2011 natgas may jump to $6/MMBtu on lower production - survey

18 November 2010 17:13  [Source: ICIS news]

HOUSTON (ICIS)--Oil and gas industry professionals believe the price of natural gas will rise to an average of about $6/MMBtu in 2011, according to a survey released on Thursday.

However, natural gas prices are unlikely to move significantly higher than that through at least 2014, said Adam Seiminski, chief energy economist with research firm Deutsche Bank.

The higher prices would largely result from decreased production of natural gas, caused by new state and federal regulations on hydraulic fracturing in shale plays, such as the Marcellus Shale in the northeast.

Hydraulic fracturing is the means of breaking through rock with mainly water and sand to extract oil and gas.

According to the survey, 20% of executives were unsure of the effect the regulations would have, but almost no one said that prices would decrease in the wake of new laws. The survey was conducted by US-based consultancy firm Deloitte.

In the short-term, the US has benefited from low natural gas prices. However, that has stifled some industrial growth in the energy industry, said Gregg Aliff, vice chairman and US energy and resource leader for Deloitte.

For example, the US electrical industry has halted construction despite implications that there would be new load growth. As such, the US has not kept up with electrical generation demand, he explained.

The only real construction has been to replace existing infrastructure, Aliff said.

In addition, construction of nuclear power plants has almost stopped, he said. With current natural gas prices hovering around $4/MMBtu or lower, the economics for building a new plant would not result in a profit.

Two such US plants are under construction, currently by regulated utilities. That compares with 24 plants under construction in China and about 75 plants in the planning stages, the survey said.

Seimenski said that as long as natural gas prices do not fall too low, the industry could survive. But if prices drop much lower and hold below $4/MMBtu, it would restrain companies from investing, as already seen in the electrical and nuclear industries.

Natural gas is widely used by chemical companies as a power source as well as a raw material in production.

To discuss issues facing the chemical industry go to ICIS connect

By: Sheena Martin
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index