Natural Gas: Supply and Demand Outlook for Kentucky Oil and Gas Association June 18, 2010 Howard Gruenspecht, Deputy Administrator Howard Gruenspecht, Richard Newell, SAIS, December Ky Oil & Gas 14,Assn, 2009 6-18-2010 1
Current Role of Natural Gas and Short-term Price Outlook Howard Gruenspecht, Ky Oil & Gas Assn, 6-18-2010 2
U.S. primary energy consumption was 84% fossil-fueled in 2008 Howard Gruenspecht, Ky Oil & Gas Assn, 6-18-2010 Source: EIA Annual Energy Review 2008 3
EIA recognizes that natural gas price forecasts are highly uncertain dollars per million btu 14 Historical spot price STEO price forecast 12 NYMEX futures price 95% NYMEX futures price confidence interval 10 8 6 4 2…
Long-term Supply and Demand for Natural Gas: Insights from the Annual Energy Outlook Howard Gruenspecht, Ky Oil & Gas Assn, 6-18-2010 5
Key natural gas and electricity updates included in the AEO2010 reference case Extended projection period to 2035 assumes permission will be granted to extend existing nuclear power unit operating licenses beyond 60 years Revised…
Non-fossil energy use grows rapidly, but fossil fuels still provide 78 percent of total energy use in 2035 quadrillion Btu History Projections 120 Renewables (excluding liquid biofuels) 100 Liquid biofuels 80 Liquid fuels 60…
Natural gas wellhead price is projected to rise from low levels experienced during 2008-2009 recession 2008 dollars per thousand cubic feet History Projections 10 8 6 4 2 0 1980 1985 1990 1995 2000 2005 2010 2015 2020…
In AEO2010, demand and supply of natural gas both grow to 2035. Supply grows faster, reducing the role of imports trillion cubic feet 30 History Projections 25 Consumption 6% Net imports 13% 20 Domestic supply 15 10 1990 1995…
Assuming no new policies, growth in energy-related CO2 is driven by electricity and transportation fuel use 2008 2035 Buildings and Electric Power Electric Power Industrial Buildings and 2,359 (41%) 2,634 (42%) 1,571 (25%) Industrial…
Supply Howard Gruenspecht, Ky Oil & Gas Assn, 6-18-2010 11
Shale gas and Alaska production offset declines in other supply to meet consumption growth and reduce imports trillion cubic feet History Projections 25 Alaska 20 Shale gas Coalbed methane 15 Non-associated onshore 10 5…
The level of shale gas production significantly influences projections of total U.S. natural gas production, imports, consumption, and prices. Considerable uncertainty regarding the extent of the low permeability natural gas resource…
Access to shale gas has major implications for prices, production imports, and the Alaska gas pipeline Natural gas prices, supply, and consumption in four cases, 2035 No Low- High Shale No Shale Permeability Gas Projection Reference…
Demand Howard Gruenspecht, Ky Oil & Gas Assn, 6-18-2010 15
As over the past decade, developments in the electricity sector drive changes in overall demand for natural gas trillion cubic feet 10 History Projections 8 Electric Power Industrial 6 Residential 4 Commercial 2 Lease and…
Slow growth in electricity use is projected 3-year rolling average percent growth Period Annual Growth History 1950s 9.8 14 1960s 7.3 1970s 4.7 12 1980s 2.9 1990s 2.4 10 2000-2008 0.9 2008-2035 1.0 8 Projections 6 4 2 0…
Renewables gain electricity market share; coal share declines billion kilowatthours and percent shares 6,000 History Projections 5,000 17.0 4,000 Renewable 9.1 20.8 Natural gas 21.4 3,000 2,000 48.5 Coal 43.8 Oil and other…
Natural gas and renewables account for the majority of capacity additions from 2008 to 2035 2008 capacity Capacity additions 2008 to 2035 Hydropower* Hydropower* 99 (10%) 1 (0.4%) Nuclear Coal 8 (3%) Coal Nuclear 312 (31%) 31…
Key results from the AEO2010 Shale gas drives growth in U.S. natural gas production and reduces reliance on imported gas Electricity consumption grows by 1% per year in the reference case, limiting the need for new capacity…
Climate policy and other drivers affecting the demand for natural gas in electricity generation Howard Gruenspecht, Ky Oil & Gas Assn, 6-18-2010 21
Climate policy impact on operating costs: OLD vs. OLD Fuel Cost for Existing Coal and Combined Cycle Natural Gas Units with a Value Climate policies affect the Placed on Carbon Dioxide Emissions operating costs of both coal-fired…
Climate policy impact on levelized cost: NEW vs. OLD/NEW Levelized Costs for New Plants in 2025 with a Value Placed on Carbon Dioxide Emissions Levelized cost, which considers 2008 dollars per megawatthour 250 both capital and…
Electricity demand is also uncertain EIAs reference electricity demand projection is sensitive to: the projected rate of economic growth and its mix: faster growth and more growth in energy-intensive sectors would raise demand the…
EIAs August 2009 analysis of H.R. 2454 (Waxman-Markey) suggests a near-term increase in gas-fired generation; the long-term effect varies across cases billion kilowatthours 1800 Reference ACESA Basic ACESA High Cost ACESA No…
So, what is the impact of energy, climate, or other pollution policies on the use of natural gas for electricity generation What is the implicit value of carbon What are the emissions targets To what extent are offsets allowed or used…
For more information U.S. Energy Information Administration home page www.eia.gov Short-Term Energy Outlook www.eia.gov/emeu/steo/pub/contents.html Annual Energy Outlook www.eia.gov/oiaf/aeo/index.html International Energy Outlook…
Incentives for using natural gas to fuel heavy trucks are under active discussion in Congress AEO2010 includes sensitivity cases examine the impact of tax credits aimed at stimulating natural gas use in heavy duty (class 3 through 8)…
Despite the expected cost advantage of natural gas relative to diesel, the impact of incentives for natural gas heavy trucks depends primarily on the extent of the market, which is highly uncertain. Figure 21. Delivered energy prices for…
Oil to natural gas price ratio remains high over the AEO2010 projection Oil and natural gas prices 2008 dollars per million Btu Ratio of oil price to natural gas price 25 20 5 Crude oil 15 10 4 5 U.S. natural gas wellhead 0…
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