CenterPoint Energy Proprietary and Confidential Information
Natural Gas Price Update
May 2015
Phil Reeves
Director of Commercial & Industrial Sales
& Transportation Services
CenterPoint Energy
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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
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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
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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.
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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
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NYMEX Settled Low Forecast NYMEX Forecast High Forecast
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Natural Gas Price Update
Henry Hub Natural Gas Price
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Natural Gas Price Update
Primary Energy Consumption By Fuel
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• 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
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Natural Gas Price Update
Energy Consumption By Sector
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Natural Gas Price Update
U.S. Natural Gas Consumed for Electric Power
Generation
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Natural Gas Price Update
Regional Natural Gas Consumption for Electric
Power Generation
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•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
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Natural Gas Price Update
Domestically Produced Shale Basins
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Natural Gas Price Update
Monthly Dry Shale Production
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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.
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Natural Gas Price Update
Supply- Natural Gas in Storage
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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
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Natural Gas Price Update
Supply- Natural Gas in Storage
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Questions?