North America gas markets long-term outlook H1 2013 Report

Commodity Market Report 15 June 2013

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Report summary

North American gas markets rallied from 2012 lows, but despite the improved price levels, gas-related rig counts continue to decline. This discipline on the production side is matched by a relatively stable market size, so for the 2013-’15 period, we expect Henry Hub prices to range between $3.75 and $4.25/mmbtu in real terms.

Executive summary
- Prices and Markets
  - Through 2016: domestic markets define price
  - Back half of the decade: a different dash for gas
  - Long-term markets
Supply
- Producers response to dictate medium term production rebound
- Key plays-growth remains concentrated on leading plays
  - Marcellus-wells and drilling continue to improve while infrastructure remains a constraint
  - Piceance-Marginal gas resource, but massive opportunity
- Regional production trends
- Drilling outlook-reduced call on gas rigs till the second half of the decade
- Canada
- Key risks to outlook
  - Downside pricing risks
  - Upside pricing risks
- Mexico: Power generation leads to increased imports
Demand
- Power generation
  - Key messages
  - Major risk factors
  - Power sector gas burn changes
  - Coal-gas substitution dynamics
  - Regional distribution
- Industrial
- Residential and commercial
- US NGV outlook
  - Transport
  - Marine bunker fuel
  - Global markets
  - North American LNG export outlook
  - US
  - Canada
  - Alaska
  - Export Policy
- Proposed Projects
  - US Lower 48 LNG
  - Alaska LNG
  - Canada LNG
- Canada
  - Domestic Demand
  - Power
  - Oil Sands
  - Core Industrial
  - Residential/Commercial
  - Canada NGV outlook
  - Net Exports
  - Mexico
Infrastructure
- Pipeline expansions
- Marcellus and Utica-accommodating growth
- Redirecting Western supplies.
- Basis: weak east, weaker west, and the low seasonal spreads
  - The Northeast: Changing dynamics
  - The Northeast: The infrastructure impact
  - The Rockies and California: Near term together, long term apart
  - AECO, Dawn, Chicago: Down they go
  - Gulf Coast: Shale Gas vs. LNG Exports

Tables and charts

This report includes 46 images and tables including:

Demand: Image 1
Demand: Image 2
Table 1. Key US plays supply metrics

Figure 1. North American supply growth (relative to 2013) by region and key play
Supply: Image 6
Supply: Image 7
Supply: Table 2
Chart 10. Mexico supply
Demand: Image 6
Demand: Image 7
Chart 17. Core heating demand and use per customer
Infrastructure: Table 1
Infrastructure: Table 2
Infrastructure: Image 1
Infrastructure: Image 2
Chart 31. Rockies export flows
Chart 1. Relative gas, coal (heat rate adjusted) and oil prices
Chart 2. Marginal play and price
Chart 3. Change in production and play breakevens
Chart 4. Change in Marcellus production by area from
Supply: Image 2
Supply: Image 3
Supply: Image 4
Table 3. Power sector gas risks
Chart 13. Power sector gas burn
Chart 14. Coal-gas substitution versus fuel price ratio
Figure 2. Census-region gas burn, 20130-2025
Demand: Image 9
Demand: Image 10
Demand: Image 11
Demand: Image 12
Chart 22. Global gas price outlook
Chart 23. North America LNG export outlook
Demand: Table 2
Demand: Table 3
Demand: Table 4
Chart 24. Canadian natural gas demand
Chart 25. Canadian power demand by province
Chart 26. Gas demand for oil sands by technology
Chart 27. Canadian NGV demand
Chart 28. Mexico demand growth
Chart 32. Marcellus basis outlook
Chart 33. Northeast basis outlook
Chart 34. California and Rockies basis outlook
Chart 35. Midwest and Canadian basis outlook
Chart 36. Texas basis outlook