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Cook inlet natural gas the way forward
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Cook inlet natural gas the way forward

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  • 1. Cook Inlet Natural Gas: k l l The Way Forward Study conducted by Petrotechnical Resources of AlaskaSponsored by: ENSTAR Natural Gas Chugach Electric Association Municipal Light & Power 1
  • 2. Why Do Utilities Care About CookInlet Gas?I l tG ? ENSTAR ◦ Cook Inlet gas provides 100% of supply ◦ 2009 consumption: 32.5 Bcf Chugach ◦ Cook Inlet gas used for 90% of generation ◦ 2009 consumption: 26 Bcf p ML&P ◦ Cook Inlet gas used for 88% of generation ◦ 2009 consumption: 10.8 Bcf2 2
  • 3. Where Does Gas Come From?3
  • 4. Gas Under Contract/Ownership / p ENSTAR ◦ 100% of needs met through 2010 ◦ Approximately 25% unmet needs beginning 2011 Chugach ◦ 100% of needs met to spring 2011 ◦ 50% met through 2014; 60% in 2015; 29% in 2016 g ; ; ML&P ◦ Share of Beluga field estimated to meet majority of needs th through 2015 h4 4
  • 5. Combined Utility Met and Unmet Gas Demand 90 Met Unmet 80 70 60 50 40 30 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 5
  • 6. Supply Concepts pp y p Reserves ◦ Proven ◦ Probable ◦ Possible Annual supply Deliverability (seasonal demand) ◦ Storage Needed by winter 2011-2012 Agreement in progress6
  • 7. Annual Supply pp y Source: AK DNR December 2009 Study7
  • 8. Cook Inlet Gas Study8 8
  • 9. The Study y Commissioned by ENSTAR, Chugach and ML&P Performed by PRA Completed March 20109 9
  • 10. Study Objectives y j Review DNR reserves analysis Review the deliverability of Cook Inlet gas wells drilled from 2001-2009 Forecast deliverability of existing and future gas wells Analyze ti i required f d li A l timing i d for delivery of non-Cook f C k Inlet gas sources10 10
  • 11. 11
  • 12. Methodology gy Field-level decline curve analysis Individual well decline curve analysis ◦ Initial Production ◦ P d ti profile Production fil IP progression through time Calculate activity required to meet demand POD review Analysis of business drivers12
  • 13. Cook Inlet Drilling Results g Period Gas Wells Gas Wells Initial Drilled D ill d Completed C l t d Production P d ti (MMCF/day)2001-2009 128 105 3.6 per well p2007-2009 34 34 3.1 per well13
  • 14. Cook Inlet Gas Development p14
  • 15. The Problem Both PRA and DNR conclude from decline curves we have annual supply problems by 2013 if no new wells are drilled PRA study concludes th t significant d t d l d that i ifi t development l t activity is required15
  • 16. Annual Supply pp y16
  • 17. Scenarios With development drilling continuing at the same pace as in 2007-2009, supply is sufficient to meet demand until 2018, assumes 136 new wells being drilled17 17
  • 18. Cook Inlet Supply and Demand pp y PRA Forecast December 2009 Assumes 2007-09 Drilling Activity of 13.6 Completions/Yr 2010 to 2019 160 140 Supply Forecast Demand Forecast 120 100BCF/Year 80 60 40 20 0 2008 2010 2012 2014 2016 2018 202018
  • 19. Scenarios If current trends in drilling success rates continue, an estimated 185 new wells must be drilled to meet utility needs between now and 202020 20
  • 20. Cook Inlet Supply and Demand PRA Forecast December 2009 Includes 185 Wells Completed to Meet Demand to 2020 160 140 Supply Forecast Demand Forecast 120 100 BCF/Year r 80 60 40 20 0 2008 2010 2012 2014 2016 2018 202021
  • 21. The Cost The estimated cost of drilling & development in the past decade was $1 – $1.2 billion The estimated cost of drilling & development in the coming d i decade i $1 9 - $2 8 billion d is $1.9 $2.8 billi Higher production costs will lead to higher prices for energy23 23
  • 22. Caveats Near-term drilling must be successful or gas resources from outside the Cook Inlet could be required as early as 2013 If near-term drilling d t d illi does not kt keep pace with ith demand, the only viable option is LNG imports; that option requires immediate action LNG imports could be necessary for several years until an in-state gas line is available g24 24
  • 23. Where Must We Go From Here?25 25
  • 24. Immediate Actions Needed New gas supply agreements between Cook Inlet Utilities and producers Predictable timelines and standards for RCA approval of agreements l f t Utilities must secure storage Continue customer awareness conservation and awareness, curtailment plans26 26
  • 25. Immediate Actions Needed (cont.) ( ) Land management processes must be streamlined Determine how gas will come to the region to meet long-term needs of consumers tl t d f Attract exploration & development companies27 27
  • 26. Wells Drilled, Wells Required & Influencing Factors 35 30 •Renewed LNG  er of Wells Export Licenses 25 •Rising Regional  Price •Industrial Fertilizer Operations Numbe 20 •New Gas Contracts Wells  Drilled 15 •Contract Approvals •Predictable Regulatory   Environment Needed •Incent Investment with  10 Stable Pricing Future  •Streamline Permitting Wells  Process Needed 5 Transition Period 0 2001 2002 2003 2004 2005 2006 2007 2008  2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Year28 28
  • 27. Summary Cook Inlet Supply and Demand PRA Forecast December 2009 PRA F tD b 2009 with wells drilled through 2009 160 140 Projected level of 120 Projected level of demand Utilities’ demand for for Cook Inlet natural gas Cook Inlet natural gas 100BCF/Year 80 $1.9 to $2.8 billion capital investment required to increase supply of gas 60 needed to meet demand from existing and new wells Projected level of supply if Projected level of supply if 40 no no new Investmentmade new Investment is is tomade to develop develop additional production li productionI i l t additionalin thd C ti k Inlet ddititi d the Cook in 20 the Cook Inlet 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 29
  • 28. The Way Forward Increase drilling in Cook Inlet ◦ Streamline resource development processes ◦ Timely contract approval to incent drilling Facilitate natural gas storage To backstop drilling program, develop LNG import options for 2013 In-state gas line offers long term solutions30 30

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