IOGCC 2003
Outlook for Natural Gas & Outlook for Natural Gas & PetroleumPetroleum
Guy Caruso
Administrator
Energy Information Administration
IOGCC Conference
Williamsburg, Virginia
May 19, 2003(Corrected August 2003)
www.eia.doe.gov
IOGCC 2003
Presentation CoveragePresentation Coverage
• Petroleum: World Oil Market
U.S. Petroleum Stocks
Short-Term Outlook
Long-Term Outlook• Natural Gas: Current Supply
Short-Term Outlook
Long-Term Outlook
IOGCC 2003
0
5
10
15
20
25
30
35
40
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Do
llar
s p
er B
arre
lWTI Crude Oil PriceWTI Crude Oil PriceExpected to DropExpected to Drop
Source: Reuters Spot Prices, EIA Short-Term Energy Outlook, May 2003
Proj.History
IOGCC 2003
Annual World Oil Demand GrowthAnnual World Oil Demand Growth
0.00.2
0.40.6
0.81.01.2
1.41.6
1.82.0
1991-1997
Average
1998 1999 2000 2001 2002 2003 2004
Mil
lio
n B
arre
ls p
er D
ay
Projection
Sources: EIA; Short-Term Energy Outlook, May 2003
History
IOGCC 2003
OPEC Production Highly Uncertain in 2003OPEC Production Highly Uncertain in 2003
0
5 0
1 9 9
9 Q 1
2 0 0
1 Q 4
OPEC 10 (OPEC excluding Iraq) Iraq0
5 0
1 9 9 9 Q 1 2 0 0 1 Q 3
OPEC 10 (OPEC excluding Iraq) Iraq
0
5 0
1 9 9
9 Q 1
2 0 0
1 Q 4
OPEC 10 (OPEC excluding Iraq) Iraq
151719212325272931
'98
Q1
'99
Q1
'00
Q1
'01
Q1
'02
Q1
'03
Q1
OPEC 10 Iraq
Proj.History
Sources: EIA; Short-Term Energy Outlook, May 2003
Mil l
ion
Ba
rre
ls p
er D
ay
IOGCC 2003
Demand Growth Expected in 2003 and Demand Growth Expected in 2003 and 2004 for Most Petroleum Products2004 for Most Petroleum Products
(Change from Year Ago)(Change from Year Ago)
Sources: History: EIA; Projections: Short-Term Energy Outlook, May 2003.
-400
-300
-200
-100
0
100
200
300
400
500
600
700
800
900
1000
2002 2003 2004
Th
ou
san
d B
arre
ls p
er D
ay
Total Motor Gasoline Jet Fuel Fuel Oil * Other
History Projections
* Sum of distillate and residual fuel.
0.2% 2.4% 2.4%
0.2% 2.4% 2.4%
IOGCC 2003
U.S. Crude Inventory Expected to Remain Close U.S. Crude Inventory Expected to Remain Close to Minimum Operating Levels Through 2003to Minimum Operating Levels Through 2003
250
270
290
310
330
350
370
Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03
Crude Oil Lower Operational Inventory
U.S. Crude Oil Actual
NOTE: Colored band is the normal inventory range.
U.S. Crude Oil Inventory
Proj.
Sources: EIA, Short-Term Energy Outlook, May 2003
History
Mill
ion
Ba
rre
ls
IOGCC 2003
70
80
90
100
110
120
130
140
150
160
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
NOTE: Colored Band is Normal Stock Range
U.S. Total Distillate Stocks
Distillate Lower Operational Inventory
Distillate Stocks Could Begin Next Distillate Stocks Could Begin Next Winter on the Low SideWinter on the Low Side
Sources: EIA, Short-Term Energy Outlook, May 2003
Proj.History
Mill
ion
Ba
rre
ls
IOGCC 2003
U.S. Propane Stocks Show Strong U.S. Propane Stocks Show Strong Winter Draw & Need to RebuildWinter Draw & Need to Rebuild
0
10
20
30
40
50
60
70
80
Jan
-99
Jul-
99
Jan
-00
Jul-
00
Jan
-01
Jul-
01
Jan
-02
Jul-
02
Jan
-03
Jul-
03
Jan
-04
Jul-
04
Mil
lio
n B
arre
ls
Typical Range
Actual
U.S. Propane Inventories
Propane Lower Operational Inventory
Source: EIA
Proj.History
IOGCC 2003
Near-Term Petroleum Market Outlook
• World Oil Supply:Global stock build expected
• World Oil Prices: No near-term collapse expected;
• U.S. Stocks: Crude, distillate expected to be tight
for several months;
Slow recovery expected• Consumption: U.S. petroleum demand expected
to increase 2.3 percent in 2003 and 2004
IOGCC 2003
1970 1980 1990 2000 2010 20250
5
10
15
20
25
30
Domestic supply
Consumption
History Projections
Net imports
55%
68%
Petroleum Supply, Consumption, and Imports, 1970-2025
(million barrels per day)
IOGCC 2003
0
5
10
15
20
25
1990 1995 2000 2005 2010 2015 2020 2025
U.S. Petroleum Consumption by U.S. Petroleum Consumption by Sector, 1990-2025Sector, 1990-2025
(million barrels per day)(million barrels per day)
IndustrialElectric generators
Residential and Commercial
Transportation
ProjectionsHistory
IOGCC 2003
NATURAL GASNATURAL GAS
IOGCC 2003
U.S. Natural Gas Price Projection Shows U.S. Natural Gas Price Projection Shows Continued Market TightnessContinued Market Tightness
0
1
2
3
4
5
6
7
8
9
10Ja
n-9
5
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
$/M
illi
on
Btu
Henry Hub Monthly Average Price
Source: Reuters Spot Prices, EIA Short-Term Energy Outlook, May 2003
Proj.History
IOGCC 2003
Factors Driving Natural Gas PricesFactors Driving Natural Gas Prices
• Prices encourage drilling, but must both fill depleted storage and meet demand
• Demand expected to fall slightly in 2003 then increase in 2004– Economic recovery will increase industrial demand in
2004– High crude price (less fuel switching)– Growing gas-fired electricity capacity
• Supply picture is mixed– Need increasing completion rates to offset high decline
rates of new wells– Expect net imports in 2004 to remain at 2003 level– Storage refill is a question
IOGCC 2003
Demand Growth Expected in 2004, But Demand Growth Expected in 2004, But Level Stays Below 2000 Peak Level Stays Below 2000 Peak
15
16
17
18
19
20
21
22
23
24
1990 1992 1994 1996 1998 2000 2002 2004
Tri
llio
n C
ub
ic F
ee
t
Natural Gas Consumption
Ind.34%
Comm.14%
Elec.24%
Resid.21%
Pipe & Lease
7%
2002 Demand Shares
Proj.History
IOGCC 2003
Projected Natural Gas Demand Projected Natural Gas Demand Increases Stem from Several FactorsIncreases Stem from Several Factors
80
85
90
95
100
105
110
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Industrial Production Index
Forecast
0
50
100
150
200
250
300
2000
2001
2002
2003
Electric Power Natural Gas Capacity (Gigawatts)
Est.
Combustion Turbine
Combined Cycle
Sources: Federal Reserve Board, EIA March Short Term Energy Outlook,
RDI Corporation (2003 Electricity Capacity)
IOGCC 2003
U.S. Natural Gas Production Growth U.S. Natural Gas Production Growth Requires High Rig GrowthRequires High Rig Growth
0
200
400
600
800
1000
1200
1990 1992 1994 1996 1998 2000 2002 2004
Nu
mb
er G
as R
ota
ry R
igs
15.5
16.0
16.5
17.0
17.5
18.0
18.5
19.0
19.5
20.0
20.5
Tri
llio
n C
ub
ic F
eet
Pro
du
ctio
nU.S. Dry Gas Production & Rotary Rigs
Dry Gas Production
Average Annual Rig Count
Sources: EIA, Baker Hughes Gas Rig Counts,
Short-Term Energy Outlook, May 2003
IOGCC 2003
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000D
ec-0
1
Feb
-02
Apr-
02
Jun-0
2
Aug-0
2
Oct
-02
Dec
-02
Feb
-03
Apr-
03
Jun-0
3
Aug-0
3
Oct
-03
Dec
-03
Feb
-04
Apr-
04
Jun-0
4
Aug-0
4
Oct
-04
Dec
-04
End of Month
NOTE: Colored Band is Minimum & Maximum Values 1998-2002
U.S. Working Gas in Underground Storage
Natural Gas Storage Natural Gas Storage
Source: EIA
History Projections
Bill
ion
Cu
bic
Fee
t
IOGCC 2003
0
100
200
300
400
500
Dec
-00
Mar
-01
Jun-
01
Sep
-01
Dec
-01
Mar
-02
Jun-
02
Sep
-02
Dec
-02
Mar
-03
Jun-
03
Working Gas in the West Compared with 5-Year Range
Bill
ion
Cu
bic
Fee
t
0
200
400
600
800
1,000
Dec
-00
Mar
-01
Jun-
01
Sep
-01
Dec
-01
Mar
-02
Jun-
02
Sep
-02
Dec
-02
Mar
-03
Jun-
03
Bill
ion
Cu
bic
Fee
t
Working Gas in the Producing Areas Compared with 5-Year Range
500
1,500
2,500
3,500
Nov
-00
Feb
-01
May
-01
Aug
-01
Nov
-01
Feb
-02
May
-02
Aug
-02
Nov
-02
Feb
-03
May
-03
Bill
ion
Cu
bic
Fee
t
Working Gas in the Total US Compared with 5-Year Range
0
500
1,000
1,500
2,000
2,500
Dec
-00
Mar
-01
Jun-
01
Sep
-01
Dec
-01
Mar
-02
Jun-
02
Sep
-02
Dec
-02
Mar
-03
Jun-
03
Bill
ion
Cu
bic
Fee
t
Working Gas in the East Compared with 5-Year Range
Natural Gas Stocks are Beginning to Recover from Winter Lows
IOGCC 2003
0
500
1,000
1,500
2,000
2,500
3,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
Bill
ion
Cu
bic
Fe
et
Natural Gas Volumes Needed For Selected Storage Refill Targets
2,700 Bcf
3,000 Bcf
Volume needed if target is:
Working Gas Refill Volumes By Year
IOGCC 2003
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?
IOGCC 2003
1970 1980 1990 2000 2010 20250
5
10
15
20
25
30
35History Projections
Production
NetImports
Consumption
Pipeline Liquefied Natural Gas0
1
2
3
4
5
6
2001
2025
Natural Gas Net Imports, 2001, 2025(trillion cubic feet)
Source: AEO 2003
1970 1980 1990 2000 2010 20250
5
10
15
20
25
30
35History Projections
Production
NetImports
Consumption
Pipeline Liquefied Natural Gas0
1
2
3
4
5
6
2001
2025
Natural Gas Net Imports, 2001, 2025(trillion cubic feet)
Source: AEO 2003
Natural Gas Supply, Consumption, and Imports Are Projected to Expand Through 2025
(Trillion cubic feet)
IOGCC 2003
U.S. Natural Gas Consumption by Sector, U.S. Natural Gas Consumption by Sector, 1990-20251990-2025(trillion cubic feet)(trillion cubic feet)
0
2
4
6
8
10
12
1990 1995 2000 2005 2010 2015 2020 2025
History
Industrial
Electric generatorsResidential
Commercial
CNG vehicles
Projections