Transcript Progress Energy Florida

Gas Supply for the Next Generation
of Gas Fired Power Plants
PENC 2010 Raleigh Conference
McKimmon Center, NCSU
December 16, 2010
Joe McCallister
Director - Gas, Oil and Power
Caution Regarding
Forward-Looking Statements
This presentation includes forward-looking information that is subject
to change. Many factors could cause the actual results to be different
than the forward-looking information provided and should not be
relied on for any decisions.
2
Outline




Strategic Decision Making Process
Natural Gas Trends
New Gas Generation Projects
Meeting the Future Gas Needs of PEC
3
Progress Energy Overview
North Carolina – 10,870 MW
Coal – 5,013 MW
Nuclear – 2,758 MW
Gas/Oil – 2,874 MW
Hydro – 225 MW
South Carolina – 1,715 MW
Coal – 177 MW
Nuclear – 724 MW
Gas/Oil – 814 MW

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

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
Florida – 10,013 MW
Coal – 2,267 MW
Nuclear – 860 MW
Gas/Oil – 6,886 MW
As of December 31, 2009.
Progress Energy
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~22,600 MW capacity
~3.1M customers
$10B total revenue
$33B total assets
11,000 employees
54,000 sq. mile service area
32 plants, 146 units
Strategic Decision Drivers

NC Clean Smokestacks enacted in 2002 to reduce actual NOx and
SO2 emissions from coal-fired plants in NC
•
NOX - 25,000 ton cap starting in 2007
• SO2 - 100,000 ton cap in 2009 (Phase I)
50,000 ton cap in 2013 (Phase II)

Strategic Question: Is continuing to install scrubbers the optimal
solution to achieving the 50,000 ton Phase II SO2 cap in 2013?

PEC evaluated several options:
•
Compliance coal
• Additional scrubber installations
• Repower with combined cycles
5
Carolinas Coal-to-Gas
Strategic Decision Making Process
Clean Smokestacks NOx Emissions (Tons)
Clean Smokestacks SO2 Emissions (Tons)
2004 - 2009 and Projections 2010 - 2014
2004 - 2009 and Projections 2010 - 2014
60,000
250,000
50,000
200,000
NC
NOx Cap
40,000
30,000
NC
SO2 Cap
150,000
100,000
20,000
50,000
10,000
0
0
2004

2005
2006
2007
2008
2009
2010E 2011E 2012E 2013E 2014E
2004
Retire 11 remaining unscrubbed
North Carolina coal-fired units
–
–
–
–
Lee
397 MW
Sutton
600 MW
Cape Fear
316 MW
Weatherspoon
172 MW
Total coal retirement ~1,485 MW

(Jan 2013)
(Jan 2014)
(2013 –
2017)
2005
2006
2007
2008
2009
2010E 2011E 2012E 2013E 2014E
Repower with combined cycle gas turbines
– Lee
950 MW
– Sutton
600 MW
– Future gas
TBD ?
Total CCGT build
~1,550 MW
Addresses environmental concerns and fuel diversification
6
Sources and Uses of Natural Gas (2009)
Supply
Bcf/day
Demand
Bcf/day
U.S. Production
60.0
Electric Power
18.9
Net Pipeline Imports
7.3
Industrial
16.8
LNG Imports
1.2
Residential
13.0
Total
68.5
Commercial
8.5
Other
5.4
Total
62.6
Source: U.S. Energy Information Administration (EIA)
7
Changes in Long-Term Natural Gas Prices
$13
$12
July
2008
$11
$/MMBtu
$10
$9
January
2009
$8
$7
$6
$5
$4
$3
2011
January
2010
November
2010
2012
2013
2014
2015
2016
8
2017
2018
2019
2020
2021
Shale Gas In the Mainstream News

“Shale Gas May Be ‘Total Game Changer’ for Energy Market” –
Bloomberg, February 2, 2010

“Natural Gas From Shale Plays Create ‘New World for Energy
Industry” – The New York Times, March 11, 2010

“Shale Gas Will Rock the World” – The Wall Street Journal, May 10,
2010

“Haynesville, A Nation’s Hunt for an Energy Future” – Documentary
Film aired on CNBC, November 23, 2010
9
What is Shale Gas?

Shale formations are a fine
grained, organic rich, sedimentary
rock that typically have high
porosity and very low permeability

Shale gas is an “unconventional”
source of natural gas due to the
historical difficulty in accessing
natural gas found in shale
formations

Porosity – storage capability of a rock
Permeability – ability of a rock to transmit a fluid
Recent technological
advancements in horizontal drilling
and hydraulic fracturing have
made vast resources of shale gas
economical to produce
Source: Devon Energy
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Conventional Vertical Drilling for Natural Gas
Source: Devon Energy
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Horizontal Drilling and Fracking
Technology
Source: Devon Energy
Horizontal Drilling and Fracking Process
1. Drill wellbore (vertical then horizontal)
2. Insert perforation gun and perforate holes in shale (~30 in. depth)
3. Fracking: high-pressure proppant fluid mixture injection (~100 ft. depth)
4. Withdraw proppant fluid
5. Gas production 12
What’s the Result?

Horizontal rigs have larger “pay zones”, can “kick out” in multiple
directions and cover broader areas than vertical drilling

Higher reserves and production rates per well results in lower per
unit production costs

Technological advances have taken out the “guess work”

Increased production at lower sustainable prices

According to a June 2010 MIT report, U.S. reserves have increased
from ~1,500 Tcf in 2006 to ~2,100 Tcf. (65 year supply to 92 year
supply)
13
Supply Update
Shale Gas Supply Regions
Source: EIA
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Gas Supply Update
Increasing Production of Shale Gas
Source: Devon Energy, Tristone Capital
15
Note: Using $80 per Bbl Crude Oil
Barnette Shale - Southern Liquids
Rich
Source: Company data, Credit Suisse estimates;
Data based on current information and subject to change over time.
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$7.43 $7.52
Cotton Valley Vertical
$5.55 $5.74
Powder River CBM
$8.00
Cotton Valley Horizontal
$7.00
Haynesville/Bossier Shale - NE
TX
Granite Wash - Horiz.
$5.11 $5.21
Piceance Basin Valley
$4.77 $4.85
Barnett Shale
$6.00
Fayetteville Shale
Haynesville Shale - Core LA / TX
$4.54 $4.60
$4.06 $4.08 $4.33 $4.36
Woodford Shale - Arkoma
Huron Shale
Barnette Shale - Core
Marcellus Shale - NE
$0.00
$3.96
Eagle Ford Shale - Dry Gas
$3.63
Horn River Basin
$5.00
Pinedale
$2.66
Marcellus Shale - SW
$4.00
Cana Woodford Shale
$3.00
Marcellus Shale - SW Liquids
Rich
$1.00
Eagle Ford Shale - Liquids Rich
Granite Wash - Liquids Rich
Horiz.
Most Shale Gas Plays Work Below $6.00/MMBtu
Basin by Basin Natural Gas NYMEX Breakeven Prices for
15% ATAX ROR ($ per MMBtu)
$9.00
$7.81
$6.18
$3.06
$2.00
$0.35
$0.00
U.S. Natural Gas Supply Outlook
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2007
2010
26
Alaskan Production
24
Alaskan
Production
22
LNG Imports
Trillion Cubic Feet
Net Pipeline Imports
LNG Imports
20
Net Pipeline Imports
18
Unconventional
Shale Gas
16
Unconventional Shale Gas
14
Base Production (all sources)
12
Base Production (all sources)
10
Source: U.S. Department of Energy, 2007 Annual Energy Outlook
Source: U.S. Department of Energy, 2010 Annual Energy Outlook
17
Natural Gas Summary Points

Current spot gas prices and the forecast future prices have
declined

Significant growth in production from shale basins have changed
the domestic fundamental natural gas supply picture for the future

Producers have contracted with pipelines to bring gas from
production basins to market aggregation points.
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PEC Generating Plants
Lee - Repower (Jan. 2013)
Richmond – Additional CC (Jun. 2011)
Sutton Repower (Dec. 2013)
Generation Capability (2009)
Coal – 5,190 MW (19 units)
Nuclear – 3,482 MW (4 units)
CC (gas) – 470 MW (1 unit)
CT (gas/oil) – 3,218 MW (44 units)
Hydro – 225 MW (15 units)
Total – 12,585 MW (83 units at 18 sites)
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PEC New Gas Fired Generation Projects



Richmond ~ 620 MW 2x1 CC (Target COD - June 2011)
•
Upstream/Delivery Pipeline: Transco/Sandhills (Piedmont)
•
2 - Siemens SGT6-5000F Gas Turbines; 1 - GE Steam Turbine
Lee Complex ~ 950 MW 3x1 CC (Target COD - Jan. 2013)
•
Upstream/Delivery Pipeline: Transco/Cardinal/Piedmont
•
3 - Siemens SGT6-5000F Gas Turbines; 1 - Toshiba Steam Turbine
Sutton ~ 620 MW 2x1 CC (Target COD - Dec. 2013)
•
Upstream/Delivery Pipeline: Transco/Piedmont
•
2 - Siemens SGT6-5000F Gas Turbines; 1 - Toshiba Steam Turbine
Total ~ 2,190 MW of New Gas-Fired Generation
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Carolinas Coal-to-Gas
Fleet Modernization
Lee Repowering
Sutton Repowering
• Replacing 600 MW coal-fired plant with 620
MW CCGT
•Received CPCN* from NCUC in June 2010
•Announced agreement with Piedmont Natural
Gas for gas transportation service
•Expected in-service in December 2013
•Estimated capex ~ $500M, net of AFUDC
• Replacing 397 MW coal-fired Lee Plant with
950 MW CCGT
•Received CPCN* from NCUC in Oct. 2009
•Announced agreement with Piedmont Natural
Gas for gas transportation service
•Expected in-service in January 2013
•Estimated capex ~ $800M, net of AFUDC
* CPCN – Certificate of public convenience and necessity.
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PEC Gas Burn Trends 2000-2020
160
140
Sutton 2X1
CC
Lee 3X1
CC
120
BCF
100
80
Richmond
CC (PB5)
60
Richmond
CT & CC (PB4)
40
Richmond
CT's (1-4)
20
Wayne CTs (1-4)
0
Note: Future forecast gas burns are estimates and will change over time.
22
PGN Gas Burn Trends 2000-2020
400
350
300
BCF
250
PEC
Richmond
CT & CC (PB4)
150
PEC
PEF
Richmond
Hines 2
100 PEC CT's (1-4)
2X1 CC
Wayne CTs (1-4)
200
PEF
Hines 3
2X1 CC
PEF
Hines 4
2X1 CC
PEF
Bartow
Repower
3X1 CC
PEC
Richmond
CC (PB5)
PEC
Sutton 2X1
CC
PEC
Lee 3X1
CC
50
0
Note: Future forecast gas burns are estimates and are subject to change over time. Information being provided for background only.
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PEC Estimated Resource Energy Mix
2010*
Purchases,
3.4%
2014*
Nuclear,
44.0%
Purchases,
3.4%
Coal, 35.3%
Nuclear,
43.5%
Coal, 48.3%
Hydro, 1.1% Gas & Oil,
3.2%
Hydro, 1.0%
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*All information are estimates/subject to change and being provided for background only.
Gas & Oil,
16.8%
Meeting the Gas Needs of PEC
Overview of Pipelines Serving PEC
Greenville
Iredell
Grover, SC
Harris
Cape Fear
Lee Repower (Jan. 2013)
950 MW 3X1 CC
Moore, SC
Elba Express PL
Piedmont Natural Gas
Sutton Repower (Dec. 2013)
620 MW 2X1 CC
Aiken, SC
Richmond (Jun. 2011)
620 MW 2X1 CC
Carolina Gas
Transmission(SCANA)
Elba Island LNG
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Pipeline and Fuel Decision Making
Evaluation Criteria

Sample evaluation criteria for long-term infrastructure planning
•
•
•
•
•
•
Supply Flexibility/Growth
Operational Flexibility
Estimated Risk Adjusted Economics
Project Timing
Regulatory
Contractual terms
26
Meeting the Gas Needs of PEC Transcontinental
Gas Pipe Line (“Transco”)
The nation’s largest gas pipeline system

Extends from TX to NYC
•
~10,000 miles of pipelines
• 8.6 Bcf/d of peak-design
capacity
• 3 to 5 parallel lines from MS
through Pennsylvania
• 45 compressor stations

Diverse supply sources
•

Shale, LNG, Offshore,
Storage
Market Areas: Southeast, MidAtlantic and Northeastern
States
Source: Williams
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Meeting the Gas Needs of PEC
Transco - Diverse, Growing Supply Sources
Source: Williams
28
Meeting the Gas Needs of PEC
Transco Expansion Project Map - South
Piedmont
Participated for
PEC - Lee CC
PEC Participated
PEC Participated
PEF Participated
Source: Williams
29
Richmond – 2X1 Combined Cycle
Gas Transportation Projects

Transco
•
85 North Expansion
31.5 Miles of 42” Pipeline Loops in AL, SC and NC
• Total of 63,925 HP of additional compression at 6 locations
•

Piedmont Natural Gas
•
Richmond Expansion Project
Total of ~1,800 feet of 30” pipeline extension in Richmond County
• Total of ~10,000 HP of new compression existing site in Cabarrus County
• New M&R Station for PB5
•

In-Service Dates
•
Piedmont - December 2010 (Target)
• Transco - March 2011 (Target)
• Project COD - June 2011 (Target)
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Lee Complex – 3X1 Combined Cycle
Gas Transportation Projects

Transco
•
Mid-South Expansion
15.6 Miles of 42” Pipeline Loop in AL & NC
• Total of 37,280 HP additional compression in 5 locations
•

Cardinal Pipeline
Cardinal Expansion of Existing 24” Pipeline
• 9,470 HP of additional compression in 1 location
•

Piedmont Natural Gas
•
Lee Expansion Project
38 Miles of 20” Pipeline from Wake County to Wayne County Plant
• Three Compression Units (3,000 - 3,500 HP each) at Clayton, NC
•

In-Service Dates
•
Piedmont - June 2012 (Target)
• Transco - September 2012 (Target)
• Project COD - January 2013 (Target)
31
Sutton – 2X1 Combined Cycle
Gas Transportation Projects

Piedmont Sutton Expansion
•
•
•
•

127 miles of 20” from Richmond County to New Hanover County
6 miles of 30” loop in Cabarrus County
Total incremental compression 22,490 HP in 2 locations
New M&R Station at Sutton
In-Service Dates
•
Piedmont - June 2013 (Target)
• Project COD - December 2013 (Target)
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Project Management and Integration

Many teams must work together to effectively integrate new
generation into daily operation

Cross-functional Project Management Team
•
•
•
•
•

Construction
Operations
Fuel
Environmental
Vendors
Managing Contracts and Milestones
33
Questions?
Contact Information
Joe McCallister
Director – Gas, Oil & Power
Phone: 919-546-7963
[email protected]
Jim McClay
Manager – Gas & Oil Trading
Phone: 919-546-7866
[email protected]
John Trimble
Sr. Gas Supply Representative
Phone: 919-546-3323
[email protected]
Jeff Patton
Sr. Gas Supply Representative
Phone: 919-546-4937
[email protected]
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