the west : keeping its fingers crossed - cera alert - - - - - - - - - - - - - - - - - - - - - - forwarded by lorna brennan / et & s / enron on 07 / 27 / 2000
01 : 07 pm - - - - - - - - - - - - - - - - - - - - - - - - - - -
webmaster @ cera . com on 07 / 26 / 2000 10 : 57 : 49 pm
to : lorna . brennan @ enron . com
cc :
subject : the west : keeping its fingers crossed - cera alert
cera alert : sent wed , july 26 , 2000
title : the west : keeping its fingers crossed
author : zenker , moritzburke , snyder
e - mail category : alert
product line : western energy ,
url : http : / / www . cera . com / cfm / track / eprofile . cfm ? u = 5526 the strong western demand for gas for power
generation does not extend to the rockies . generation within the region
remains nearly all coal - fired . these regional pressures should remain a
feature of western gas markets through september .
moderate summer weather and reassuring injection rates nationwide during
recent weeks have allowed some easing in prices at the henry hub . however ,
summer is not yet over and absolute storage inventories are still at critical
levels . higher gas prices are likely to resurface .
regional power market drivers
august demand under normal weather is expected to rise by an additional 7
percent , or nearly 5 , 500 amw , over average june levels ( see table 1 ) . peak
demand levels should exceed those in june as well , with a coincident peak
over the whole western systems coordinating council ( wscc ) of 118 , 600 mw
expected under normal weather conditions in 2000 , a 2 . 7 percent increase over
the weather - muted 1999 peak . california alone should experience peak loads
that are approximately 3 , 600 mw higher than peak levels in june .
available generation capacity in the west has been at normal levels for this
time of year , although coal - fired plants are responding to a record
production year with repeated but short - lived outages . the steady decline in
hydroelectric generation will remove 3 , 900 amw from the west resource base
when compared with july levels and about 6 , 800 amw since june , although
reservoir refilling operations temporarily removed significant quantities of
hydroelectric generation during portions of june . given hydro operators '
economic interest in maximizing on - peak production at the expense of off - peak
production , the loss of capacity during the on - peak period will be lower than
these levels .
august will be a critical month for the heavily import - dependent state of
california . while the state will be drawing approximately 7 , 000 amw of
imports during august to meet demands during peak periods , cera expects the
level of imports to exceed 8 , 200 mw during peak demand conditions . the
southwest ' s need to supply native demand first will limit its ability to
export to california , and lower year - over - year hydroelectric production in
the pacific northwest will limit exports from that region .
pacific northwest
cera expects pacific northwest demand in august to climb by nearly 1 , 300 amw
when compared with june levels . the water supply for the pacific northwest
has declined to 91 percent of normal levels for the lower columbia owing to
warmer - than - normal weather in june . in addition , normal seasonal decline in
runoff levels will drop about 6 , 000 amw from the resource base when compared
with levels in june ( see table 2 ) . generation plant operators have responded
to both growing native demand and a robust export market by running coal and
gas - fired generation at high levels . although less than 4 , 000 mw of gas - fired
generation is currently available in the region , it has been running at high
utilization rates .
high energy demand in california for pacific northwest energy will keep
differentials low between the regions . as in june , pacific northwest prices
will respond in kind to the volatility cera expects to occur in california in
august . in addition , if hot weather in the pacific northwest pressures
regional energy reserves , local prices will rise to keep energy in the
region , potentially causing prices in the pacific northwest to move higher
than those to the south .
california
california is entering the peak load season with relatively little generating
capacity down for maintenance . although hydroelectric output continues to
decline , statewide reservoir storage levels remain high at roughly 118
percent of normal . nevertheless , declining hydroelectric production is
expected to remove about 730 amw when compared with hydroelectric production
levels in june .
normal summer weather will push demand in the state up by about 3 , 600 amw
over june levels , which were high ( see table 3 ) . california ' s peak load is
expected to exceed 57 , 000 mw , compared with a peak load in june of
approximately 53 , 500 mw ( 43 , 447 mw on the state ' s iso system alone , according
to its own estimate ) . assuming normal plant outage rates , this demand level
will necessitate the import of about 8 , 200 mw of energy to meet the statewide
peak . even after curtailing the approximately 2 , 800 mw of interruptible load
available for tight supply situations , the state has a precarious 6 percent
capacity margin during the system peak . an extreme hot weather event could
push state loads up by an additional 3 , 000 mw . outages are likely if
additional imports are not available .
a capacity limit of 4 , 600 mw will be in place during the summer for energy
exports from the pacific northwest to northern california . the import limit
from the pacific northwest to southern california will be 3 , 100 mw .
rockies and southwest
august demand levels in the combined rockies / southwest region will increase
only slightly above levels in august 1999 , climbing approximately 275 amw , as
loads in the region - unlike the rest of the below - average wscc - were near
normal last august . even so , august loads will increase demand by over 1 , 250
amw when compared with levels in june of this year . as with last year and
this june , supplies in the region should be sufficient to meet peak demand
conditions under normal weather , although growing loads in the
rockies / southwest region have reduced its ability to supply neighboring
regions with energy during peak demand conditions .
high loads driven by hot weather will keep the region ' s prices high .
differentials between the region and california will be tight , but
california , having tighter supply - demand balances , will need to price at a
premium to attract energy . the high - capacity transmission ties between the
rockies / southwest and the california market , which is about 150 percent the
size of the rockies / southwest market , will ensure that prices in the
rockies / southwest stay close behind california prices whenever loads are high
in california .
regional gas market drivers
evidence of pipeline bottlenecks has emerged across the west , and supply and
demand forces over the next year look likely to intensify these pressures .
since the northern border expansion in late 1998 , narrow north - south and
east - west differentials across pricing points defined the market . this
summer , the continuing supply growth in the rocky mountains has widened
differentials between the rockies and the rest of the west . at topock ,
increasing gas demand in california and high utilization rates have resulted
in high premiums .
overall in north american gas markets , strong storage injection rates in
recent weeks have allowed some easing in prices - from an early july henry hub
price of $ 4 . 50 per mmbtu to under $ 4 . 00 per mmbtu . however , despite these
high injection rates , the supply - demand balance and absolute level of storage
inventories remain precarious . summer is not over and higher nationwide power
loads in weeks to come will likely cut into storage injections and boost
prices . the ongoing competition between power and storage for supply should
support an average henry hub price of $ 4 . 20 per mmbtu in august .
through the end of the summer , differentials in the west should hold near
current levels . the pressure of growing rocky mountain supply will continue
until heating loads start climbing in the fall . in california high seasonal
power loads should continue through august with hot weather and continued
declines in hydroelectric generation . demand strength is expected to
continue . across the west , august demand for gas should climb from 9 . 8
billion cubic feet ( bcf ) per day in june to 10 . 4 bcf per day , buoyed by an
increase in gas demand for power generation ( see table 4 ) .
california
high gas demand for power generation within california will continue through
august . cera expects an increase from the state ' s june demand levels of 5 . 6
bcf per day to 6 . 2 bcf per day during august . the increase stems from
declines in hydroelectric generation and increases in overall power loads .
total demand is expected to exceed last year ' s demand level by 1 . 2 bcf per
day . this will increase flows on pipelines into california , reduce the
state ' s storage surplus , and sustain high prices . cera expects pipeline
utilization rates during august to average 95 percent ( see table 5 ) . cera
expects an august topock - henry hub differential of $ 0 . 45 per mmbtu ( see table
6 ) .
pacific northwest
despite the extremely high prices at topock and high demand in california ,
until recently gas at malin priced at a slight discount to henry hub prices .
after averaging $ 0 . 17 per mmbtu below the henry hub during the third quarter
last year , the differential so far during the third quarter this year is
$ 0 . 15 per mmbtu below the hub . this week malin is pricing at a $ 0 . 25 per
mmbtu premium relative to the henry hub . the topock - malin differential has
swelled to over $ 0 . 60 per mmbtu , signaling intra - california pipeline capacity
constraints . two factors pressured malin differentials during the early
summer .
* pressure on rocky mountain and aeco differentials . prices in the two areas
supplying the pacific northwest are under some pressure . increasing supplies
in the rockies are beginning to reach the limits of export capacity and put
downward pressure on rockies prices by limiting external market access . at
aeco , although export capacity out of the province is available , almost all
of that excess capacity accesses eastern canada on transcanada pipeline .
pipelines into the united states are running near capacity . because of
transcanada ' s limited ability to discount interruptible transport , the
available space is more expensive and therefore the last to be filled .
* low early summer regional demand . gas demand in the pacific northwest is
limited during late spring and early summer by declines in heating loads and
very strong hydroelectric output . even in a normal or dry hydroelectric year ,
seasonal runoff holds down gas demand for power generation in may and june
even as gas demand for power generation begins climbing in california .
increasing power loads are already evident .
the first factor will likely endure until heating season begins in late fall
and regional demand in the rockies and western canada begins climbing .
however , gas demand for power generation in the pacific northwest has
increased already this summer and will continue to climb through the end of
july and into august as hydroelectric generation wanes . this added demand - 200
million cubic feet ( mmcf ) per day above june demand levels - will provide some
support for malin prices and limited support for rockies and aeco prices .
malin - henry hub differentials are expected to average $ 0 . 05 per mmbtu above
the henry hub price during august .
rocky mountains
pressure on regional supplies within the rockies continues as exports out of
the region reach new highs . differentials to the henry hub have widened to
over $ 0 . 70 per mmbtu and although prices in the rest of the west will gain
some support from high power loads , regional demand in the rockies is
expected to remain near low seasonal levels through august . august demand is
expected to average 1 . 2 bcf per day in the region , approximately equal to
june ' s 1 . 1 bcf per day total demand . demand begins to build during september ,
but until the heating season begins in october , rocky mountain prices will
lag well below prices in the rest of the west . cera expects a rocky
mountain - henry hub differential of $ 0 . 60 per mmbtu during august .
although some narrowing in rocky mountain differentials looks likely as
seasonal demand increases through the fall , the rapid build in supply in the
region will likely keep differentials wide during 2001 . cera expects a supply
build this year of nearly 300 mmcf per day , followed by a build of over 350
mmcf per day during 2001 . currently , approximately 300 mmcf per day of excess
pipeline export exists out of the region , with the largest increment on
transcolorado into the san juan basin . next summer , all capacity will likely
run close to full . until export pipelines expand - the first likely expansion
is trailblazer - differentials will remain wide . for 2001 , cera expects an
average annual differential below the henry hub of $ 0 . 65 per mmbtu .
southwest
differentials in the san juan and permian basins have gained considerable
strength relative to henry hub prices amid the recent hot weather in texas .
permian supplies are pricing at a slight premium to the henry hub price , and
in the san juan basin prices have narrowed from an early july differential of
$ 0 . 35 per mmbtu to a differential of less than $ 0 . 20 per mmbtu . cera expects
demand in the southwest during august of 1 . 4 bcf per day , an increase from
june ' s level of 1 . 3 bcf per day , but the larger texas market will determine
the relative strength of differentials in those two basins . cera expects a
san juan differential of $ 0 . 30 per mmbtu during august , with a permian basin
differential of $ 0 . 06 per mmbtu .
differentials between the rocky mountains and the san juan basin have widened
substantially over the past two months with supply increases in the rocky
mountains . flows on transcolorado increased from a monthly average of under
20 mmcf per day to over 100 mmcf per day during june . supply in the two
regions is following opposite paths ; rockies supply is climbing rapidly , and
san juan supply has likely peaked and should decline slowly beginning this
year . cera expects a decline in supply of 30 mmcf per day during 2000
relative to 1999 and an additional decline of 150 mmcf per day during 2001 .
because of these different outlooks , wider rockies - san juan differentials
will persist .
* * end * *
follow url for pdf version of this monthly briefing with associated tables .
note : should the above url not work , please use the following :
account changes
to edit your personal account information , including your e - mail
address , etc . go to : http : / / eprofile . cera . com / cfm / edit / account . cfm
this electronic message and attachments , if any , contain information
from cambridge energy research associates , inc . ( cera ) which is
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in whole or in part , is strictly prohibited .
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copyright 2000 . cambridge energy research associates
the west : keeping its fingers crossed - cera alert
- - - - - - - - - - - - - - - - - - - - - - forwarded by lorna brennan / et & s / enron on 07 / 27 / 2000
01 : 07 pm - - - - - - - - - - - - - - - - - - - - - - - - - - -
webmaster @ cera . com on 07 / 26 / 2000 10 : 57 : 49 pm
to : lorna . brennan @ enron . com
cc :
subject : the west : keeping its fingers crossed - cera alert
cera alert : sent wed , july 26 , 2000
title : the west : keeping its fingers crossed
author : zenker , moritzburke , snyder
e - mail category : alert
product line : western energy ,
url : http : / / www . cera . com / cfm / track / eprofile . cfm ? u = 5526 the strong western demand for gas for power
generation does not extend to the rockies . generation within the region
remains nearly all coal - fired . these regional pressures should remain a
feature of western gas markets through september .
moderate summer weather and reassuring injection rates nationwide during
recent weeks have allowed some easing in prices at the henry hub . however ,
summer is not yet over and absolute storage inventories are still at critical
levels . higher gas prices are likely to resurface .
regional power market drivers
august demand under normal weather is expected to rise by an additional 7
percent , or nearly 5 , 500 amw , over average june levels ( see table 1 ) . peak
demand levels should exceed those in june as well , with a coincident peak
over the whole western systems coordinating council ( wscc ) of 118 , 600 mw
expected under normal weather conditions in 2000 , a 2 . 7 percent increase over
the weather - muted 1999 peak . california alone should experience peak loads
that are approximately 3 , 600 mw higher than peak levels in june .
available generation capacity in the west has been at normal levels for this
time of year , although coal - fired plants are responding to a record
production year with repeated but short - lived outages . the steady decline in
hydroelectric generation will remove 3 , 900 amw from the west resource base
when compared with july levels and about 6 , 800 amw since june , although
reservoir refilling operations temporarily removed significant quantities of
hydroelectric generation during portions of june . given hydro operators '
economic interest in maximizing on - peak production at the expense of off - peak
production , the loss of capacity during the on - peak period will be lower than
these levels .
august will be a critical month for the heavily import - dependent state of
california . while the state will be drawing approximately 7 , 000 amw of
imports during august to meet demands during peak periods , cera expects the
level of imports to exceed 8 , 200 mw during peak demand conditions . the
southwest ' s need to supply native demand first will limit its ability to
export to california , and lower year - over - year hydroelectric production in
the pacific northwest will limit exports from that region .
pacific northwest
cera expects pacific northwest demand in august to climb by nearly 1 , 300 amw
when compared with june levels . the water supply for the pacific northwest
has declined to 91 percent of normal levels for the lower columbia owing to
warmer - than - normal weather in june . in addition , normal seasonal decline in
runoff levels will drop about 6 , 000 amw from the resource base when compared
with levels in june ( see table 2 ) . generation plant operators have responded
to both growing native demand and a robust export market by running coal and
gas - fired generation at high levels . although less than 4 , 000 mw of gas - fired
generation is currently available in the region , it has been running at high
utilization rates .
high energy demand in california for pacific northwest energy will keep
differentials low between the regions . as in june , pacific northwest prices
will respond in kind to the volatility cera expects to occur in california in
august . in addition , if hot weather in the pacific northwest pressures
regional energy reserves , local prices will rise to keep energy in the
region , potentially causing prices in the pacific northwest to move higher
than those to the south .
california
california is entering the peak load season with relatively little generating
capacity down for maintenance . although hydroelectric output continues to
decline , statewide reservoir storage levels remain high at roughly 118
percent of normal . nevertheless , declining hydroelectric production is
expected to remove about 730 amw when compared with hydroelectric production
levels in june .
normal summer weather will push demand in the state up by about 3 , 600 amw
over june levels , which were high ( see table 3 ) . california ' s peak load is
expected to exceed 57 , 000 mw , compared with a peak load in june of
approximately 53 , 500 mw ( 43 , 447 mw on the state ' s iso system alone , according
to its own estimate ) . assuming normal plant outage rates , this demand level
will necessitate the import of about 8 , 200 mw of energy to meet the statewide
peak . even after curtailing the approximately 2 , 800 mw of interruptible load
available for tight supply situations , the state has a precarious 6 percent
capacity margin during the system peak . an extreme hot weather event could
push state loads up by an additional 3 , 000 mw . outages are likely if
additional imports are not available .
a capacity limit of 4 , 600 mw will be in place during the summer for energy
exports from the pacific northwest to northern california . the import limit
from the pacific northwest to southern california will be 3 , 100 mw .
rockies and southwest
august demand levels in the combined rockies / southwest region will increase
only slightly above levels in august 1999 , climbing approximately 275 amw , as
loads in the region - unlike the rest of the below - average wscc - were near
normal last august . even so , august loads will increase demand by over 1 , 250
amw when compared with levels in june of this year . as with last year and
this june , supplies in the region should be sufficient to meet peak demand
conditions under normal weather , although growing loads in the
rockies / southwest region have reduced its ability to supply neighboring
regions with energy during peak demand conditions .
high loads driven by hot weather will keep the region ' s prices high .
differentials between the region and california will be tight , but
california , having tighter supply - demand balances , will need to price at a
premium to attract energy . the high - capacity transmission ties between the
rockies / southwest and the california market , which is about 150 percent the
size of the rockies / southwest market , will ensure that prices in the
rockies / southwest stay close behind california prices whenever loads are high
in california .
regional gas market drivers
evidence of pipeline bottlenecks has emerged across the west , and supply and
demand forces over the next year look likely to intensify these pressures .
since the northern border expansion in late 1998 , narrow north - south and
east - west differentials across pricing points defined the market . this
summer , the continuing supply growth in the rocky mountains has widened
differentials between the rockies and the rest of the west . at topock ,
increasing gas demand in california and high utilization rates have resulted
in high premiums .
overall in north american gas markets , strong storage injection rates in
recent weeks have allowed some easing in prices - from an early july henry hub
price of $ 4 . 50 per mmbtu to under $ 4 . 00 per mmbtu . however , despite these
high injection rates , the supply - demand balance and absolute level of storage
inventories remain precarious . summer is not over and higher nationwide power
loads in weeks to come will likely cut into storage injections and boost
prices . the ongoing competition between power and storage for supply should
support an average henry hub price of $ 4 . 20 per mmbtu in august .
through the end of the summer , differentials in the west should hold near
current levels . the pressure of growing rocky mountain supply will continue
until heating loads start climbing in the fall . in california high seasonal
power loads should continue through august with hot weather and continued
declines in hydroelectric generation . demand strength is expected to
continue . across the west , august demand for gas should climb from 9 . 8
billion cubic feet ( bcf ) per day in june to 10 . 4 bcf per day , buoyed by an
increase in gas demand for power generation ( see table 4 ) .
california
high gas demand for power generation within california will continue through
august . cera expects an increase from the state ' s june demand levels of 5 . 6
bcf per day to 6 . 2 bcf per day during august . the increase stems from
declines in hydroelectric generation and increases in overall power loads .
total demand is expected to exceed last year ' s demand level by 1 . 2 bcf per
day . this will increase flows on pipelines into california , reduce the
state ' s storage surplus , and sustain high prices . cera expects pipeline
utilization rates during august to average 95 percent ( see table 5 ) . cera
expects an august topock - henry hub differential of $ 0 . 45 per mmbtu ( see table
6 ) .
pacific northwest
despite the extremely high prices at topock and high demand in california ,
until recently gas at malin priced at a slight discount to henry hub prices .
after averaging $ 0 . 17 per mmbtu below the henry hub during the third quarter
last year , the differential so far during the third quarter this year is
$ 0 . 15 per mmbtu below the hub . this week malin is pricing at a $ 0 . 25 per
mmbtu premium relative to the henry hub . the topock - malin differential has
swelled to over $ 0 . 60 per mmbtu , signaling intra - california pipeline capacity
constraints . two factors pressured malin differentials during the early
summer .
* pressure on rocky mountain and aeco differentials . prices in the two areas
supplying the pacific northwest are under some pressure . increasing supplies
in the rockies are beginning to reach the limits of export capacity and put
downward pressure on rockies prices by limiting external market access . at
aeco , although export capacity out of the province is available , almost all
of that excess capacity accesses eastern canada on transcanada pipeline .
pipelines into the united states are running near capacity . because of
transcanada ' s limited ability to discount interruptible transport , the
available space is more expensive and therefore the last to be filled .
* low early summer regional demand . gas demand in the pacific northwest is
limited during late spring and early summer by declines in heating loads and
very strong hydroelectric output . even in a normal or dry hydroelectric year ,
seasonal runoff holds down gas demand for power generation in may and june
even as gas demand for power generation begins climbing in california .
increasing power loads are already evident .
the first factor will likely endure until heating season begins in late fall
and regional demand in the rockies and western canada begins climbing .
however , gas demand for power generation in the pacific northwest has
increased already this summer and will continue to climb through the end of
july and into august as hydroelectric generation wanes . this added demand - 200
million cubic feet ( mmcf ) per day above june demand levels - will provide some
support for malin prices and limited support for rockies and aeco prices .
malin - henry hub differentials are expected to average $ 0 . 05 per mmbtu above
the henry hub price during august .
rocky mountains
pressure on regional supplies within the rockies continues as exports out of
the region reach new highs . differentials to the henry hub have widened to
over $ 0 . 70 per mmbtu and although prices in the rest of the west will gain
some support from high power loads , regional demand in the rockies is
expected to remain near low seasonal levels through august . august demand is
expected to average 1 . 2 bcf per day in the region , approximately equal to
june ' s 1 . 1 bcf per day total demand . demand begins to build during september ,
but until the heating season begins in october , rocky mountain prices will
lag well below prices in the rest of the west . cera expects a rocky
mountain - henry hub differential of $ 0 . 60 per mmbtu during august .
although some narrowing in rocky mountain differentials looks likely as
seasonal demand increases through the fall , the rapid build in supply in the
region will likely keep differentials wide during 2001 . cera expects a supply
build this year of nearly 300 mmcf per day , followed by a build of over 350
mmcf per day during 2001 . currently , approximately 300 mmcf per day of excess
pipeline export exists out of the region , with the largest increment on
transcolorado into the san juan basin . next summer , all capacity will likely
run close to full . until export pipelines expand - the first likely expansion
is trailblazer - differentials will remain wide . for 2001 , cera expects an
average annual differential below the henry hub of $ 0 . 65 per mmbtu .
southwest
differentials in the san juan and permian basins have gained considerable
strength relative to henry hub prices amid the recent hot weather in texas .
permian supplies are pricing at a slight premium to the henry hub price , and
in the san juan basin prices have narrowed from an early july differential of
$ 0 . 35 per mmbtu to a differential of less than $ 0 . 20 per mmbtu . cera expects
demand in the southwest during august of 1 . 4 bcf per day , an increase from
june ' s level of 1 . 3 bcf per day , but the larger texas market will determine
the relative strength of differentials in those two basins . cera expects a
san juan differential of $ 0 . 30 per mmbtu during august , with a permian basin
differential of $ 0 . 06 per mmbtu .
differentials between the rocky mountains and the san juan basin have widened
substantially over the past two months with supply increases in the rocky
mountains . flows on transcolorado increased from a monthly average of under
20 mmcf per day to over 100 mmcf per day during june . supply in the two
regions is following opposite paths ; rockies supply is climbing rapidly , and
san juan supply has likely peaked and should decline slowly beginning this
year . cera expects a decline in supply of 30 mmcf per day during 2000
relative to 1999 and an additional decline of 150 mmcf per day during 2001 .
because of these different outlooks , wider rockies - san juan differentials
will persist .
* * end * *
follow url for pdf version of this monthly briefing with associated tables .
note : should the above url not work , please use the following :
account changes
to edit your personal account information , including your e - mail
address , etc . go to : http : / / eprofile . cera . com / cfm / edit / account . cfm
this electronic message and attachments , if any , contain information
from cambridge energy research associates , inc . ( cera ) which is
confidential and may be privileged . unauthorized disclosure , copying ,
distribution or use of the contents of this message or any attachments ,
in whole or in part , is strictly prohibited .
terms of use : http : / / www . cera . com / tos . html
questions / comments : webmaster @ cera . com
copyright 2000 . cambridge energy research associates