NOVEMBER 2013 The outlook for natural gas at the start of the winter of 2013/’14 heating season could be a market adequately supplied for the coming winter but it is a market that it is continuing to adjust to fundamental shifts in both supply and demand. Shale production continues to set new record levels as drillers become increasingly efficient in new production basins such as Marcellus and Bakken. On the demand side, the ability of gas fired power generation to absorb surplus gas as it competes with coal is a key balancing mechanism when gas is oversupplied and industrial demand continues to make slow but incremental gains. The chart below highlights some key supply and demand drivers YTD vs. 2012. On the supply side, supply is only up 0.8% as slower but steady increases in shale supply continue to displace Canadian imports. Natural gas production is up 2.0% y-o-y and EIA reported on Nov 1st that dry gas production for August had set a new all-time record high at 66.6 Bcf/d, a 2.0 Bcf or (3%) increase. On the demand side, power generation demand is lower -14% YTD due to natural gas prices being higher than 2012 during which natural gas prices hit 10 year lows. Industrial demand is higher by 5% YTD as low natural gas prices in the U.S. have given manufacturing a competitive advantage over global competitors. Residential & Commercial demand is weather driven and as a result, warmer than normal winter weather will drive prices lower to create an increase in power generation demand due to the economic advantage in switching generation from coal to gas. In a colder than normal winter, prices will trend upward thus driving an increase in producer hedging and associated new drilling. Working gas in underground storage currently stands at 3,779 Bcf as of 10/25/13 and will essentially close out the official end injection season, 10/31 near 3,800 Bcf. Stocks Natural Gas Price & Supply Outlook – Winter 2013-‘14 By Constellation Energy are -3.1% below last year’s record inventory of 3,929 Bcf but above the 5 year average of 3,750 Bcf. Current 11-15 day weather forecasts are calling for above normal temperatures for almost the entire Lower 48 east of the Rockies.This will likely lead to a delayed start to winterheating load for the first half of November and this weakness has been reflected in the recent sell off of NYMEX from an intraday high of $3.86 on 10/16 to a close of $3.447 on 11/4. Winter heating demand is the largest demand component for natural gas and the current warm spell in November will likely require a turn to colder than normal temps in Dec/Jan/Feb to make up for a slow start to winter. As the winter of 2012/’13 demonstrated with a warm December but a cold late Jan/ into February & March weather patterns can shift dramatically within a season. The current NOAA outlook calls for equal chance or “normal” temps across much of the Lower 48 with the exception of the South Central region. Private forecasting models are calling for much below normal temps in the Upper Midwest, Plains and Ohio Valley. The “Equal Chance” detailed above can be boiled down to weather models disagreeing on whether the jet stream will buckle down toward the Deep South, bringing cold Canadian air or stay in a normal pattern that keeps it flowing across the upper Midwest bringing warmer Pacific air. In its monthly Short Term Energy Outlook (STEO) for October, EIA forecasts NYMEX prices will average $4.001/MMBtu for 2014. Options traded on the NYMEX for Cal ’14 have a 95% confidence interval of $5.86 MMBtu for the high side and a lower confidence interval of $2.56/MMBtu. Private forecasters are calling for Henry Hub prices for 2014 to range from as low as $3.80/MMBtu to $4.17/MMBtu while for 2015 the NYMEX forward curve is $4.06/ MMBtu while private forecast are around $4.10/MMBtu. This coming winter will be key to setting storage for 2015 when a wave of coal retirements are expected to occur due to the EPA’s rule regulating the emission of mercury from coal plants. The Mercury Air Toxics Standards (MATS) rule could lead to a significant increase in gas fired generation demand but a key question the market will be assessing is whether growing supplies of shale gas will be adequate to meet that demand. An under supplied market in spring of 2014 due to strong winter demand could set the table for robust injection builds in anticipation of new demand from power generation. A more normal to above normal winter would allow the pace of injections adjust for summer demand and be ready for retiring coal generation demand in 2015. Source: FERC/Bentek
Transcript
NOVEMBER 2013
The outlook for natural gas at the start of the winter of 2013/’14 heating season could be a market adequately supplied for the coming winter but it is a market that it is continuing to adjust to fundamental shifts in both supply and demand. Shale production continues to set new record levels as drillers become increasingly efficient in new production basins such as Marcellus and Bakken. On the demand side, the ability of gas fired power generation to absorb surplus gas as it competes with coal is a key balancing mechanism when gas is oversupplied and industrial demand continues to make slow but incremental gains.
The chart below highlights some key supply and demand drivers YTD vs. 2012. On the supply side, supply is only up 0.8% as slower but steady increases in shale supply continue to displace Canadian imports. Natural gas production is up 2.0% y-o-y and EIA reported on Nov 1st that dry gas production for August had set a new all-time record high at 66.6 Bcf/d, a 2.0 Bcf or (3%) increase. On the demand side, power generation demand is lower -14% YTD due to natural gas prices being higher than 2012 during which natural gas prices hit 10 year lows. Industrial demand is higher by 5% YTD as low natural gas prices in the U.S. have given manufacturing a competitive advantage over global competitors. Residential & Commercial demand is weather driven and as a result, warmer than normal winter weather will drive prices lower to create an increase in power generation demand due to the economic advantage in switching generation from coal to gas. In a colder than normal winter, prices will trend upward thus driving an increase in producer hedging and associated new drilling.
Working gas in underground storage currently stands at 3,779 Bcf as of 10/25/13 and will essentially close out the official end injection season, 10/31 near 3,800 Bcf. Stocks
Natural Gas Price & Supply Outlook – Winter 2013-‘14By Constellation Energy
are -3.1% below last year’s record inventory of 3,929 Bcf but above the 5 year average of 3,750 Bcf. Current 11-15 day weather forecasts are calling for above normal temperatures for almost the entire Lower 48 east of the Rockies.This will likely lead to a delayed start to winterheating load for the first half of November and this weakness has been reflected in the recent sell off of NYMEX from an intraday high of $3.86 on 10/16 to a close of $3.447 on 11/4.
Winter heating demand is the largest demand component for natural gas and the current warm spell in November will likely require a turn to colder than normal temps in Dec/Jan/Feb to make up for a slow start to winter. As the winter of 2012/’13 demonstrated with a warm December but a cold late Jan/ into February & March weather patterns can shift dramatically within a season. The current NOAA outlook calls for equal chance or “normal” temps across much of the Lower 48 with the exception of the South Central region. Private forecasting models are calling for much below normal temps in the Upper Midwest, Plains and Ohio Valley. The “Equal Chance” detailed above can be boiled down to weather models disagreeing on whether the jet stream will buckle down toward the Deep South, bringing cold Canadian air or stay in a normal pattern that keeps it flowing across the upper Midwest bringing warmer Pacific air.
In its monthly Short Term Energy Outlook (STEO) for October, EIA forecasts NYMEX prices will average $4.001/MMBtu for 2014. Options traded on the NYMEX for Cal ’14 have a 95% confidence interval of $5.86 MMBtu for the high side and a lower confidence interval of $2.56/MMBtu. Private forecasters are calling for Henry Hub prices for 2014 to range from as low as $3.80/MMBtu to $4.17/MMBtu while for 2015 the NYMEX forward curve is $4.06/MMBtu while private forecast are around $4.10/MMBtu.
This coming winter will be key to setting storage for 2015 when a wave of coal retirements are expected to occur due to the EPA’s rule regulating the emission of mercury from coal plants. The Mercury Air Toxics Standards (MATS) rule could lead to a significant increase in gas fired generation demand but a key question the market will be assessing is whether growing supplies of shale gas will be adequate to meet that demand. An under supplied market in spring of 2014 due to strong winter demand could set the table for robust injection builds in anticipation of new demand from power generation. A more normal to above normal winter would allow the pace of injections adjust for summer demand and be ready for retiring coal generation demand in 2015.
Source: FERC/Bentek
Trucking fleets are converting in droves from diesel fuel to natural gas, said John Hausladen, CEO of the Minnesota Trucking Association, which hosted a related summit on October 17 at the Earle Brown Heritage Center in Brooklyn Center.
Natural gas is plentiful, up to $2 cheaper per gallon than diesel fuel and manufacturers are collaborating on heavy-duty engines that can power big rigs, Hausladen said.
“New natural gas engines are more expensive but the difference in price can be paid back in a couple of years or less,” he said. “We’re seeing the fueling network being built out.”
Moreover, it’s cleaner-burning and cuts carbon-dioxide and other emissions.
Convenience store chain Kwik Trip, which has converted 50 of its 350 light-duty and semitrailer trucks to compressed natural
Truckers Hitching Their Rigs to Natural GasBy Neal St. Anthony, Star Tribune, October 13, 2013
gas (CNG) and liquefied natural gas (LNG), has added natural gas pumps at 17 of its 430 fueling stations in Minnesota, Wisconsin, and Iowa. More are on the way.
Joel Hirschboeck, superintendent of alternative fuels at Kwik Trip, said the company has ordered 35 new semitrailer trucks that will run on natural gas.
“We’re no longer purchasing diesel-fueled trucks, and we’re transitioning our fleet to natural gas,” he said. “It’s cost and environmental benefits…natural gas is a domestic, cleaner-burning fuel.”
Recently, Phoenix-based Republic Services added 23 CNG solid waste and recycling trucks to its Twin Cities fleet, replacing older, diesel-powered trucks.
For the complete article, visit www.startribune.com
The world’s first CNG-powered aircraft debuted this past summer at the Innovations Pavilion at the AirVenture 2013 show in Oshkosh, Wis. Built by Wyoming-based Aviat Aircraft, the proof-of-concept airplane is a standard Aviat Husky A1-C model outfitted with a CNG fuel tank along with its standard aviation gasoline tanks. CNG power is up to 80 percent less expensive than the national average of $6-per-gallon aviation gasoline, says Aviat president Stu Horn. CNG also reduces smog pollutants by 90 percent and CO2 emissions by 30 percent.
“This is a sophisticated solution that can be readily applied to a variety of piston-powered aircraft,” said Greg Herrick, president of the Aviation Foundation of America in Minneapolis. “If a flight school installs a simple CNG refueling station, they can cut the cost for the student’s fuel, perhaps by thousands of dollars.”
CNG Aircraft: O Cleaner Skies By Gary James, American Gas,October 2013
Chemical Plants: Coming HomeBy Eric Schoeniger, American Gas, October 2013
Geismar, LA – The story of manufacturers moving operations to cheaper overseas markets is a tale well-told. But in a sudden reversal, chemicals companies are building plants here at home. The lure? Abundant and affordable natural gas.
Large companies, from BASF to Shell to ExxonMobil, plan to spend some $100 billion on new or expanded chemicals facilities in the United States, according to Bloomberg Businessweek. South Africa’s Sasol is spending $21 billion on several plants in Louisiana, including a $7 billion ethane cracker. The projects represent some of the largest foreign direct investments ever in U.S. manufacturing. Sasol says the plenitude of affordable gas is a primary driver.
Visit www.aga.org for details and the complete article.
The Nominating Committee of the board is currently accepting the names of members interested in being considered for board positions opening January 2014, please contact Diane at [email protected] or 763-424-1841. The deadline is November 22, 2013.
Board Nominations Being Accepted
Ballots Coming Soon! Watch your e-mail in late November for your ballot to vote for three board members to fill the three positions expiring in January 2014. More details to come with the ballot.
Quote of the Quarter:
“There are no secrets to success. It is the result
of preparation, hard work, learning from failure.”
Colin Powell
On Friday, September 20, the Blue Flame Conservation Committee met to learn more about natural gas commercial foodservice equipment and discuss opportunities for conservation savings in this area. Ann Lovcik, Foodservice Energy Efficiency Consultant for CenterPoint Energy, made a presentation to the group showing different types of commercial foodservice equipment and the benefits of each. After the presentation, committee members did “hands-on” training with the various pieces of equipment and got to sample their work!
Conservation Committee Cookin’ Up Savings!
Pictured are: Dave Thompson-Austin Public Utilities, Greg Olson-Xcel Energy, Jeff Larson-Mn Energy Resources, Ann Lovcik-CenterPoint Energy, Jared Hendricks-Owatonna Public Utilities, Jeremy Fischer-Great Plains Natural Gas, Roger Warehime-Owatonna Public Utilities, Kelly Lady-Austin Public Utilities, Sarah Schaffer and Todd Berreman-CenterPoint Energy and Eric Schlacks-ComfortSystems-Duluth.
The Conservation Committee meets quarterly to discuss natural gas conservation opportunities and challenges.
On September 24, the Commercial/Industrial Committee held its annual fall conservation conference at the beautiful Hillcrest Golf Club in St. Paul. Xcel Energy was a major sponsor of this event along with supporting utility sponsors CenterPoint Energy and Minnesota Energy Resources.
The conference drew approximately 100 attendees from all over the state to attend presentations and visit the vendors displaying their natural gas products and services at the tabletops.
Two sessions, each with two tracks, presented the following seminars: SB2030, Energy Efficient Foodservice Equipment, Mechanical Energy Code Changes/ASHRAE 90.1, and ROI of Energy Investments.
Natural Gas Fuel Cells were the lunch keynote topic and the AKF Group flew speakers in from New York to present details about a natural gas fuel cell project they did in a New York City building. As an emerging natural gas technology,
Commercial/Industrial Fall Natural Gas Conservation Conference Utility Rebates, Sustainability, Energy Efficiency, and Emerging Natural Gas Technology Draw a Crowd!
attendees had a lot of interest and AKF welcomed their questions. Hollis Linehan, LEED AP; Joseph Rubino, PE; and Anthony Lopez were the AKF speakers.
The conference also wanted to help increase interest and awareness of natural gas vehicles. Kwik Trip brought a CNG pickup and was on hand to answer questions and provide literature for attendees to learn more about NGVs. Another emerging natural gas technology starting to take hold and grow!
Utility representatives from CenterPoint Energy, Minnesota Energy Resources and Xcel Energy gave overviews and updates on their Conservation Improvement Programs.
In addition to utility sponsorships, seven trade allies helped sponsor the conference – AKF Group, Mulcahy, Harris Service, HumeraTech, RM Cotton Co., Seminole Retail Energy Services and Crane Engineering. Special thanks to all of them and our vendor tabletops for helping to make this event a huge success - we filled the space!
Save the Date!: Tuesday, September 23, 2014 (tentative date)2014 Commercial/Industrial Conservation Conference
Mark Your 2014 Calendars: Tuesday, June 3
Blue Flame Walleye Fishing Event
Mille Lacs Lake.
Thursday, June 19 Blue Flame Golf Event
Thursday, Aug. 21thru Labor Day, Monday, Sept. 1Minnesota State Fair
Tuesday, September 23 Commercial/Industrial Fall
Energy Conference, Hillcrest Golf Club
(tentative date)
Minnesota State Fair-Blue Flame Lodge State Fair Heats Up but Blue Flame Lodge is the Cool Place to Be!
With record hot temperatures, the Blue Flame Lodge was the cool place to be! The Lodge is one of only three facilities at the state fairgrounds that has air conditioning and was a refuge for hot fairgoers! We even made a sign to help fairgoers find our cool haven!
Final attendance for the 2013 Minnesota State Fair was 1,731,162. Down from last year’s attendance of 1,788,512.
The Blue Flame Lodge is the association’s primary vehicle to interact with consumers and to promote natural gas, natural gas products, educational materials, and provides visibility for the association and its members. Located in Carousel Park across from the Giant Slide.
Natural gas equipment featured in the lodge included: fireplaces, grills, patio campfires, water heaters-tank and tankless, furnaces, boilers, garage heaters, and more.
Members displaying this year were AirTech Heating & Cooling, Benjamin Franklin Plumbing/Blue Ox Heating & Cooling, CenterPoint Energy, Empire Comfort Systems, Erickson Plumbing & Heating, Gopher State One Call, Haley Comfort Systems, HeatShare, J.H. Larson Co., John J. Morgan Co., Kwik Trip, Minnesota Exteriors, Inc., SPS Companies, and Minnesota Energy Resources and Xcel Energy had literature available.
New this Year! – Natural Gas Vehicle display. To help increase the awareness, interest and demand for natural gas vehicles, the Blue Flame designed a display to help answer the basic questions people have about natural gas vehicles. (photo)
In front of the Lodge, Kwik Trip displayed a CNG Chevy Silverado pickup truck for fairgoers to “kick the tires” and check it out. (photo) Kwik Trip also had a display inside the Lodge showing fuel pricing, CNG fill station locations and informational literature for fairgoers to pick up.
Buddy Blue Flame visits the Lodge! CenterPoint Energy’s Buddy Blue Flame came to the Lodge to greet visitors and provide fairgoers a photo-op with him. It was toasty in the costume but….Buddy was a trooper and loved the Lodge’s AC!!
If you are interested in displaying in the lodge in 2014, please contact Diane to get more information.
Save the date!: The 2014 Minnesota State Fair! Thursday, August 21 – Labor Day, September 1
Member News:CenterPoint Energy named winner of 2013 Better Business Bureau Torch Awards for Ethics Minneapolis, Minn. – October 29, 2013CenterPoint Energy was named winner in the largest business category by the Better Business Bureau (BBB) of Minnesota and North Dakota at the 2013 Torch Awards Ceremony held at the Guthrie Theater in Minneapolis. The Torch Award for Ethics is given by the BBB to publicly recognize and acknowledge the outstanding level of ethics, customer service and integrity in all aspects of a business’s operations.
“At CenterPoint Energy, we live our values every day – integrity, accountability, initiative and respect. It’s a standard principle we’ve held for over 140 years,” said Joe Vortherms, vice president of Gas Operations in Minnesota. “Operating ethically is simply what we do. This award reflects the ethical work of all of our employees and the work we do in the community on a daily basis.”
Interested in Joining the Association?Contact Diane at [email protected] or visit our website at www.blueflame.org Associate memberships are $200 per year. Join the team now!
Benefits to joining: Networking Opportunities, Industry Contacts, Advertising Opportunities, Member rates (reduced rates) for Association events, seminars, etc., Increased Company Visibility (via a website hotlink to your company from our site, our Member Directory, etc.), and many more.
If you would like to submit information to be considered for the next member newsletter or have an e-mail change, contact Diane at [email protected].
Have Something to submit?E-mail change?
Kwik Trip Inc. is a Wisconsin-based chain of convenience stores started in 1965. Based out of La Crosse, WI, the company has grown to over 11,000 employees and 400 plus locations throughout Minnesota, Wisconsin and Iowa. As a privately held company, Kwik Trip is heavily focused on building the future of the company. In early 2012, Kwik Trip opened a first of its kind alternative fuels fuelling station. The site features 10 different fuels, including CNG and LNG. Since opening the alternative fuels site Kwik Trip has built an additional 16 CNG locations at existing Kwik Trip stores. Each site is semi accessible and open to the public 24 hours a day, 7 days a week. The following is a list of current locations: La Crosse, WI (2), Oshkosh, WI (2), Sturtevant, WI, Rochester, MN, Baldwin, WI, Minnesota City, MN, Owatonna, MN, Pewaukee, WI, Sheboygan, WI, Appleton, WI, Verona, WI, Cedar Falls, IA, St. Michael, MN, Janesville, WI and Mankato, MN. Kwik Trip plans to expand availability throughout its current network of stores as well as building new fueling locations. This will allow Kwik Trip to provide the best and most functional natural gas vehicle fueling infrastructure possible.This fall Kwik Trip plans to open an additional 3 sites in Wisconsin including, New Berlin, Plover and Oak Creek and one site in Eagan, Minnesota. The 2014 build schedule will kick off with locations in De Pere, Wausau and Menominee, Wisconsin as well as Waterloo, Iowa. Kwik Trip’s plans include an additional 10-15 locations before the close of the calendar year. As a privately held company, Kwik Trip has taken on the task to expand its fuel offerings using only its own internal resources and expertise. By bringing natural gas to the market, Kwik Trip has positioned itself to provide a better, more affordable fueling solution to the public.Kwik Trip believes that, in order to be successful, it needs to drive both natural gas vehicle (NGV) adoption and simultaneously build a functional infrastructure for its guests. Kwik Trip will leverage its vertical integration model to help foster the growth of NGVs in its market. Kwik Trip's own distribution fleet, Convenience Transportation, travels 18 million miles on an annual basis. Through this fleet, all classes and sizes of vehicles are being tested, evaluated, and promoted, based on the company's real world experiences.Kwik Trip owns and operates over 50 NGVs, ranging from light-duty vehicles to heavy-duty Class 8 semis. In addition, the company will take delivery of 30 more natural gas semis in the coming months. For more information on Kwik Trip’s alternative fuel initiative, contact the Alternative Fuels office at [email protected] or www.kwiktrip.com.
