First, we all know natural gas is cheap. Some people swear if I keep bringing this up, they're going to use me to cap off a retired oil well. But did you know it's the cheapest compared to oil since '92?
This year’s 31 percent decline in natural gas made it the worst performing commodity and the cheapest next to oil since the fall of the Soviet Union. That’s about to change, if history is any guide.
Natural gas lost 72 percent in 11 months as the U.S. fell into the deepest recession in 50 years and drillers failed to idle rigs fast enough to control inventories. Stockpiles are 22 percent larger than the five-year average, the Energy Department said. Oil costs 18 times more than gas, the biggest gap since 1992, when the collapse of communism cut supplies from Russia, according to data compiled by Bloomberg News.
The EIA sees total US gas consumption falling 2.2% this year:
The U.S. Energy Information Administration on Tuesday expects natural gas prices to remain below $4 a thousand cubic feet until late this year amid robust supplies and weaker demand resulting from the economic downturn.
Industrial gas consumption is forecast to decline by 8% this year, unchanged from last month's forecasted decrease, according to the EIA's Short-Term Energy Outlook.
Major industrial gas consumers, including companies in the fertilizer, chemicals and aluminum industries, have curbed gas use and cut spending.
Total natural gas consumption is expected to fall 2.2% in 2009 amid the ongoing economic downturn and increase slightly in 2010, said the EIA, the statistical arm of the U.S. Energy Department. The EIA had previously forecast a 1.9% drop in 2009.
U.S. marketed natural gas production is expected to fall 1.1% in 2009 and slip 2.6% in 2010 following a widespread pullback in drilling activity. Producers such as Chesapeake Energy Corp. (CHK), Devon Energy Corp. (HK) and SandRidge Energy (SD) have scaled back spending amid falling commodity prices. The companies idled rigs and trimmed production forecasts to cope with lower gas prices and stem the flow of gas into the marketplace.
Liquefied natural gas imports to the U.S. are expected to rise to 495 billion cubic feet in 2009, up from the 352 billion cubic feet received last year, as new global LNG production capacity comes on line worldwide.
Natural gas prices at the benchmark Henry Hub are expected to average $4.13 a thousand cubic feet in 2009 and 5.49 a thousand cubic feet in 2010, slightly higher than the previous forecast and down from an average $9.13 a thousand cubic feet in 2008, the EIA said.
Finally, with North Slope oil production dribbling close to a trickle, the long-awaited dream of building a natural gas pipeline to sap out Alaska's huge natural gas reserves and pipe it down to the lower-48 may be coming closer to fruition (assuming Governor Palin doesn't ditz this up):
Key U.S. lawmakers have reached a deal on legislation that would boost the federal government's loan guarantee for building a massive pipeline that would transport Alaska's huge natural gas reserves to the lower 48 States.
Senate Energy and Natural Resources Committee Democratic chairman Jeff Bingaman and top panel Republican Lisa Murkowski have agreed to a measure that would raise the 2004 loan guarantee program for the pipeline project to $30 billion from $18 billion.
TransCanada Corp (TRP.TO) received a state license in December to build a $26 billion pipeline from Alaska to a pipeline hub in Alberta. North Slope Gas producers BP Plc (BP.L) and ConocoPhillips (COP.N) have also proposed an Alaskan gas line project, however.Either project would be eligible for the Senate measure, which also clarifies that the federal government will step in and repay loans for up to 80 percent of the cost of the total project if the pipeline's owners default on the financing.
Since the 1970s government officials and industry groups have sought to construct a pipeline that would be used to ship the North Slope's known natural gas reserves of 35 trillion cubic feet.