With prices staying persistently low, now may be the best time to invest in long-term natural gas contracts, according to Paul Corby, senior vice president of Planalytics.

“These are the levels and these are the times to buy natural gas — when it’s very, very low,” Corby said at GasMart 2010 in Chicago last Tuesday. Corby downplayed any worries of prices falling much further, saying the bottom can’t be far below the recent lows and the industry has something of a built-in fail-safe mechanism.

“I don’t care if it does drop to $3.50 because the rigs are going to close in and it’s going to bounce right back up again…We’ve got more pressure to the upside than to the downside,” he said.

Natural gas may be poised to take away chunks of market share from coal, according to Dick Snyder, vice president of business development for CenterPoint Energy Services.

“We’ve been here before, where we had to slug it out with coal for market share, and that’s probably the road we have to head down in the future,” Snyder said. Gas was able to make significant inroads into coal’s grip on half of the primary energy market beginning in the late 1930s and was able to continue that success until the 1970s, he said.

“Natural gas really is now in a situation like the 1930s, where we’re going to be able to grow. We have the supplies and we have the resources to do that.” While there’s more gas capacity than coal available today, gas accounts for only 21% of the nation’s electricity generation — less than half of coal-fired generation. But the growth potential for gas is tremendous, Snyder said.

“We have about 9 GW of growth annually and we have about 6 GW of [coal-fired] retirements annually. That’s about 15 GW of potential gas that we could put in there.” Coal has several perceived advantages that gas should be able to overcome, Snyder said. Gas is reliable, domestically produced, provides plenty of jobs and — thanks in large part to the effect of huge shale reserves — will remain relatively inexpensive.

“If I were coal, I’d be worried about the railroads. You’ve got $6 coal and $9 transport the last time I checked,” Snyder said.

Some of the traditional gas buying strategies may need to be set aside, according to Corby. “Let’s dispel the myth and the rumors that there’s a relationship between natural gas and crude [oil]…Forget about looking at crude as a guide to buy natural gas. It doesn’t work…[gross domestic production] is a great benchmark to look at when you buy natural gas. There are other financial instruments to be looking at.”

Investing in long-term gas contracts doesn’t have to be “thrill seeking,” according to Brian Vatthauer, financial products director for BP Gas & Power. “We suggest a portfolio approach…[such as] a dollar-cost averaging approach, where you don’t put all your eggs in one basket at one time. That’s certainly a great tool that has worked over time.”

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