(MAS) RH-001-2013 Tariff Proposals Application Transcanada 1.14
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Market Area Shippers (MAS) TransCanada 1.14 RH-001-2013 Tariff Proposals Application Response to Information Request IR No. TransCanada 1.14 Topic: Reference: (i) Written Evidence of Henning, page 5, lines 17-19 and page 6, lines 18-20. Preamble: At the referenced portion of the evidence, Mr. Henning states, “These include a 2010 report commissioned by the Ontario Energy Board Staff that examined North American natural gas markets” and “ICF’s analysis, presented in various reports filed with the Ontario Energy Board and with the Régie de l’énergie demonstrated that acquiring supplies through Dawn…” Request: (a) Please provide a copy of each of the referenced reports. Response: (a) See TCPL 1.14 Attachments 1, 2, and 3 August 16, 2013 Page 1 of 1 EB-2012-0433 Schedule 4-7 Page 1 of 36 Impact of Changing Supply Dynamics on the Ontario Natural Gas Market Prepared by: ICF International 9300 Lee Highway Fairfax, VA USA ICF Contacts January 30, 2013 Bruce Henning [email protected] 703-218-2739 Prepared under Direction of Counsel Michael Sloan Prepared for: [email protected] (703)218-2758 Torys LLP 79 Wellington Street W #3000 Toronto, Ontario Briana Adams EB-2012-0433 Schedule 4-7 Page 2 of 36 Warranties and Representations. ICF endeavors to provide information and projections consistent with standard practices in a professional manner. ICF MAKES NO WARRANTIES, HOWEVER, EXPRESS OR IMPLIED (INCLUDING WITHOUT LIMITATION ANY WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), AS TO THIS MATERIAL. Specifically but without limitation, ICF makes no warranty or guarantee regarding the accuracy of any forecasts, estimates, or analyses, or that such work products will be accepted by any legal or regulatory body. Waivers. Those viewing this Material hereby waive any claim at any time, whether now or in the future, against ICF, its officers, directors, employees or agents arising out of or in connection with this Material. In no event whatsoever shall ICF, its officers, directors, employees, or agents be liable to those viewing this Material. EB-2012-0433 Schedule 4-7 Page 3 of 36 Prepared for Counsel Table of Contents List of Exhibits ............................................................................................................................. ii 1 Executive Summary ............................................................................................................ 1 2 Introduction ......................................................................................................................... 3 3 Ontario Natural Gas Market Outlook ................................................................................... 4 3.1 Ontario Natural Gas Demand ....................................................................................... 4 3.1.1 Ontario Natural Gas Consumption ........................................................................ 4 3.1.2 Ontario Natural Gas Exports ................................................................................. 5 3.2 Natural Gas Supply ...................................................................................................... 6 3.2.1 Role of U.S. Shale Gas Supplies in Serving Ontario Energy Markets ................... 7 3.3 Changes in TransCanada’s Role in Serving Ontario Markets ....................................... 8 3.4 Parkway-Maple Pipeline Capacity Constraints ............................................................11 3.5 Landed Cost of Ontario Natural Gas Supply ...............................................................11 4 North American Natural Gas Market Outlook .....................................................................13 4.1 North American Demand.............................................................................................13 4.1.1 Western Canadian Natural Gas Demand .............................................................15 4.2 North American Natural Gas Supply Outlook ..............................................................17 4.2.1 ICF Base Case Supply Outlook ...........................................................................17 4.2.2 Natural Gas Production Costs ..............................................................................19 4.3 LNG Exports ...............................................................................................................20 4.3.1 LNG exports from British Columbia ......................................................................21 4.4 North American Pipeline Flows ...................................................................................22 4.5 Natural Gas Price Outlook ..........................................................................................25 5 Conclusions .......................................................................................................................27 6 Appendices ........................................................................................................................28 Appendix A: New Sources of Western Canadian Natural Gas Supply ..................................28 6.1.1 Overview of New Natural Gas Resource Plays in Western Canada .....................28 6.1.2 Expected Production from Western Canadian Resource Basins ..........................31 i EB-2012-0433 Schedule 4-7 Page 4 of 36 Prepared for Counsel List of Exhibits Exhibit 1-1: Monthly Average Spot Price at Henry Hub (Nom$/MMBtu) .................................... 1 Exhibit 3-1: Ontario Natural Gas Consumption by End Use....................................................... 5 Exhibit 3-2: Historical and Projected Ontario Natural Gas Demand ........................................... 6 Exhibit 3-3: Historical and Projected Ontario Natural Gas Supply.............................................. 7 Exhibit 3-4: Ontario’s Supply Sources and Competing Demand Sources .................................. 8 Exhibit 3-5: Production Trends in WCSB versus Marcellus Shale ............................................. 9 Exhibit 3-6: Changes in TransCanada Mainline Throughput Forecasts .....................................10 Exhibit 3-7: Long-term Transportation Contracting Analysis (Full Utilization) ............................12 Exhibit 3-8: Long-term Transportation Contracting Analysis (80% Utilization) ..........................12 Exhibit 4-1: U.S. and Canadian Gas Consumption by Sector (Tcf per year) ..............................14 Exhibit 4-2: Western Canadian Gas Consumption by Sector (Tcf per year) ..............................15 Exhibit 4-3: Alberta Oil Sands and Related Gas Consumption .................................................16 Exhibit 4-4: Projected U.S. and Canadian Gas Supplies ...........................................................18 Exhibit 4-5: Projected U.S. and Canadian Shale Gas Production (Bcfd)....................................19 Exhibit 4-6: Projected North American LNG Exports (Bcfd) .......................................................20 Exhibit 4-7: TransCanada Mainline Flows versus Canadian LNG Exports ................................21 Exhibit 4-8: Projected Change in Interregional Pipeline Flows (2012-2025) ..............................23 Exhibit 4-9: Impact of Marcellus Production Growth on Regional Flows (2012-2025) ...............25 Exhibit 4-10: GMM Average Annual Prices for Selected Markets .............................................26 Exhibit 6-1: Encana Regional Play Map ....................................................................................30 Exhibit 6-2: Location of Duvernay Gas and Condensate Trend, Alberta ....................................30 Exhibit 6-3: Tight Oil Plays of Western Canada .........................................................................31 Exhibit 6-4: Production in WCSB versus Marcellus Shale ........................................................32 ii EB-2012-0433 Schedule 4-7 Page 5 of 36 Prepared for Counsel 1 Executive Summary As 2013 begins, natural gas markets in Ontario are at a pivotal turn. The development of abundant and competitively priced sources of gas in the Marcellus and Utica formations in Pennsylvania, Ohio, and West Virginia offer the promise of gas supply in relatively close proximity to Ontario. The technological advancements that made the development of these and other unconventional resources throughout North America possible have significantly changed the outlook for future natural gas markets and natural gas commodity prices (see Exhibit 1-1 below). North American natural gas is now a resource that can provide a growing source of economic energy to homes and businesses in Ontario for decades to come. Exhibit 1-1 : Monthly Average Spot Price at Henry Hub (Nom$/MMBtu) 16 14 Monthly Average 12 10 2004-2008 Average 8 (US$/MMBtu) 6 2009-2012 Average 4 2 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: The U.S. Energy Information Administration (EIA). “Henry Hub Gulf Coast Natural Gas Spot Price.” EIA, 16 January 2013: Washington, D.C. Available at: http://www.eia.gov/dnav/ng/hist/rngwhhdm.htm At the same time, the maturation of traditional supply sources of western Canada, as well as competition for the nascent unconventional gas resources in Alberta and British Columbia, create uncertainty and gas supply planning risk for Ontario. Decisions being made today regarding gas supply planning and infrastructure development within the Province and at the national level will have implications for the natural gas costs and gas supply reliability in Ontario for the next