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Trends in Natural Gas Markets 2006

Trends in Natural Gas Markets 2006. An Overview of NYMEX. Regulated by Commodity Futures Trading Commission as a Trading Facility and a Clearing Organization Two Divisions: NYMEX and COMEX Continuous 133-Year History as Commodity Exchange Open Outcry Floor Trading

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Trends in Natural Gas Markets 2006

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  1. Trends in Natural Gas Markets 2006

  2. An Overview of NYMEX • Regulated by Commodity Futures Trading Commission as a Trading Facility and a Clearing Organization • Two Divisions: NYMEX and COMEX • Continuous 133-Year History as Commodity Exchange • Open Outcry Floor Trading • Web-Based Clearing and Trading

  3. Economic Function of Regulated Commodity Futures Exchange • Hedging Function • Price risk is competitively shifted between parties with opposing risk profiles or tolerance for risk • Price Discovery • Prices are determined : • In an open, competitive and transparent manner • By market participants • And disseminated throughout the world instantaneously through market data vendors

  4. NYMEX Regulatory Protections • NYMEX CFTC Regulation • Compliance Department • Market Surveillance • Trade Surveillance • Financial Surveillance

  5. NYMEX MARKET SURVEILLANCE • Staff Conducts Daily Surveillance of NYMEX Market Activity and Analyzes Trading Activity and Fundamental Factors in Underlying Cash Markets • Futures Review is Based Upon Large Trader Reporter Data and Exchange Audit Trail • Staff also Enforces Exchange Position Limit and Position Accountability Levels

  6. NYMEX Clearinghouse and Financial Protections • Currently 40 Clearing Members • Clearing Member Financial Requirements • $5 Million Minimum Net Working Capital • Currently $14 Billion on Deposit in Margin Funds • Rated AA+ by S&P • Clearing Member Guaranty Fund of Over $140 Million • $100 Million Default Insurance • Margin Requirements • Original • Variation • NYMEX Emergency Procedures

  7. Emergency Procedures • Delivery Committee Operation • Hurricanes Andrew, Katrina, Rita • Resolution of Financial Difficulties with Clearing Firms • Rapid Adjustment to Volatile Market Conditions • Persian Gulf, NG Volatility, Increase in Oil Prices • Business as Usual

  8. Total Volume of NYMEX Cleared Contracts in Million Contracts / Year(Thru 12/05)

  9. NYMEX Natural Gas Annual Volumes

  10. NYMEX NATURAL GAS FUTURESFRONT MONTH SETTLE(4/3/90-11/30/05)

  11. December 2005

  12. NYMEX NATURAL GAS FUTURESFRONT MONTH SETTLE(4/1/05-4/10/06)

  13. January 2006

  14. Natural Gas VolatilityFront Month

  15. U.S. Natural Gas Total Consumption Source: EIA

  16. Source: EIA

  17. Source: EIA

  18. U.S. Natural Gas Sector Distribution Summary(1997-2004) • Industrial use has declined from 41% to 36% of total U.S. consumption (-1.1 Tcf) • Electricity use has increased from 20% to 26% of total consumption (1.3 Tcf) • This shift from industrial to electric use has resulted in an increase in total natural gas that is subject to weather sensitive demand and pricing

  19. U.S. Electricity Consumer Delivery 25% over 04 30% over 04 Source: EIA

  20. Gulf Of Mexico Gas DeclineFirst Year Well Depletion SOURCE: Simmons & Company International

  21. Gulf of Mexico First Year Natural Gas Well DeclineSource: IHS Energy

  22. Texas First Year Natural Gas Well Depletion Source: Gary S. Swindell

  23. 2005 Announced Deepwater Discoveries, Gulf of Mexico(as of 11/30/05) • Prospect Operator Area Water Depth (ft) • Clipper Pioneer Green Canyon299 3,452 • Knotty Head Chevron/Unocal Green Canyon512 3,557 • Q Spinnaker Mississippi Canyon961 7,925 • Stones BP Walker Ridge 508 9,576 Genghis Khan Anadarko Green Canyon 652 4,300 • Anduin Nexen Mississippi Canyon755 2,400 Wrigley Newfield Mississippi Canyon506 3,700 • MondoNW Ext Anadarko Lloyd Ridge001 8,340 • Jubilee Ext Anadarko Lloyd Ridge309 8,774 Source: MMS

  24. Source: EIA

  25. Source: EIA

  26. Source: EIA

  27. Source: EIA

  28. Canada First Year New Well Depletion SOURCE: Simmons & Company International

  29. Canada First Year Natural Gas Well Decline

  30. Expanded and proposed new re-gas terminals dot the coastlines. Existing LNG terminals Proposed terminal sites Gas pricing points/hubs NGI Pipeline Map Source: Ben Schlesinger 7/2005; illustrative.

  31. Ivan v. Katrina/Rita MMS Daily Natural Gas Shut-in ReportsThrough 4/5/06

  32. EIA U.S. Natural Gas Storage Report Historical Comparison

  33. NYMEX NG Forward Curves

  34. NYMEX NG Forward Curves(Summer 06-07)

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