--> Abstract: Framework of Factors Controlling the U.S. Natural Gas Market Outlook, by Jeremy Platt and Steve Thumb; #90078 (2008)

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Framework of Factors Controlling the U.S. Natural Gas Market Outlook

Jeremy Platt1 and Steve Thumb2
1Electric Power Research Institute, Palo Alto, CA
2Energy Ventures Analysis, Inc., Arlington, VA

The price of natural gas has transcending importance in the new energy economy. Seemingly linked at times to oil, in 2007 its price (in the U.S.) has fallen below 50% of parity with WTI. Its price marches to a different drummer. This presentation summarizes research by the Electric Power Research Institute on the key factors shaping the natural gas supply-demand balance and price envelope over the intermediate term. The greatest single factor is the surge in LNG imports anticipated during 2008 and continuing thereafter. Also important is the outlook for U.S. gas production, which at record drilling levels has begun to increase. This is a significant turnaround from trends since 2000. Results from the Lippman Gas Supply Model quantify scenarios of drilling, in which the industry’s response to softening prices is an important question. On the negative side of the ledger are anticipated declines in imports from Canada, largely already realized and responding to Canada’s drilling-production cycles, oil sands’ requirements, and schedule for replacing coal-fired power generation. Over the next 3-4 years, the balance of these factors leads to a price-softening outlook; yet this will likely be followed by the opposite when, first, gas demands for power generation increase unexpectedly on account of the recent wave of withdrawals of proposed coal plants, and, second, the difficulties of tapping Arctic supplies constrain needed supplies. The resulting topsy-turvy outlook will be a challenge to technology planners, policy makers, and investors in the power, natural gas and alternative energy industries.

 

AAPG Search and Discover Article #90078©2008 AAPG Annual Convention, San Antonio, Texas