Topics in Module 5 Include:
Module 5.1 — Natural Gas Fundamentals & North American Market Overview
Presenter: Marc Passy
The natural gas market’s volatility over the last couple of years has exceeded anything the industry has seen since the Shale Revolution changed the U.S. oil and gas world. Gas prices, which saw $9/MMBtu as recently as 2 years ago, plunged below $2/MMBtu on the back of resilient production. Producers seem to have discovered some discipline; the real question is whether demand will ride to the rescue as everyone seems to expect. Do futures traders know something we don’t? Not at all. History has shown that in more cases than not market sentiment and reality never agree. But we can get a feel for what is happening in the market today by looking back at history, especially the relationship between U.S. natural gas prices and production. In this module, we discuss recent market trends and go into the basics of the gas market, including measurement, pipeline corridors, flows and basis.
Module 5.2 — Lab Model: Natural Gas Netbacks
Presenter: John Abeln
Understanding the interaction of prices and flows is key to grasping how the North American natural gas market functions. Today we are going to cover how to calculate netbacks and net spreads – which are key tools we can use to translate price and tariff data into metrics showing where gas will flow. These tools can be used to identify and explain day-to-day changes in the market based on weather, seasonal variations in natural gas flows, and long-term demand for new pipelines. Using very simple equations, publicly available tariff data, and pricing data from our partners at Natural Gas Intelligence, we will teach you how to calculate netbacks and net spreads and how to apply these in your analysis of the market.
Module 5.3 — Gas-Price Sensitive Basin Trends
Presenter: Lindsay Schneider
In this module we’ll take a closer look at two large and important gas-price sensitive production basins. First, the largest gas producing basin in the U.S., the Appalachian basin where infrastructure has constrained supply growth and limited upside potential. And next, the Haynesville, where production will be heavily dependent on where Henry Hub Prices are headed. We’ll examine the regional balances, prices, infrastructure development and the growing impact of LNG demand on these supply basins.
Module 5.4 — Natural Gas Prices and Demand
Presenter: Marc Passy
With production stubbornly high (though responding achingly slowly), attention turns again to demand. This module discusses the details of how to think about demand and its balance with supply in the natural gas markets, as well as how to understand their connection to pricing. It also discusses the role of storage, how it shapes the forward curve, and the how to think about the uses of the forward curve as an estimate of the future path of prices.
Module 5.5 — Lab Model: Coal vs. Gas Switching
Presenter: Marc Passy
The coal-to-gas module provides an in-depth tutorial on how power plants choose to dispatch the two biggest fossil fuel sources used in power generation: coal and natural gas. Key concepts covered include the spark spread, dark spread, heat rates and efficiency factors. A detailed Excel model is provided that calculates the relative economics of the two fuels for a variety of coal types, gas hubs, and power markets. Further, a second Excel model allows you to estimate gas burn for the U.S. at various gas price levels. Detailed examples allow you to gain experience using both models.
Module 5.6 — LNG Exports, Feedgas and Pipeline Projects
Presenter: Lindsay Schneider
LNG export capacity in the U.S. is more than 12 Bcf/d and growing with new projects under construction and nearing completion. This module discusses how U.S. LNG interacts with the global gas market as well as how growing LNG feedgas demand will impact the U.S. Gas markets. The discussion will include some LNG fundamentals, project development, and Gulf Coast regional flows and infrastructure. We’ll also take a look at the new LNG projects on the horizon and what that means for the U.S. and global LNG markets.
Module 5.7 — Canada Gas
Presenter: Martin King
Canadian natural gas plays an important, and sometimes underappreciated, role in the North American market. Canada is one of the largest producers of natural gas in the world, with about half of its production being exported to the U.S. and the rest consumed domestically. Starting this year, that export relationship is going to change as Canada begins to export natural gas in the form of LNG, creating an unprecedented shift in the U.S./Canadian gas relationship. Moreover, Canada’s internal gas consumption is also set to increase, possibly further impacting exports to the U.S. This module places Canada in the North American and global gas context and considers the developments that will be transitioning the Canadian gas market to a more globally connected gas player.
Module 5.8 — Natural Gas Transportation, Rates and Regulation
Presenter: Rick Smead
To get natural gas to its end-use markets, new and existing pipelines are used to move those volumes around. How the value of the natural gas changes by location is heavily dependent on the cost for moving that gas. For interstate gas pipelines, those costs are subject to a pipeline’s regulated tariff, which is based on a complex set of regulations promulgated over decades of FERC (Federal Energy Regulatory Commission) oversight. Meanwhile, whether enough pipeline capacity even exists depends on approvals by that same Commission. This section describes the state of rate-setting under FERC rules and of the policies and rules for approving much-needed new gas pipeline projects. It also explains why, for intrastate pipelines, such as those out of the Permian basin in Texas, regulatory life is a lot simpler.
Module 5.9 — Lab Model: Gas Pipeline Rate Estimation
Presenter: Rick Smead
The premise of this model is that constraints exist that make your natural gas worth a lot more at the other end of a possible pipeline than it is where it’s produced. This model lets you get a rough estimate of what a new pipeline would cost to reach a more lucrative market, and what its transportation rate might look like. Although the estimate is only approximate, it can help you decide whether the gain in value (the “basis differential”) the gas can achieve by getting to the other end of the hypothetical pipeline is less or more than what transportation would cost — in other words, whether you should spend more time and attention on the subject. We walk through how to do this calculation at a very high, quick level, to be able to know how to proceed when the new pipeline is just an idea. The model is hands-on and simple.
Module 5.10 — Lab Model: Gas Pipeline Flows
Presenter: Lindsay Schneider
The availability of pipeline flow data makes the U.S. natural gas market uniquely positioned to grasp with reasonable accuracy where it stands with regional or national supply and demand on a daily basis. If you understand how to wrangle and finesse this robust data source, you can track supply, demand and how gas moves across the country, and ultimately, what that all means for prices. This module, brought to you by RBN’s NATGAS Master Class, will get you started with the basics of pipeline flow analysis, including how to read and interpret this incredible data set.
Module 5.11 — Certified Natural Gas: Certification and Markets
Presenter: Marc Passy
Whether you call it certified natural gas, responsibly sourced gas (RSG), or differentiated gas, natural gas that’s produced to a standard of low emissions intensity has been attracting a lot of attention lately. What started as a way for natural gas companies to differentiate themselves on an ESG basis has evolved into a market that includes a growing proportion of North American natural gas production and half of the gas produced in Appalachia and the Haynesville. But what exactly is certified gas and who does the certifying? In this module, we’ll explain what the deals for certified gas look like, who the major players are, the impact on Scope 1, 2 and 3 emissions and what the future might hold for this burgeoning market.
