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Published on December 17, 2007

Author: Mudki

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Natural Gas Prices and Supplies in the Northeast-Midwest Region:  Guy Caruso Administrator Energy Information Administration April 7, 2003 Natural Gas Prices and Supplies in the Northeast-Midwest Region Outline:  Outline Background on the natural gas industry and markets Brief discussion of storage operations Recent and current events in natural gas markets Overview of EIA’s natural gas projections Concluding remarks U.S. Gas Industry at a Glance:  U.S. Gas Industry at a Glance Transaction Paths for Natural Gas Flows and Purchases:  Transaction Paths for Natural Gas Flows and Purchases Producing basins and regional natural gas flows:  Producing basins and regional natural gas flows Dry Natural Gas Reserves as of 12/31/01 (trillion cubic feet):  Northeast Gulf Coast West Coast Rocky Mountain Southwest Mid-continent Offshore 50.8 15.7 24.2 12.4 27.7 40.6 3.2 Alaska 8.8 Total U.S. Natural Gas Proved Reserves: 183.4 Tcf Dry Natural Gas Reserves as of 12/31/01 (trillion cubic feet) Storage Supplies Help Satisfy Demand Peaks:  Storage Supplies Help Satisfy Demand Peaks Natural Gas Storage Attributes:  Natural Gas Storage Attributes Critical supply component during heating season Smoothes gas production throughout the year Help satisfy sudden shifts in demand and supply Supports pipeline operations and hub services Natural Gas Storage in the U.S. :  Natural Gas Storage in the U.S. Underground Storage: Depleted reservoirs in oil and/or gas fields Aquifers Salt cavern formations (high deliverability) Additional Storage: Liquefied natural gas (LNG) facilities Pipeline line pack Peaking facilities (LNG and propane) Types of Underground Storage:  Types of Underground Storage     Underground Natural Gas Storage Facilities in the Lower 48 States:  Note: Aquifers in the Producing Region have been displayed as depleted oil/gas fields to preserve data confidentiality. Underground Natural Gas Storage Facilities in the Lower 48 States Where underground storage is not feasible, LNG facilities provide peaking service:  Where underground storage is not feasible, LNG facilities provide peaking service Recent Natural Gas Wellhead Prices Have Been Close To Record Levels:  Recent Natural Gas Wellhead Prices Have Been Close To Record Levels Sources: History: EIA; Projections: Short-Term Energy Outlook, April 2003 High Natural Gas Prices in Winter 2002-2003:  High Natural Gas Prices in Winter 2002-2003 High crude prices Cold temperatures in major gas markets Relatively low storage volumes Weak production Low net imports Natural Gas Prices Increased And Were Volatile During The Past Winter:  Natural Gas Prices Increased And Were Volatile During The Past Winter Note: The West Texas Intermediate crude oil price, in dollars per barrel, is converted to $/MMBtu using a conversion factor of 5.8 MMBtu per barrel. Source: NGI's Daily Gas Price Index (http://Intelligencepress.com) This Winter Was Colder Than Last Winter (Cumulative Heating Degree Days, Heating Season 2002-2003):  This Winter Was Colder Than Last Winter (Cumulative Heating Degree Days, Heating Season 2002-2003) Source: Energy Information Administration, derived from Heating Degree Day Monitoring, National Climatic Center. Working Gas Stocks Began Strong But Declined With Large Withdrawals:  Working Gas Stocks Began Strong But Declined With Large Withdrawals Most Production Flows from Wells Not More Than Three Years Old:  Most Production Flows from Wells Not More Than Three Years Old Source: Energy Information Administration. Gas Rigs Tend To Follow Spot Prices With A Lag:  Gas Rigs Tend To Follow Spot Prices With A Lag Source: Natural Gas Intelligence Weekly Gas Price Index, Baker-Hughes Weekly US Rig Report. Natural Gas Net Imports Declined for the First Time Since 1986:  U.S. Natural Gas Net Imports Natural Gas Net Imports Declined for the First Time Since 1986 Natural Gas Market Outlook:  Natural Gas Market Outlook Demand is projected to increase through 2004 Domestic production is expected to expand with rising gas rigs drilling Net imports are projected to return to an increasing trend Storage refill will depend on weather and other market conditions this summer U.S. Gas Consumption:  Varies by location and by season: Colder climates with large heating loads show the most seasonal variation Some areas peak during cooling season due to electricity load Some Consumers can Switch Fuels: Obtain service that can be interrupted Provides flexibility for service providers during periods of peak demand U.S. Gas Consumption Total Natural Gas Demand Is Expected to Expand For the Next Two Years:  Total Natural Gas Demand Is Expected to Expand For the Next Two Years Sources: History: EIA; Projections: Short-Term Energy Outlook, April 2003. Note: This chart replaces a previous Figure 12 because of revised data for April 2003. Large-Volume Natural Gas Customers Are Expected To Increase Demand :  Large-Volume Natural Gas Customers Are Expected To Increase Demand Sources: Federal Reserve Board, EIA, RDI Corporation (2003 Electricity Capacity) Natural Gas Storage Volumes Vary At The Start Of The Heating Season:  Natural Gas Storage Volumes Vary At The Start Of The Heating Season Working Gas Stock as of November 1 Natural Gas Volumes Needed For Selected Storage Refill Targets:  Natural Gas Volumes Needed For Selected Storage Refill Targets Natural Gas Spot Prices Will Decline From The Level of the First Quarter of 2003 (Base Case and 95% Confidence Interval) :  Sources: History: Natural Gas Week; Projections: Short-Term Energy Outlook, April 2003. Natural Gas Spot Prices Will Decline From The Level of the First Quarter of 2003 (Base Case and 95% Confidence Interval) Natural Gas Supply, Consumption, and Imports Are Projected to Expand Through 2025 (1970-2025, trillion cubic feet) :  Natural Gas Supply, Consumption, and Imports Are Projected to Expand Through 2025 (1970-2025, trillion cubic feet) Mechanisms to Manage Price Risk:  Mechanisms to Manage Price Risk Trading in Futures Contracts Longer-Term Contracts Fixed-Price Contracts Storage for Physicals Hedging Ability to Use an Alternate Fuel Residential Customers Can Choose Budget Payment Plans Near-Term Natural Gas Market Issues:  Near-Term Natural Gas Market Issues Supply: Will supply increase enough to satisfy growth in consumption? Will Boom and bust cycles discourage investment? Weather: The possibility of a hot summer or cold winter would put upward demand pressure on gas markets. Storage: Will refill be adequate for next winter’s demand? Consumption: Will forecasted growth in natural gas consumption be realized? How will consumption be affected by price volatility, fuel competition and service requirements of electric generators? Pipelines: Will necessary capital investments be made to expand delivery capability? Energy Information Administration:  Energy Information Administration Website: www.eia.doe.gov Key EIA Staff Contacts for Natural Gas: Beth Campbell, (202)586-5590, elizabeth.campbell@eia.doe.gov Barbara Mariner-Volpe, (202)586-5878, barbara.marinervolpe@eia.doe.gov Bill Trapmann, (202)586-6408, william.trapmann@eia.doe.gov

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