Module 4 - Natural Gas Markets

Topics in Module 4 include:

Module 4.1 - Natural Gas Market Overview

Presenter: Scott Potter

Since July of this year the average natural gas price has nearly doubled, with some prices north of $6/MMBtu, but the market doesn’t think these prices are here to stay. Why is that? To begin to answer that question, this module dives into natural gas fundamentals, including terminology, the difference between wet gas and dry gas, natural gas infrastructure, trading hubs, and more. We start with a discussion of gas prices from January 2020 until today, then look at where the market thinks gas prices are going over the next few years.

Module 4.2a — Danger Zone: Appalachian Takeaway Constraints Lurk

Presenter: Sheetal Nasta

We've been sounding the alarm about the growing risk of mainstream constraints out of Appalachia for some time now. Gas prices are no longer a constraint for Marcellus/Utica producers, at least for now, but pipeline and processing constraints are a different issue. The midstream renaissance that fueled the Shale Revolution is pretty much over, with just a couple of approved expansions left, and it's gotten much harder for additional midstream capacity to gain traction, especially in the Northeast. How much running room do producers have left? When will they run out of capacity to leave the region? And what are the implications of midstream constraints for supply growth out of Appalachia? This module tackles those questions, looking at production, available outbound capacity, RBN’s forecast, and a midstream update.

Module 4.2b — Natural Gas Flow Data Model

Presenter: Sheetal Nasta

Natural gas production in the Northeast has shot up over the last decade, from the minimal amounts produced in 2009 to more than 30 Bcf/d this year. Regional production zoomed past demand in 2015, which resulted in major implications for pipeline flows and prices, in the Northeast and elsewhere. In this session we’ll look at the primary way the gas market keeps track of fundamentals, using daily pipeline flow data. We’ll walk through what flow data is and how we use it to track supply and demand, specifically for the Northeast gas market.

Module 4.4a – Natural Gas Pricing and Demand Factors

Presenter: David Braziel

The natural gas production in the U.S. looks primed for growth, with prices high and rising gas to oil ratios. But the midstream conundrum Rusty introduced in module 1.1 could constrain production from two of the nation’s most prolific regions: the Permian and Appalachia. Every molecule of available gas will be needed to meet rising demand, particularly from growing LNG export capacity. Gas storage may absorb some of the coming shocks but a tighter overall balance means that we could soon experience more gas price volatility.  

Module 4.4b — Key Driver of Demand: Coal to Gas Switching

Presenter: Jason Ferguson

The coal to gas module provides an in-depth tutorial that will allow you to gain understanding of how power plants choose to dispatch either coal or natural gas as a fuel source. 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 4.5 — North American LNG: Exports, Feedgas and Projects

Presenter: Lindsay Schneider

LNG export capacity in the U.S. tops 75 million mt each year, with feedgas demands near 11 Bcf/d when the fleet is operating at full capacity, numbers that could head higher with expansions underway at existing U.S. sites and three additional projects that could be online by mid-decade, including the first projects in Canada and Mexico. This module discusses North American LNG exports, the global gas markets, and the relationship between the two. The discussion will include some LNG fundamentals, a look at what’s happening in the market, and what to expect in the coming months for existing terminals, those under construction or commissioning, as well as proposed projects that have yet to reach a final investment decision.

Module 4.6 — Permian Gas: Flow, Capacity and Pricing Developments

Presenter: Jason Ferguson

In the Permian natural gas module, you will get a detailed view of the basin’s supply and demand balance for associated gas at a time of strong production in the basin, currently sitting near 14 Bcf/d, having quickly recovered from Winter Storm Uri and the Texas Deep Freeze. We’ll discuss production, infrastructure, and pricing; the RBN outlook for all three; and a little about how Permian natural gas will impact the rest of the gas market across the Gulf Coast.

Module 4.7a — Natural Gas Transportation Rates and Regulations

Presenter: Rick Smead

To get natural gas to its end-use markets, new and existing pipelines are used to move those volumes around. How and where gas moves is not only a function of supply and demand, it is also dependent on the cost for moving that gas. Those costs are subject to a pipeline’s tariff, that is based on a complex set of regulations promulgated over decades of Federal Energy Regulatory Commission (FERC) oversight. This section describes those key regulations and rate-setting mechanisms, providing an understanding of how pipelines charge for their services under different market conditions.

Module 4.7b — Estimating Rates for Natural Gas Pipelines

Presenter: Rick Smead

The premise of this model is that a new pipeline is getting built that will relieve a constraint and allow gas to move from Point A to Point B. You have got your sights set on shipping gas on that new pipeline, but first you need to know: what will the rate be once construction is complete? In this model, we walk through how to do this calculation.