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Natural Gas Price Update - CenterPoint Energy...Natural Gas Price Update Natural Gas Price Overview...

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  • CenterPoint Energy Proprietary and Confidential Information

    Natural Gas Price Update

    May 2015

    Phil Reeves

    Director of Commercial & Industrial Sales

    & Transportation Services

    CenterPoint Energy

  • 2

    Natural Gas Price Update

    Natural Gas Price Overview

    • Cumulatively, from October 2014 through January 2015, the nation was 3.6%

    warmer than normal.

    • Consumption is expected to grow in the industrial and power sectors and

    decline in the commercial and residential sectors in 2015 and remain flat in

    2016.

    • Prices are projected to remain at relatively low levels, reflecting abundant and

    strong supplies.

    Source: Energy Information Administration and American Gas Association

  • 3

    Storage levels

    Supply (short-term and long-term)

    • Availability of long-term domestic supplies

    • Production capacity

    • Weather (e.g. temperatures, hurricanes)

    Demand

    • Increased use of natural gas to generate electricity and in the

    Industrial sector

    • Warm winters/cool summers (demand ↓)

    • Cold winters/warm summers (demand ↑)

    • Economic conditions

    Natural Gas Price Update

    Factors That Affect Natural Gas Prices

  • 4

    Prices are given in Therms in your bill:

    • 1 Therm = 100,000 BTU

    • 10 Therm = 1 Dekatherm (Dth) = 1 MM Btu = 1 MCF

    Natural Gas Price Update

    Components of Your Natural Gas Bill

    Delivery Charge The Delivery Charge is a fixed rate and

    recovers the natural gas utility’s cost of

    doing business not recovered through the

    basic charge.

    Pipeline Demand Charge Covers the cost of transporting the gas on

    the interstate pipeline (e.g., from Oklahoma

    to Minnesota)

    Commodity Charge Covers the total costs paid by the natural

    gas utility to purchase the gas used by

    customers. The commodity charge varies

    from month-to-month as the price of natural

    gas from the producers and suppliers

    changes. Customers only pay the

    wholesale cost of natural gas which is

    passed through to the customer without

    mark-up.

    4

  • 5

    Higher Gas Prices Case:

    - Economic growth

    - Weather Impact: Cold winters / hurricanes

    Lower Gas Prices Case:

    - Domestic supply continues to grow

    - Mild Winters / limited hurricane impact

    - Recession / limited economic growth

    * Prices are based on the NYMEX forecast as of April 28, 2015. CenterPoint Energy makes no definite predictions on actual future prices.

    Based on the NYMEX, natural gas commodity prices are forecasted to be mainly below $4/MCF until late next year.*

    Natural Gas Price Update

    2015 Price, Supply and Demand

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    8.0

    NYMEX Settled Low Forecast NYMEX Forecast High Forecast

  • 6

    Natural Gas Price Update

    Henry Hub Natural Gas Price

  • 7

    Natural Gas Price Update

    Primary Energy Consumption By Fuel

  • 8

    • Energy Information Administration predicts that U.S. total natural gas

    consumption will increase to an average of 73.8 Bcf/d in 2015 and 74.8

    Bcf/d in 2016, compared to 73.6 Bcf/d in 2014.

    • Growth is largely driven by the industrial and electric power sectors.

    • Consumption in the power sector is expected to increase 3.2% in 2015 and

    1.8% in 2016.

    • Industrial sector consumption is expected to grow by 4.5% in 2015 and

    2.1% in 2016.

    • Residential and commercial consumption is expected to decline in 2015

    and remain flat in 2016.

    Source: EIA Short-Term Energy Analysis, January 2015

    Natural Gas Price Update

    Natural Gas Demand

  • 9

    Natural Gas Price Update

    Energy Consumption By Sector

  • 10

    Natural Gas Price Update

    U.S. Natural Gas Consumed for Electric Power

    Generation

  • 11

    Natural Gas Price Update

    Regional Natural Gas Consumption for Electric

    Power Generation

  • 12

    •Total gas production increased 35% from 2005-2013

    •Shale-sourced natural gas is now the main provider for our domestic

    supply

    • Increases in drilling efficiency and growth in oil production (although at a

    slower rate) will continue to support growing natural gas production in the

    coming years

    •More than half of the total increase comes from the Hayesville and

    Marcellus shale formations

    •Dry natural gas production is 12.2% greater than year-ago levels

    •With the current economic environment, shale directed drilling and

    infrastructure builds will likely slow

    Natural Gas Price Update

    Supply From Shale Production

  • 13

    Natural Gas Price Update

    Domestically Produced Shale Basins

    13

  • 14

    Natural Gas Price Update

    Monthly Dry Shale Production

  • 15

    Natural Gas Price Update

    U.S. Natural Gas Production and Imports

  • At the end of the 2014-15 heating season, underground

    storage was 75% higher than last year, but 12% below the 5-

    year average.

    The injection season started earlier this year and does not have

    as far to go compared to last year to reach operationally full.

    Current natural gas in storage is 77% higher than year-ago

    levels.

    16

    Natural Gas Price Update

    Supply- Natural Gas in Storage

  • 17

    Working gas in underground storage compared with 5-year range

    Working gas in storage was 1,710 Bcf as of Friday, April 24, 2015, according to

    EIA estimates, which is 77% above year-ago levels and 4% below the five-year

    average.

    Natural Gas Price Update

    Supply- Natural Gas in Storage

  • 18

    Natural Gas Price Update

    Supply- Natural Gas in Storage

  • 19

    Questions?

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