US natgas seen to average under $4/MMBtu in 2011

17 September 2010 20:00  [Source: ICIS news]

BOSTON (ICIS)--US natural gas prices will average less than $4/MMBtu in 2011, as abundant supplies of shale gas reduce prices and volatility, an energy industry observer said on Friday.

 “It is very unlikely prices will go up and there’s a fairly good change that prices could fall sharply,” said Andy Weissman, publisher of Energy Business Watch and counsel at law firm Carter Ledyard & Milburn. He spoke at the 3rd ICIS Chemical Purchasing Summit.

“Shale gas development and increased storage capacity have brought about a fundamental change in the industry. Sharp upward price hikes will be a thing of the past,” he said.

Drilling for shale gas would only increase in the coming months as companies sought to prove their expertise, he said.

“Many are drilling for strategic reasons as they may want to get taken over by the oil majors. They have a desire to develop their skills and show they’re the best and” said Weissman.

US energy major ExxonMobil acquired XTO Energy for $27bn (€21bn) earlier this year to gain access to shale gas acreage and technology.

More than 20% of natural gas in the US today comes from shale gas, he noted.

“The explosive growth in shale gas began just 30 months ago, and we are still at an early stage,” Weissman said.

The rise of shale gas is good news for the US petrochemical industry, he noted.

“This is wet gas, and the market has the potential to be flooded with NGLs [natural gas liquids],” said Weissman.

The Eagle Ford Shale in South Texas in particular, could be very rich in NGLs, he added.

($1 = €0.77)

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