Houston Chronicle
Growing pains en route / Natural gas markets are bound to see some volatility in the short term as several projects come on line and create tension points in the supply channel, but longerterm the work may lower prices

Sunday, May 25, 2008

A rush of new projects moving natural gas from areas like Texas' Barnett Shale through a pair of Louisiana pipeline hubs could increase volatility for the fuel in the short term and drive down prices in the long term, according to a new study.

Some 40 pipeline, storage and liquefied natural gas terminal projects will come on line over the next 18 to 24 months, providing billions of cubic feet of new gas supplies for the key pipeline hubs of Perryville and Henry Hub in Louisiana.

Those new sources of fuel are likely to outpace capacity to move the fuel farther east to markets including Florida, Ohio and New York, according to data compiled by Bentek Energy, a Evergreen, Colo.-based research and consulting firm.

That could first mean greater price swings as markets figure out how to accommodate the new supplies and, ultimately, put downward pressure on prices because of oversupply.

Lower prices at the Henry Hub would affect prices throughout the country, because it's a widely used benchmark price.

"It's too much gas in the wrong place," said Rusty Braziel, managing director of Bentek. "It's going to be a roller coaster ride for a while."

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