David Givens Boston LDC Forum 2013 Presentation on New England winter gas and power markets

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Slide deck for David Givens speech to LDC Forum In Boston in June 2013. Givens is head of Gas and Power Services at Argus Media in Washington, D.C.

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David Givens Boston LDC Forum 2013 Presentation on New England winter gas and power markets

  1. 1. London, Houston, Washington, New York, Portland, Calgary, Santiago, Bogota, Rio de Janeiro, Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Porto and Johannesburg illuminating the markets Energy and commodity price benchmarking and market insights
  2. 2. Winter 2013 impact on gas-fired generation in New England Boston, Massachusetts Presented at the 18th Annual Northeast LDC Gas Forum David Givens, Head of Gas and Power Services, North America June 10, 2013
  3. 3. illuminating the markets • Gas price rebound magnified in region last winter • Physical constraints abound • Exceptionally favorable reversal from 2012 for sellers to power plants in New England • Hands off approach by FERC in favor of club regulation Topics to be covered Copyright © 2012 Argus Media Ltd. All rights reserved.
  4. 4. illuminating the markets • Report prices in all world markets for ◦ Natural Gas and Power ◦ LNG ◦ NGL and LPG ◦ Crude and Refined products ◦ Coal and Petroleum Coke ◦ Fertilizers ◦ Emissions ◦ Petrochemicals • Rapid growth in spot and term contract indexation, swaps market indexation • 500 staff globally with numerous offices Who is Argus? Copyright © 2013 Argus Media Ltd. All rights reserved.
  5. 5. London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg illuminating the markets Copyright © 2012 Argus Media Ltd. All rights reserved.
  6. 6. illuminating the markets • 100 daily, 80 bid week indexes across US & Canada • Companies transacting cash- settled requests for purchase (RFPs) against Argus indexes Argus Natural Gas Americas Copyright © 2012 Argus Media Ltd. All rights reserved.
  7. 7. illuminating the markets Price gains in northeast US outpace west Copyright © 2012 Argus Media Ltd. All rights reserved. • Algonquin Citygates ◦ $9.90/mmBtu ◦ ↑ 70pc since 2010 • Transco New York ◦ $7.00/mmBtu ◦ ↑ 20pc since 2010 • Pacific Gas & Electric ◦ $3.90/mmBtu ◦ ↓ 25pc from 2010 0 2 4 6 8 10 12 Argus daily spot prices January to April 2010 2011 2012 2013 Source: Argus Media
  8. 8. illuminating the markets • Colder weather in winter 2012-13 vs. 2011-12 • Reduced LNG imports • Production declining from Sable Island gas field offshore Nova Scotia • Delayed startup of Encana’s Deep Panuke gas field offshore Nova Scotia Colder winter, lower LNG imports hit northeast Copyright © 2012 Argus Media Ltd. All rights reserved.
  9. 9. illuminating the markets • Algonquin Gas Transmission taking more supply from Millennium and Tennessee Gas pipelines ◦ winter 2012-13 50pc of Algonquin supply ◦ winter 2010-11 25pc of Algonquin supply • Daily capacity constraints at major compressor stations on Algonquin’s northbound mainline • Merchant coal plants in the money Flow patterns shift in New England in 2013 Copyright © 2012 Argus Media Ltd. All rights reserved.
  10. 10. illuminating the markets • Six days in Jan-Feb when New England gas-fired generation exceeded 150,000 MWh/d • Gas prices weakened ◦ Algonquin 11-Jan: $4.615 ◦ Algonquin 29-Feb: $3.255 • Power grid was reliable 2012 winter unfavorable for spot trade Copyright © 2012 Argus Media Ltd. All rights reserved.
  11. 11. illuminating the markets Steady gas use in Jan-Feb 2012 for New England power Copyright © 2013 Argus Media Ltd. All rights reserved. 0 100 200 300 400 4-Jan 18-Jan 1-Feb 15-Feb 29-Feb '000MWh/day Source: ISO-NE Coal Gas Oil Total
  12. 12. illuminating the markets CT hub real-time stronger Copyright © 2013 Argus Media Ltd. All rights reserved. 0 50 100 150 200 250 3-Jan 17-Jan 31-Jan 14-Feb 28-Feb $/MWh Source: ISO-NE 2013 2012
  13. 13. illuminating the markets Gas accommodates swings in winter 2013 Copyright © 2013 Argus Media Ltd. All rights reserved. 0 90 180 270 360 450 '000MWh/day Source: ISO-NE Coal Gas Total Oil
  14. 14. illuminating the markets Iroquois Zone 2 illustrates deliverability Copyright © 2013 Argus Media Ltd. All rights reserved. 0 10 20 30 40 3-Jan 17-Jan 31-Jan 14-Feb 28-Feb $/mmBtu 2013 2012
  15. 15. illuminating the markets Algonquin Citygates show constraints Copyright © 2013 Argus Media Ltd. All rights reserved. 0 10 20 30 40 3-Jan 17-Jan 31-Jan 14-Feb 28-Feb $/mmBtu 2013 2012
  16. 16. illuminating the markets Tennessee Zone 6 conditions not as severe Copyright © 2013 Argus Media Ltd. All rights reserved. 0 7 14 21 28 35 3-Jan 17-Jan 31-Jan 14-Feb 28-Feb $/mmBtu 2013 2012
  17. 17. illuminating the markets • Fuel inventories low after cold January • Daily re-offer provisions utilized • More than 6,000 MW of gas- and oil-fired generation unavailable 8-9 February • In response to generation and transmission outages, ISO needed more generation, and “more than half a dozen” generators informed the ISO that they could not get gas New England was vulnerable in February Copyright © 2012 Argus Media Ltd. All rights reserved.
  18. 18. illuminating the markets New England gas-fired generation varies Copyright © 2013 Argus Media Ltd. All rights reserved. 65 95 125 155 185 3-Jan 17-Jan 31-Jan 14-Feb 28-Feb ‘000MWh/day Source: ISO-NE 2013 2012
  19. 19. illuminating the markets MWh/day 2012 2013 Winter gas-fired generation finds inflection point Copyright © 2013 Argus Media Ltd. All rights reserved. Source: ISO-NE Avg 131,879 117,819 Median 133,304 113,307 High 157,187 180,222 Low 81,232 66,510 Total MWh (Jan-Feb) 19,531,071 18,242,384
  20. 20. illuminating the markets 2012 2013 Estimated revenue from gas-fired generation differs Copyright © 2013 Argus Media Ltd. All rights reserved. Estimate based on ISO-NE output data 16-Jan $8,021,771 24-Jan $36,701,517 4-Jan $6,860,574 23-Jan $36,385,056 Jan-Feb. total $266,267,193 Jan-Feb. total $675,717,818
  21. 21. illuminating the markets • “Addressing gas dependence is our highest priority” -- Kevin Kirby, vp, market operations • Day-ahead power scheduling advanced two hours to 10am starting 23 May • Other changes later this decade ◦ As fuel costs change ‐ Hourly (rather than daily) offers ‐ Intra-day offer modifications (rather than only prior to the operating day) ◦ Capacity markets ◦ Non-delivery penalties ISO New England response Copyright © 2012 Argus Media Ltd. All rights reserved.
  22. 22. illuminating the markets • Last few percentage points of grid reliability • Last miles to the citygate • Regional variations apparent • No appetite for common energy scheduling day FERC gas-power coordination docket Copyright © 2012 Argus Media Ltd. All rights reserved.
  23. 23. illuminating the markets • Expectation of a connection from EBB data to which meter serves a specific generator • Lack of your lifetime experience and understanding of the systems in the region • Overtakes in evening power peak followed by undertakes to avoid pipeline penalties during morning power peak • Requests for more gas cycles or more information about status of grid, construed as discriminatory FERC gas-power coordination discussion Copyright © 2012 Argus Media Ltd. All rights reserved.
  24. 24. illuminating the markets Some markets lack typical contango Copyright © 2013 Argus Media Ltd. All rights reserved. 5.50 5.75 6.00 6.25 6.50 2014 2015 2016 2017 2018 2019 $/mmBtu Algonquin Dracut
  25. 25. illuminating the markets • Independent market valuation to support investment and trading decisions ◦ 63 hubs assessed daily across North America ◦ Wide range of data sources used for liquid hubs & periods ◦ Locational, time spreads used for illiquid hubs & periods • Monthly, quarterly, seasonal, calendar contracts • Minimum 7-year forward curves Copyright © 2012 Argus Media Ltd. All rights reserved. Argus forward curves
  26. 26. illuminating the markets • Weather, LNG shortages supported gas, power prices • Power plant sales had superior margin per mmBtu • But markets work, and sales eventually curbed • Unease over lack of automated fuel supply solution suggests return to trading profitability Key Takeaways Copyright © 2012 Argus Media Ltd. All rights reserved.
  27. 27. illuminating the markets • Argus Media US natural gas indexes • ISO New England data on real-time prices, generation stack by source • Presentation to FERC, 16 May, 2013; ISO New England Winter Operational Experiences and Regional Actions, Kevin Kirby, VP, market operations • FERC Dockets ER13-895-000, ER13-895-001 Sources Copyright © 2012 Argus Media Ltd. All rights reserved.
  28. 28. Any questions?
  29. 29. David Givens Head of Gas and Power Services, North America david.givens@argusmedia.com 1-202-349-2891 Washington, DC www.argusmedia.com Copyright notice Copyright © 2012 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, ARGUS MEDIA, the ARGUS logo, FMB, ARGUS publication titles and ARGUS index names are trademarks of Argus Media Ltd. Visit www.argusmedia.com/trademarks for more information. Disclaimer All data and other information presented (the “Data”) are provided on an “as is” basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party’s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.

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