavioral Conservation Within The Sector**
- _Structural_:  Insulation, double pane windows, etc.
- _Behavioral_:  Reduced thermostat settings, etc.
**Permanence Of The Behavioral Component Is The More Debatable Of The Two Phenomena**
- Anecdotal data from LDC’s
- Models
- Recent empirical evidence
- Table for November and December 2004.
- Similar results for February 2006.

## Electric Sector

**Major Areas Of Difference**
- EVA projects higher electric demand growth rate (1.3 vs. 1.8%/annum)(1)
- Critical issue because gas-fired generation is at the margin.
- EVA projects less coal-fired capacity and thus more gas-fired capacity
- Key driver is differing views on ‘future’ CO2 requirements.

- (1)   Net energy available to grid.

## Electric Sector Generation

**Net Result Of Two Factors Is 32 Percent More Gas-Fired Generation In 2025**

## Natural Gas Supply

## Natural Gas Supply

**Key Differences**
_**Domestic Production (2.0 TCF)**_**:**  For years EIA has been more optimistic on domestic production than EVA.  Also, EVA’s view is that the hyper-inflation in drilling costs will dampen long-term production, but this is debatable
_**Canadian Imports (1.37 TCF)**_**:**  EVA is likely more optimistic on the potential for offshore British Columbia and Nova Scotia.  Could be a timing difference, as EVA projects a sharp decline in Canadian imports in the next five-year period
_**Arctic (0.2 TCF)**_**:**  Assumptions are similar
_**LNG (1.14 TCF)**_**:**  EVA is more bullish; relates to the amount of domestic production

## LNG:  Highlights

**Global Capacity**
**U.S. regasification capacity** will be over built and could exceed 20 BCFD
**European regasification capacity** likely will be over built, but specifics vary by country
**Asian regasification capacity** likely will match supply requirements with terminals continuing to operate at about historical capacity factors
- Expansion in India and China has been downsized.
- Indonesia is a wild card.
**Liquefaction capacity** likely will increase dramatically (i.e., from 14 BCFD prior to 2000 to 43 BCFD by 2010 and possibly 65 BCFD by 2015)
**Spot Market**
- Currently very small (i.e., 2.5 BCFD in 2005), but likely will increase in size over the decade (i.e., potentially 12.5 BCFD by 2012)

## New North American Regasification Terminals

**Development Of New Terminals Still In A Relatively Dynamic State**
_**Likely Projects**_**:  17** out of 100 proposed new terminals and expansions likely to be completed (i.e., 20.0 BCFD out of 91.9 BCFD)(1)
_**Possible Projects**_**:**  Another 13 proposed projects (17.4 BCFD) still have the potential to be completed
- However, their status is difficult to predict and, in one case, depends upon a future Supreme Court decision.

- (1)   The 100 proposed projects include 10 project expansions.  The ‘Likely’ projects are at 14 sites.

## U.S. Regasification:   Plausible Scenarios For 2012

**Three Plausible Scenarios**
_**Key Conclusion**_**:**  U.S. regasification will be over built
- Excess capacity a critical requirement for a robust spot market.
_**Key Observation**_**:**  Major project shakeout likely to occur in 2006/2007
- First movers secure available LNG supplies, market share and key infrastructure (e.g., pipeline and storage capacity).
- Recent series of proposed expansions may be a signal to second movers.*

- * F**ive expansions totaling 6 BCFD.**

## 2012 Foreign Regasification Projects:  Europe

- Note:  Cat 1 (built); Cat 2 (under construction); Cat 3 (has permit); Cat 4 (in process); Cat 5 (unlikely); Cat 6 (cancelled).

## Europe:  Supply And Demand Analysis For Big Four

## Europe:  Country Specific Assessment For 2012

**About 81% of New Capacity in Four Countries:  Italy, U.K., Spain and France**
- There are sharp contrasts in the outlook for LNG imports within each of these countries (i.e., see table below)
- General conclusion is that Italy, U.K. and France will be over built, while Spain’s terminals will operate at high capacity factors.
- Remaining 19% of capacity are single terminals in seven countries

## New Liquefaction Capacity

**Liquefaction Capacity Added This Decade Will Exceed The Capacity Added Over the Last Forty Years**
- By 2010 world liquefaction capacity will increase by more than three fold
- By 2012 world liquefaction capacity likely will increase more than four fold

## New Liquefaction Facilities For 2012

## Supply Commitments (2000-2012)

- Note:  Potential 2012 LNG imports are 12.3 + 3.3 = 15.6 BCFD.

## New Liquefaction Capacity

**Excluded From Prior Analysis Are a Series of Liquefaction Projects Because:**
- Data on supply commitments not available
- Project is still in its early stages of development

## U.S. LNG Imports

**Near-Term**
- Overly dependent on very competitive spot market
- As a result, likely to be rather volatile
- Watch out for upset conditions
**Long-Term**
- Likely will reach 7.5 BCFD by 2010 and could approach 15 BCFD in 2012

## Natural Gas Prices

## Summary:  Key Tension Points