Natural Gas Intelligence
Lots of Cheaper Gas for Winter, But New England a Worry, Says FERC Staff

Friday, November 16, 2012

Since last year, gas supplies are higher, prices are lower, the forward curve is friendlier to buyers, but winter is still a wild card, FERC staff told the Commission Thursday during the Winter 2012-2013 Energy Market Assessment presentation.

"Current natural gas prices and winter forwards are the lowest we have seen in 10 years," said Federal Energy Regulatory Commission (FERC) staffer Eric Primosch of the Commission's Office of Enforcement. "The U.S. natural gas market is well supplied, with production at almost 40-year highs and inventories approaching last year's record.

"This should help keep natural gas prices relatively low into the winter, assuming normal winter weather, and also help moderate electric prices."

Primosch offered a snapshot of prices in 12 regions derived from IntercontinentalExchange data that showed declines across the board from a year ago. Prices at Henry Hub are down 36% year to date; Chicago is down 37%; Southern California, 42%. And in the Northeast, gas on Algonquin is 35% lower, and Transco Zone 6 in New York is down by 37%.

"During much of 2012, regional gas prices traded in a tight range of $2/MMBtu in the Gulf Coast and the Rockies to $3.50/MMBtu in the Northeast," Primosch said. "The highest prices are in New England, New York and Florida due to growing natural gas demand and pipeline bottlenecks." In Southern California, the outage of the San Onofre Nuclear Generating Station has increased reliance on gas-fired plants (see Daily GPI, Sept. 18), he said.

"Staff expects regional gas prices to remain in this tight range through the winter, although there could be occasional regional price spikes due to cold weather events or pipeline outages," Primosch said.

Credit for the anticipated price stability is owed to the robust gas supply outlook, of course, which in turn is thanks to growing production of gas from shale plays. Citing data from Bentek Energy LLC and the Energy Information Administration, Primosch told commissioners dry gas production is up 4% from a year ago, contributing to an overall supply increase of 3% in spite of a 53% decline in gas sendout from liquefied natural gas (LNG) plants and a 5% decline in net imports from Canada.

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