Transcript CERT –The Energy Roundtable G The Evolution of Natural as and

CERT –The Energy Roundtable
The Evolution of Natural Gas and
Power Markets
May 31st 2005
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Disclaimer
Forward-looking Statements
Certain statements in this presentation constitute
forward-looking statements and are not historical facts
but are based on certain assumptions and reflect
current expectations regarding future results or events.
Those statements are subject to risks and uncertainties
that could cause actual results or events to differ
materially.
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Introduction to NGX
Introduction
• Provides electronic trading and clearing services to North
American energy market participants
• Owned by the TSX group since March 2004
• Headquartered in Calgary, Alberta, Canada with about 30
employees
• Began trading and clearing operations in Feb. 1994 by lisitng
AECO gas contracts
• Listed Alberta based power swaps in 2003
• Over 125 trading customers based in Canada and the U.S.
• Trading volumes now exceed 700,000 TJ (663 Bcf or 195 TWh)
per month with an underlying value of $C 4.5 billion
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Introduction to TSX Group
Introduction
• TSX Group is a cornerstone of the Canadian financial
system and is at the centre of Canada’s equity capital
market
• TSX Group owns and operates Canada’s two national stock
exchanges, the Toronto Stock Exchange, serving the senior
equity market, and TSX Venture Exchange, serving the
public venture equity market
• From its preeminent domestic base, TSX Group’s reach
continues to extend internationally, through TSX Markets
and TSX Datalinx which provide the trading and data to
the global financial community who access Canada’s equity
capital market
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History of TSX Group
Introduction
• 1861 – Forerunner to Toronto Stock Exchange launched
• 1977 – TSE Launches the world’s first Computer Assisted
Trading System (CATS)
• 1996 - Became the first exchange in North America to
introduce decimal trading
• 1997 – Became the largest stock exchange in North America
to close it’s trading floor and choose a floorless electronic
trading environment
• 1999 – Through realignment, became the sole exchange for
trading senior equities in Canada
• 2000 – Demutalized into a “for-profit” exchange
• 2001 – Acquired Canadian Venture Exchange
• 2004 – Acquired NGX
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Overview
Canada’s oil and gas industry in North America
-
-
Canada is the world’s
third largest natural gas
producer
Canada is the world’s 9th
largest crude oil
producer
Industry Overview
-
500,000 jobs
C$35 billion capital investment
C$20 billion in payments to federal
and provincial governments.
#1 private sector investor in Canada
Canadian
Natural
Gas
Canadian
Petroleum
Ranking of
importers to
U.S.
#1
#1
Share
of U.S.
consumption
15%
10%
Share
of U.S.
imports
85%
16%
2004
Source: CAPP
Canada is the largest supplier of energy to the United States
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Gas Markets
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Demand growth is based on
increased gas-fired generation
Gas Markets
US & Canadian Natural Gas Demand
Trillion Cubic Feet
35
30
Canada
25
US Power
20
US Cogeneration
US Industrial
15
10
US Residential/Commercial
5
Other
0
1995
2000
2005
2010
Year
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2015
2020
2025
Major North American
producing supply basins
Gas Markets
WCSB: 16.7
Scotian Shelf: 0.5
MIDWEST: 0.8
ROCKIES: 4.4
APPALACHIANS: 1.5
CALIFORNIA: 0.8
ANADARKO: 7.6
SAN JUAN: 4.0
PERMIAN: 4.0
Total Production = 72.4 Bcf / d
MEXICO: 3.5
GULF (OFFSHORE): 13.8
Source: NEB
GULF (ONSHORE): 14.8
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Gas is primarily used for space
heating in most regions
Gas Markets
North American Natural
Gas Demand by Sector, 2002
Alaska
1000
500
Billion Cubic
Feet/Year
British
Columbia
Saskatchewan
0
Residential/Commercial
Alberta
Quebec
Manitoba
Industrial
Ontario
Maritimes
Power
Other
Mountain
New
England
West North
Central
Pacific
West South
Central
East South
Central
Mid-Atlantic
South
Atlantic
Mexico
(2001 Data)
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Major North American gas
pipelines move gas to the markets
ALLIANCE PIPELINE
Gas Markets
TRANSCANADA PIPELINE
NOVA TRANSCANADA
GREAT LAKES
NORTHWEST PIPELINES
NORTHERN BORDER
NORTHERN NATURAL
PG&E GTN
COLUMBIA GULF TRANSMISSION
NGPL
TRANSCO
TENNESSEE GAS PIPELINE
TRANSWESTERN
EL PASO
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LNG is forecast to make-up
more of the supply
Gas Markets
US & Canadian Gas Supply Forecast
35
Trillion Cubic Feet
30
LNG
Alaska
25
McKenzie Delta
Non-Arctic Canada
20
Rockies
15
Gulf of Mexico Shelf
Gulf of Mexico Deepwater
10
5
Other Lower 48°
0
1995
2000
2005
2010
Year
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2015
2020
2025
North American gas markets are
now operating efficiently
Gas Markets
• Wholesale natural markets have been deregulated since
the mid 80’s in Canada and the U.S.
• Since the adoption of NAFTA, the markets operate in close
synchronization
• The interstate pipelines are common carriers, transport
and merchant functions are fully segregated
• Transport tariffs are regulated by Federal Energy
Regulatory Commission (FERC) in the U.S. and National
Energy Board (NEB) in Canada
• Storage operations not associated with the pipelines are
either state regulated or unregulated
• Retail markets subject to state or provincial regulation
• EIA oversees publication of storage data in the U.S.
• FERC oversees price indexes
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Evolution of North American
energy exchanges
•
•
•
•
•
•
•
•
•
Energy Markets
Mid to late 80s - Deregulation of wholesale gas markets &
implementation of FERC Order 436
1990
– NYMEX lists natural gas futures
contracts, delivery at Henry Hub
1994
– NGX lists AECO physical spot and
forward contracts
1999
– Enron online launches and then ceases
to exist in 2001
1999
- ICE launches member owned exchange
2000
– NYMEX five power contracts, no liquidity
2001
- ICE acquires IPE in London
2002
- NYMEX provides OTC clearing services
2003
- NYMEX re-launches PJM power futures
Gas market participants have access to liquid markets with
a wide variety of hedging instruments
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FERC is encouraging the
development of RTO’s and ISO’s
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Power Markets
Energy Markets
Impact of growing gas demand
– Gas-fired power plants have reduced the summer demand
valley, some shoulder seasonality exists
– Gas is a premium fuel from an environmental perspective
– Overhanging gas surplus is blown down, gas is now a “just
in time” commodity
– Gas prices are at a premium hence gas-fired power plants
represent high cost supply and used for peaking only in
many areas
– Continued decline of conventional supplies will drive
frontier, non-conventional and LNG development
– LNG growth in market share could drive convergence with
global markets
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Energy Markets
Source: FERC
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Questions and Contact Information
Peter Krenkel – President
403.974.1705
[email protected]
Natural Gas Exchange Inc.
Suite 2330, 140 4th Avenue SW
Calgary, Alberta
Canada T2P 3N3
Phone 403.974.1700
Fax
403.974.1719
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