Marketing and trading is central to a deregulated natural gas market, and it is gradually and very quietly being restored as producers and utilities hire traders to build their marketing departments. Traders who once worked for major marketers who were part of the “midstream meltdown are being dispersed into smaller shops,” said Edward M. Kelly, head of North American gas and power consulting for Wood Mackenzie.

The companies “are not talking about it; you don’t necessarily want to be telling your board you’re hiring traders — but they are doing it.” Kelly made the remarks at the Colorado Oil and Gas Association’s Rocky Mountain Natural Gas Strategy Conference in Denver Monday.

He said margins were good and there was too much opportunity in trading to be ignored. The Wood Mackenzie analyst believes the gas market is necessary and will survive. “You can’t put the genie back in the bottle,” he said. However, in the power business, much of the electricity delivered today still is priced on a cost-based model and the future of the competitive market there is not as clear.

With no new major supplies on the horizon for the next 10 years, demand that otherwise might grow will hold to current levels with prices performing the function of demand destruction, Kelly believes. “We’ll be treading water in the natural gas business.” It will be mostly industrials that will be priced out of the market.

The growth in liquefied natural gas (LNG) will be slow. In 10-12 years when terminals and tankers are in place to boost imported LNG supplies “the industry will be unleashed to compete in the global LNG market.” But LNG will not drive the domestic price down, nor put domestic producers out of business, Kelly said. LNG will be on the margin and will flow to other world ports if prices drop in the U.S. and are higher in Europe or Japan. “LNG will be your friend. It won’t cause you to shut in wells,” Kelly told the producer members of COGA.

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