2021-2022 winter outlook

ngsa.org

2021-2022 WINTER OUTLOOKMARKETS MATTER

EMBARGOED UNTIL OCT. 7, 2021

22021-2022 Winter Outlook |

Understanding the Symbols

Upward market pressure

Flat market pressure

Downward market pressure


2021-2022 Winter Outlook: Outline

LOOKING AHEAD TO WINTER 2021-2022

Economy Weather Demand Production/Supply Storage

Wild Card Factors

Market Pressure Points

Winter Expectations

SUMMARY


Demand: Economy

Winter SeasonPeriod-to-period change

Last Winter2020-2021

ACTUAL

This Winter2021-2022

FORECAST

Economy Rebound falteredGaining

momentum

GDP Growth 0.6% 10%

Unemployment Rate 6.4% 5.2%

Consumer Sentiment Index 79.6 70.3 now

Winter-to-winter pressureon natural gas prices

Data Sources: Moody’s Analytics, Bureau of Labor Statistics,

University of Michigan, Energy Ventures Analysis


Demand: Winter Weather (November-March Heating Season)

Last Winter 2020-2021 ACTUAL

This Winter 2021-2022 FORECAST

Actual winter heating season:

3% colder than previous winter

1% warmer than last three winters

3,398 Heating degree days (NOAA)

Forecast:

1% colder than last year

Same as last three winters

3,410 Heating degree days (EVA)

Winter-to-winter pressure

on natural gas pricesData Source: Energy VenturesAnalysis.

Much warmer than average

Warmer than average

Average

Colder than average

Maps

depict

Dec-Feb


Demand: Customer Demand



ACTUAL

This Winter 2021-2022

FORECAST

PREVIOUS 3-

YEAR

WINTER

AVERAGE

Domestic Demand▪ Residential/Commercial

▪ Power burn

▪ Industrial

Subtotal

Exports

▪ Pipeline exports - Mexico

▪ LNG exports

Subtotal

Total Natural Gas Demand*

37.3 Bcf/d

26.7 Bcf/d

23.9 Bcf/d

87.9 Bcf/d

5.4 Bcf/d

10.3 Bcf/d

15.7 Bcf/d

110.9 Bcf/d

37.1 Bcf/d

24.5 Bcf/d

24.9 Bcf/d

86.5 Bcf/d

6.4 Bcf/d

12.0 Bcf/d

18.4 Bcf/d

111.9 Bcf/d

37.9 Bcf/d

27.2 Bcf/d

24.7 Bcf/d

87.0 Bcf/d

5.1 Bcf/d

7.8 Bcf/d

12.9 Bcf/d

109.9 Bcf/d

Growth sector Exports +15% Exports +17%


*includes “Lease, Plant and Pipeline Fuel”

Data Source: Energy VenturesAnalysis.


Electric Growth: Structural Growth vs. Economic Switching

Power Burn Increase from 2013-2014 Winter:

Structural Growth vs. Economic Switching

Data Source: Energy VenturesAnalysis

Note: 2021/22 winter prices are NYMEX settlements as of 9/27

0.7

1.11.6 2.3

3.4

5.76.7 6.9 7.0

0.1

3.2

-0.6

0.7

0.2

2.8

-0.2

-2.5

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

20

14

-20

15

20

15

-20

16

20

16

-20

17

20

17

-20

18

20

18

-20

19

20

19

-20

20

20

20

-20

21

20

21

-20

22

Structural Changes Economic Dispatch Henry Hub Prices

BCFD $/MMBTU


Focus: Industrial Demand Peak Growth Phase

Natural Gas Spurring 22 Major Industrial Projects 2021-2024

$32 Billion

Investment to Build

Increase of

1.0 Bcf/d by 2024

18 New Projects

14 Petrochemical2 Steel2 Fertilizer

3 Expansions

2 Fertilizer1 Steel

1Re-start

1 Steel

In addition to

53 COMPLETED

Projects for additional

$79 billion and 1.7

Bcf/d from 2016-2020

Data Source: Energy VenturesAnalysis, September 2021

Photo Courtesy: Chevron U.S.A. Inc., 2017 (Pascagoula)


U.S. LNG Exports: Steady Growth Expected to Continue

Data Source: Energy VenturesAnalysis, EIA

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Ju

l-19

Oct-

19

Ja

n-2

0

Ap

r-2

0

Ju

l-20

Oct-

20

Ja

n-2

1

Ap

r-2

1

Ju

l-21

Oct-

21

Ja

n-2

2

Ap

r-2

2

Sabine Pass Cove Point CameronElba Island Freeport Corpus ChristiCalcasieu Pass Feedgas Deliveries

BCFD

Forecast

U.S. LNG Export Capacity vs. Feedgas Deliveries


Supply: Winter Production and Imports


Last

Winter2020-2021

ACTUAL


FORECAST

3-YEAR

WINTER

AVERAGE

Winter average production(Lower 48)

89.9 Bcf/d 93.7 Bcf/d 91.2 Bcf/d

Canadian imports (net) 5.5 Bcf/d 5.2 Bcf/d 5.0 Bcf/d

LNG imports 0.1 Bcf/d 0.3 Bcf/d 0.3 Bcf/d

Winter-to-Winter pressureon natural gas prices

Data Source: Energy VenturesAnalysis.


Recession Impact: Growth of Associated Gas Production Slows

Data Source: EIA, Energy VenturesAnalysis.

Production Growth by Basin, 2021 vs. 2020 (through August)

Non-associated

Gas Production Change

1.4 BCFD

Associated

Gas Production Change

-2.1 BCFD


0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Jan

-17

Apr-

17

Jul-

17

Oct-

17

Jan

-18

Apr-

18

Jul-

18

Oct-

18

Jan

-19

Apr-

19

Jul-

19

Oct-

19

Jan

-20

Apr-

20

Jul-

20

Oct-

20

Jan

-21

Apr-

21

Jul-

21

Anadarko Appalachia Bakken Eagle Ford

Haynesville Niobrara Permian

Efficiencies in Production, Drilling

-40%

-30%

-20%

-10%

0%

10%

20%

1/1

/202

0

2/1

/202

0

3/1

/202

0

4/1

/202

0

5/1

/202

0

6/1

/202

0

7/1

/202

0

8/1

/202

0

9/1

/202

0

10/1

/20

20

11/1

/20

20

12/1

/20

20

1/1

/202

1

2/1

/202

1

3/1

/202

1

4/1

/202

1

5/1

/202

1

6/1

/202

1

7/1

/202

1

Growth of Completed DUC wells Growth of New Rigs

Drilling Uncompleted Wells Inventory

in Major U.S. Producing Areas

New Gas Supply Source Growth Indicators:

DUC vs Rig

Data Source: EIA

Data Source: EIA; Energy Ventures Analysis


Pipeline Delays and Cancellations in the Northeast

Data Source: EIA, Energy VenturesAnalysis

Northeast Production Pipeline Takeaway:

Annual Expansion vs. Total

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

0

0

0

0

0

1

1

1

1

1

1

2017 2018 2019 2020 2021 2022 2023 2024

Constitution Pipeline(Cancelled)

Diamond East Project(Cancelled)

Atlantic Coast Pipeline(Cancelled)

PennEast Pipeline(Cancelled)

Northeast SupplyEnhancement Project (OnHold)Northern Access 2016Project (On Hold)

Mountain Valley Pipeline(On Hold)

Actual Cumulative Capacity

Proposed CumulativeCapacity

Cumulative Capacity

(BCFD)

Cancelled/Delayed Capacity

(BCFD)


New Pipeline Capacity Bringing Long-Awaited Relief to Permian

Data Source: OPIS PaintLogic, Energy VenturesAnalysis.

0

2

4

6

8

10

12

14

16

18

2017 2018 2019 2020 2021 2022 2023 2024 2025

Bakersfield Compressor Station WT-1 Compressor Station Modification

Permian North Expansion-El Paso North Texas

Gulf Coast Express El Paso South Mainline Expansion

Permian Highway Pipeline Agua Blanca Expansion

Whistler Pecos Trail (Pending)

Permian Pass (Pending) Permian to Katy (Pending)

Bluebonnet Market Express (Pending)BCFD

Permian Production Takeaway Capacity


Supply: Winter Storage



ACTUAL


FORECAST

Start-of-winter inventory 3,924 Bcf 3,627 Bcf

Compared to 5-year average(Percent of total storage inventory)

1% higher 3% lower

Average daily withdrawal from storage

15.3 Bcf 12.9 Bcf

New storage capacity + 0 Bcf + 0 Bcf


Data Source: Energy Information Administration and Energy VenturesAnalysis.


Winter Outlook: Wild Cards

COVID Wave ?

LNG Exports

Weather


This Season’s Winter Outlook


This Winter2021-2022 FORECAST

Economy

Weather

Overall demand

Winter supply

Storage



Natural Gas Outlook: Flexible, Responsive Gas Market

• Exports grow strong and steady along with new gas-fired generation and increased industrial demand

• Exports – LNG and pipeline increase as production and supply issues trouble Europe and Asia

• Power burn fueled by structural growth

• Economic recovery boosts industrial demand

• Winter supply combination of production and storage

• Efficiencies in drilling and production continue to make non-associated gas economic

• Non-associated gas growth outpaces associated gas

• Production, storage, Canadian imports support supply growth


About NGSA

• Represents major producers and suppliers of domestic natural gas

• Integrated and independent companies: 8 members

• Founded in 1965

• Only national natural gas association representing producers and suppliers with a dedicated focus on downstream issues

• Promotes benefits of competitive natural gas markets, resulting in reliable and efficient transportation and delivery, increased supply and demand

• Combined with the Center for LNG


Contact:

Daphne Magnuson

[email protected]

@natgas_ngsa

www.ngsa.org


Last Year’s Projection: How Did We Score? (Background Slide)

PredictedPressure on Prices

ActualPressure on Prices

Score

Correctly predicted:

We correctly projected record-breaking

demand and supply. However, supply

abundance outpaced demand due to very

warm winter and new pipeline capacity.

Result: Downward pressure on prices

• Last winter 2020-2021 average Henry

Hub price = $3.09 MMBtu

• Previous winter 2019-2020 average

Henry Hub price = $2.08 MMBtu

Data Source: Gas Daily

2021-2022 winter outlook

Documents