scfranklin94

Natural Gas: The Next Big Thing

All the talk of the Obama administration helping out NG usage is just that, a bunch of talk. The Waxman Cap and Trade bill gives the coal-fired generators free carbon emission allowances, while industrial users of NG have to buy the emission credits at auction; so in effect, we're subsidizing coal over natural gas.

I wish people would stop bringing up the oil to natural gas ratio; there's only a very small part of the country that can swap oil-fired generation for nat gas generation, and over 99% of cars can't use natural gas for fuel, so the fuels aren't interchangable.

If natural gas is so valuable, how come it trades in the $2.50 to $3.00 range out west? Could it be that we have too much supply; no it must be evil speculators forcing the price down!

Six Companies Poised to Gain from a Natural Gas Auto Mandate

I'm all for CNG vehicles; but here's some facts:
1) A great deal of the nat gas on the north slope in Alaska is being reinjected to maintain the pressure in the depleting oil fields up there, that's why the big oil companies aren't so enthusiastic about sending the gas to the lower 48.
2) Roughly 20%+ of the gas that went into a pipeline in northern Alaska would be burned up as compression fuel to move the gas down to Chicago. It only makes economic sense to move gas from the North Slope down to the lower 48 via a pipeline if gas averages $10/mmbtu.
3) Utah's gas cost is due to a old lawsuit over captive gas in storage so the utility is forced to supply ng at a cheap price; actual cost for most places would be between $1.50 to $2.50/gal gas cost.
4) The only gas being flared in the lower 48 and most of Canada is from new wells that haven't been tied into the pipeline grid; the bulk of flared gas nowadays is in Nigeria.
5) We have about 100 years worth of nat gas based upon a burn rate of 20Tcf/yr. If a lot of the transportation vehicles got switched over, it would be more like 50 to 60 years.
6) Nat gas is sort of 'green', but it still creates carbon dioxide when it is burned, so the Enviros will never support it 100%.
7) The US gas market has 5% more supply from production than this time last year, and demand is down 2 to 4%; so the market is way over supplied for the short term, meaning 2009. Even if Obama mandates CNG filling stations, the market won't begin to soak up the excess until next winter at the earliest. My expectation is that nat gas prices will stay low till at least October, so don't rush out and buy nat gas companies just yet.
8) Three major LNG trains come on line in June, unless demand picks up, the LNG in Trindad will be forced to come here, even though we don't need it this year, so there's a real chance that prices stay low well into 2010.