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An Industrial Resurgence
The Dynamic Energy Landscape
33rd USAEE/IAEE North American Conference
Peter C. Balash, Ph.D.
Senior Economist, NETL
October 27, 2015
National Energy
Technology Laboratory
Acknowledgement
The author thanks Justin Adder and Gavin Pickenpaugh for
their able assistance in composing this presentation
Any opinion expressed is that of the author and does not
represent the views of the Department of Energy or the
National Energy Technology Laboratory
National Energy
Technology Laboratory
2
Historic Natural Gas & Oil Prices
Figure: WTI Spot Price and Henry Hub Spot Price Diverge
25
$/MMBtu (2015$)
20
West Texas Intermediate
15
10
5
Henry Hub Natural Gas
0
National Energy
Technology Laboratory
Source: EIA, Short Term Energy Outlook, Data through 2015Q2
3
Natural Gas Production Shifts
Figure: U.S. Natural Gas Production in Jan. 2005, Bcf/d
5.34
Bcf/d
11.13
Bcf/d
4.64
Bcf/d
4.46
Bcf/d
15.90
Bcf/d
10.50
Bcf/d
3.66
10.00
Bcf/d
National Energy
Technology Laboratory
Source: EIA, Annual Energy Outlook 2012 and Monthly Natural Gas and Petroleum Report, July 31, 2012
4
Natural Gas Production Shifts
Figure: U.S. Natural Gas Production, Jan. 2005 compared to Jan. 2015, Bcf/d
205%
1%
5.34
Bcf/d
5.36
Bcf/d
The 26.01 Bcf/d increase from 2005 to 2015 can
be attributed to increased production in the
Marcellus/Utica and Texas.
9.41
Bcf/d
24.31
Bcf/d
3.66
5.25
Bcf/d
43%
53%
3.34
44%
4.46
Bcf/d
6.43
Bcf/d
33.97
Bcf/d
3.57
Bcf/d
National Energy
Technology Laboratory
Source: EIA, January Monthly Natural Gas and Petroleum Report, Released February 2015
5
Natural Gas Pipeline Miles and Capacity
Figure: Annual Addition of Natural Gas Pipeline Miles and Capacity,
Northeast Region vs. Total U.S. (2000–2018)
*Announced
5,000
50
45
40
35
4,000
30
3,000
25
20
2,000
15
10
1,000
5
Northeast Miles
Total U.S. Miles
Northeast Capacity
2015
2016
2017
2018
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0
Capacity Added (Bcf/d)
Miles of Pipeline Added
6,000
Total U.S. Capacity
*(Not all announced pipelines will be built)
National Energy
Technology Laboratory
Source: EIA, http://www.eia.gov/naturalgas/data.cfm#pipelines
6
Natural Gas Consumption
Figure: Natural Gas Consumption through 2040 (Reference, High Resource & High Economic Cases)
History
45.00
Trillion Cubic Feet
40.00
35.00
Projections
Favorable economic conditions could enable
an increase of 4.46 tcf in industrial utilization
of natural gas from 2014 - 2040
30.00
27.12
29.58
26.93
26.14
25.00
9.41
20.00
39.53
31.85
29.70
Industrial*
10.88
9.93
Electric Power
15.00
8.22
10.00
5.00
7.61
0.90
3.45
0.89
3.21
1.63
3.61
Transportation**
Commercial
5.14
4.50
4.20
Residential
2014
2020
2040
0.00
2005
*Includes combined heat-and-power and lease and plant fuel
**Includes pipeline fuel
National Energy
Technology Laboratory
9.38
Reference
Reference
+ High Economic
Reference
+ High Economic
+ High Resource
Source: U.S. Energy Information Administration, http://www.eia.gov/naturalgas/data.cfm and Annual Energy Outlook 2015
7
How Natural Gas Liquids are Used
Table: Applications and End Use Products for Natural Gas Liquids
National Energy
Technology Laboratory
Source: EIA, Today in Energy, “What are natural gas liquids and how are the used?” April 20, 2012
8
U.S. Production of Natural Gas Liquids
Figure: Total U.S. Field Production of Natural Gas Liquids, Monthly, Mb/d
3,500
3,300
3,100
2,900
The growth in production since 2009
can be attributed to two main factors:
higher overall natural gas production
and the migration of production from
drier plays to more liquids-rich plays.
April 2015 = 3,313
Mb/d
2,700
2,500
79%
2,300
2,100
1,900
‘05- ‘10 Avg. = 1,856
1,700
1,500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
National Energy
Technology Laboratory
Source: EIA, Field Production of Natural Gas Plant Liquids, Reported Monthly through June 2015
9
Natural Gas Liquids Price
Figure: U.S. NGL Price at Mont Belvieu (Weekly)
Dollars per Gallon
$3.00
$2.50
$2.00
$1.50
Natural
Gasoline
$1.00
Iso-Butane
Normal Butane
Propane
Ethane
E/P Mix
$0.50
$0.00
National Energy
Technology Laboratory
Source: Bentek Energy, NGL Monitor Weekly, Prices through September 22, 2015
10
Trends in Natural Gas Consumption
Figure: Sector Trends in Natural Gas Consumption and Reliance on Imports (1997-2016 Projections)
35
30
All Other Consumption
Bcf/d
25
20
Electric Power
Industrial
15
Net Imports
10
5
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 STEO STEO
2015 2016
Industrial
National Energy
Technology Laboratory
Electric
Net Imports
Other Consumption
Source: EIA, Short Term Energy Outlook
11
Trends in Natural Gas Consumption
Figure: Sector Trends in Natural Gas Consumption and Reliance on Imports (1997-2016 Projections)
35
30
$10
All Other Consumption
$8
Bcf/d
25
20
Industrial
15
Electric Power
$6
$4
10
HH Gas Price
5
$2
Net Imports
0
$0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 STEO STEO
2015 2016
Industrial
Electric
Net Imports
Other Consumption
HH Price ($/mmbtu, 2014$)
National Energy
Technology Laboratory
Source: EIA, Short Term Energy Outlook
12
Gas and Electricity Consumption
Table: Gas and Electricity Consumption of Energy-Intensive Industries (2010)
Top 7
energy-intensive mfg
sectors
NG
NAICS Consumption
(Bcf)
% of U.S.
Mfg. Total
NG Cons.
% of all U.S.
total NG
consumption
Net
% of U.S. % of U.S.
Electricity
Mfg Total total kWh
(million
kWh Cons. Cons.
kWh)
Chemicals
325
2,192
39.4%
9.1%
131,932
18.5%
3.4%
Nonmetallic Mineral Products
327
266
4.8%
1.1%
32,576
4.6%
0.8%
Paper
322
390
7.0%
1.6%
60,497
8.5%
1.6%
Petroleum & Coal Products
324
892
16.0%
3.7%
47,014
6.6%
1.2%
Primary Metals
331
550
9.9%
2.3%
117,284
16.4%
3.0%
Textile Mills
313
31
0.6%
0.1%
13,240
1.9%
0.3%
Wood Products
321
34
0.6%
0.1%
15,323
2.1%
0.4%
Energy-intensive mfg. totals
4,355
78.3%
18.1%
417,866
58.5%
10.8%
2010 U.S. Manufacturing Total
5,564
714,166
2010 U.S. Total Consumption
24,087
3,886,752
Chemical and Primary Metal Products most sensitive to natural gas and electricity cost
National Energy
Technology Laboratory
Sources: EIA, Manufacturing Energy Consumption Survey (MECS), Table 1.1 and Table 6.1; EIA, Monthly Energy Review.
Note: Energy Intensity Defined as ratio of energy consumption per dollar of GDP
13
Gas and Electricity Consumption
Table: Gas and Electricity Consumption of Highest Energy Consuming Industries (2010)
Top 9
energy-consuming mfg
sectors
NG
NAICS Consumption
(Bcf)
% of U.S.
Mfg. Total
NG Cons.
% of all U.S.
total NG
consumption
Net
% of U.S. % of U.S.
Electricity
Mfg Total total kWh
(million
kWh Cons. Cons.
kWh)
Chemicals
325
2,192
39.4%
9.1%
131,932
18.5%
3.4%
Fabricated Metal Products
332
159
2.9%
0.7%
37,206
5.2%
1.0%
Food
311
567
10.2%
2.4%
75,407
10.6%
1.9%
Nonmetallic Mineral Products
327
266
4.8%
1.1%
32,576
4.6%
0.8%
Paper
322
390
7.0%
1.6%
60,497
8.5%
1.6%
Petroleum & Coal Products
324
892
16.0%
3.7%
47,014
6.6%
1.2%
Primary Metals
331
550
9.9%
2.3%
117,284
16.4%
3.0%
Transportation Equipment
336
125
2.2%
0.5%
38,832
5.4%
1.0%
Wood Products
321
34
0.6%
0.1%
15,323
2.1%
0.4%
Large energy using mfg. totals
5,175
93.0%
21.5%
556,071
77.9%
14.3%
2010 U.S. Manufacturing Total
5,564
714,166
2010 U.S. Total Consumption
24,087
3,886,752
Chemical and Primary Metal Products most sensitive to natural gas and electricity cost
National Energy
Technology Laboratory
Sources: EIA, Manufacturing Energy Consumption Survey (MECS), Table 1.1 and Table 6.1; EIA, Monthly Energy Review.
14
Farm Belt Linkage
Figure: Henry Hub versus Anhydrous Ammonia prices, and Ammonia supply (1997-2014)
Ammonia Net Imports (Nitrogen tonnage)
NG Henry Hub (2014$/mmbtu)
Anhydrous Ammonia (2014$/ton, FOB Gulf Coast)
18
16
$/ton ammonia (2014$)
¢/mmbtu NG ($2014)
1,000
14
800
12
10
600
8
400
6
4
200
2
0
0
National Energy
Technology Laboratory
Ammonia Supply (million metric tons of nitrogen)
1,200
Ammonia Production (Nitrogen tonnage)
Sources: EIA, Natural Gas; BEA, GDP Deflator; USGS, Minerals Commodity Summary; Minerals Yearbook
15
Manufacturing Expenditures
Figure: Manufacturing Coal, Natural Gas and Electricity Expenditures, by Region
40
35
Billion Dollars
30
25
20
15
10
5
0
Northeast
Midwest
Primary Natural Gas
National Energy
Technology Laboratory
South
Electricity
West
Primary Coal
Source: EIA, 2010 Manufacturing Energy Consumption Survey, Table 7.9
16
Energy-Intensive Industry and GDP
Figure: Energy-Intensive Industry and GDP (2013)
Energy-Intensive share of GDP
14%
12%
10%
8%
6%
4%
2%
0%
U.S.
OH
IL
MO
PA
KY
WV
TX
IN
PA, KY, WV, TX and IN exceed U.S. Average for energy-intensive manufacturing
Note: Top Seven Energy Intensive Manufacturing Industries: Chemical, Fabricated Metal Products, Petroleum and Coal Products, Primary Metal
Products, Non-metallic Mineral Products, Wood Products, and Paper Manufacturing
National Energy
Technology Laboratory
Sources: EIA, Manufacturing Energy Consumption Survey; BEA, Regional Data, GDP by State
17
Manufacturing and GDP
Figure: Manufacturing and GDP (2014)
Manufacturing share of GDP
35%
30%
25%
20%
15%
10%
5%
0%
U.S.
WV
PA
MO
IL
TX
OH
KY
IN
MO, IL, TX, OH, KY, and IN exceed U.S. Average for manufacturing share of GDP
National Energy
Technology Laboratory
Source: BEA, Regional Data, GDP by State
18
Top States Energy Consumption
Figure: Top States by Industrial Electricity , Coal and Natural Gas Energy Consumption (2013)
100%
2.5
80%
2.0
70%
60%
1.5
50%
40%
1.0
30%
20%
Quadrillion BTUs
Coal share of Generation
90%
0.5
10%
0%
0.0
KY
IN
OH
Primary Natural Gas
National Energy
Technology Laboratory
IA
MI
Primary Coal
IL
PA
TX
Electricity Sales
GA
AL
LA
CA
Coal Share of Generation
Sources: EIA, State Energy Data System, Table C7; Electric Power Monthly, Tables 1.6b, 1.7b., and 1.10b
19
Top States Energy Consumption
Figure: Top States by Industrial Electricity , Coal and Natural Gas Energy Consumption (2013)
100%
2.5
80%
2.0
70%
60%
1.5
50%
40%
1.0
30%
20%
Quadrillion BTUs
Coal share of Generation
Gas Share of Generation
90%
0.5
10%
0%
0.0
KY
IN
OH
Primary Natural Gas
Coal Share of Generation
National Energy
Technology Laboratory
IA
MI
IL
PA
TX
Primary Coal
Gas Share of Generation
GA
AL
LA
CA
Electricity Sales
Sources: EIA, State Energy Data System, Table C7; Electric Power Monthly, Tables 1.6b, 1.7b., and 1.10b
20
New Chemical Plants Boost Usage
Figure: Major Proposed Methanol and Ammonia-based Fertilizer Plants (2015-2018)
Methanol plants and ammonia- or urea-based fertilizer plants are among the most natural gas-intensive
industrial end users, with many using 100 million cubic feet per day or more.
Marcellus
Ammonia/Urea/Fertilizer
Methanol
National Energy
Technology Laboratory
Source: EIA Natural Gas Monthly, May 2015
21
Natural Gas Infrastructure Development
Figure: Major Natural Gas Pipeline Capacity Additions in the Northeast
~30 Bcf/d of new natural gas pipeline takeaway capacity from 40+ pipeline builds, expansions
and reversals to move gas out of the Appalachian basin by 2018.
Midwest
National Energy
Technology Laboratory
East
Source: RBN Energy and EIA
22
NGL Takeaway Capacity
Figure: Proposed Natural Gas Liquid Pipeline Takeaway Capacity
New natural gas liquid pipeline capacity will allow for 4,000+ Mb/d of takeaway
capacity out of the Appalachian basin by 2018.
National Energy
Technology Laboratory
Source: RBN Energy and EIA
23
Natural Gas Capacity Additions
Figure: Delivered Natural Gas Price vs. Net Natural Gas Capacity Additions (1990-2014)
300
10
Cumulative Natural Gas Capacity
Additions (GWs)
250
8
200
6
150
4
100
2
50
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
cumulative additions
National Energy
Technology Laboratory
Average real delivered NG price ($/Mcf, 2014$)
2015 delivered price of gas projected
~$1.25 lower than 2014
0
real delivered price
Sources: EIA, Electric Power Annual 4.2A (2003 to 2013 capacity data); AEO’15 (2014 capacity data); Annual Energy
Review, Table 8.11a (1989 to 2003 capacity data); Monthly Energy Review, Table 9.10; BEA, NIPA Table 1.1.9
24
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National Energy
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25
Gross Natural Gas Withdrawals by State
Figure: Natural Gas Withdrawals by State, Bcf/d
40
Other States production continues to increase. This increment can be partially explained by
new wells being brought online in the Marcellus & Utica shale plays and gains in Colorado.
35
Bcf/d
30
25
20
15
10
5
0
Texas
New Mexico
National Energy
Technology Laboratory
Federal GOM
Louisiana
Wyoming
Oklahoma
Other States (excluding Alaska)
Source: EIA, Monthly Natural Gas Gross Production Report, March 31, 2015
26
Natural Gas Consumption
Figure: U.S. Natural Gas Consumption by Sector through 2040 (Reference Case)
Projections
History
35
Trillion Cubic Feet
30
Natural gas consumption growth is driven by
increased use in all sectors except residential
Industrial*
25
10.88
9.41
20
Electric Power
15
10
8.22
9.38
0.90
3.45
1.63
Transportation**
3.61
Commercial
5.14
4.20
Residential
5
0
2005
2014
National Energy
Technology Laboratory
2020
2025
2030
2035
2040
*Includes combined heat-and-power and lease and plant fuel
**Includes pipeline fuel
Source: U.S. Energy Information Administration, http://www.eia.gov/naturalgas/data.cfm and Annual Energy Outlook 2015
27
Natural Gas Consumption - High Case
Figure: U.S. Natural Gas Consumption through 2040 (Reference vs. High Resource Case)
40.00
Trillion Cubic Feet
35.00
Projections
History
6 Tcf more of consumption by Electric Power
and Industry should natural gas remain plentiful
12.92
30.00
25.00
Industrial*
10.88
9.41
20.00
15.00
10.00
5.00
13.89
Electric Power
8.22
9.38
0.90
3.45
1.63
3.61
2.16
Transportation**
4.00
Commercial
5.14
4.20
4.40
Residential
2040
2040
0.00
2005
2014
*Includes combined heat-and-power and lease and plant fuel
**Includes pipeline fuel
National Energy
Technology Laboratory
2020
Reference
High Resource
Source: U.S. Energy Information Administration, http://www.eia.gov/naturalgas/data.cfm and Annual Energy Outlook 2015
28
Regional Natural Gas Spot Prices
Figure: Select Daily Spot Prices Since May 2015 ($/MMBtu) with Sept. Avg. Mapped
$5
$/MMBtu
$4
$3
$2
$1
$0
National Energy
Technology Laboratory
Source: SNL Energy, Spot Natural Gas Prices
29