Global Energy Decisions Inc. (GED) said last week that high natural gas prices aren't likely to be leaving anytime soon. In fact, the Boulder, CO-based company, which provides software, consultation and data solutions to the energy industry, said natural gas prices are likely to remain "stubbornly high" for the next few years.
On Thursday, GED released its Natural Gas Reference Case, a comprehensive and fundamentals-based forecast of supply and demand fundamentals, annual and monthly market clearing prices, infrastructure and market uncertainty. In the report the company forecasts annual and monthly market clearing prices through 2029 for 36 gas market pricing centers and hubs.
GED said it believes that annual natural gas consumption in the United States may increase from roughly 22 Tcf in 2004 to nearly 30 Tcf by 2020, including the gas industry's own demand. To accommodate the "sizable increase," significant improvements to and investments in natural gas pipeline and storage infrastructure will be required. The company pointed out the need is further compounded as LNG will likely come ashore in areas not presently able to accommodate and transport large gas volumes without significant new infrastructure.
"The convergence of high gas production replacement costs, persistently high crude prices, and the petroleum industry's preference for oil development over gas development has created persistently higher gas prices," explained Gary L. Hunt, president, Global Energy Advisors, a Global Energy business unit. "Our analysis indicates that gas prices will remain high until significant new North American supply materializes or LNG imports become material to meeting demand. Steps being taken right now will result in greater supply and price moderation beginning in the 2008-2009 period."
Other key findings in the Global Energy Natural Gas Reference Case are:
"If, when, and how much LNG will be brought into North America remains a critical question to the future of North American natural gas prices," said George Given, vice president of Global Energy's Market Advisory Services. "In the next 15 years our increasing reliance on LNG will transform the continental gas market into a global gas market, a new reality that cannot be underestimated for its influence on market prices, industry financial performance and investment."
GED said it still expects oil and gas prices to moderate, but it will not occur until there are significant new sources of supply in North America. "We expect that steps being taken now will lead to greater supply and a moderation in prices occurring in the 2008 and 2009 time frame," GED said in the reference case. "Expanded LNG throughput and increased North American production will line up to reduce prices. However, gone are the days of $2 or $3 gas as was seen during much of the 1990s."
For more information on GED's Natural Gas Reference Case, visit http://www.globalenergy.com.
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