Shale gas affecting industry's pricing
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The recent onslaught of severe winter weather has caused the wholesale price of natural gas to edge upward since mid-December, but it still remains lower than it has been for most of the past decade.
Thursday, the closing price was $4.407 per million British Thermal Units, according to Eugene, Ore.-based Moore Research Center, Inc. A year ago, it was closer to $6.
The trend of natural gas prices has been credited to the growth in the extraction of natural gas from shale formations, including the Marcellus Shale.
Now, the U.S. Department of Energy says that the available supply of such gas is more than twice as large as it thought just a year ago. In a December update to its annual energy outlook, the agency said that the nation's supply of shale gas is 827 trillion cubic feet, 480 million cubic feet larger than last year's estimate.
As a result, the Energy Department says the price of natural gas at the wellhead, before transportation and other costs are added, will remain less than $5 per thousand cubic feet through 2022. (A thousand cubic feet is roughly equivalent to a million BTUs.) Going further out, to the year 2035, it has lowered its estimate to $6.53, from an $8.19 estimate a year ago.
Those projections carry a bonus: a reduction in the price of electricity. The agency says that by 2016, the average price for electricity will fall as low as 8.9 cents per kilowatt hour, down from 9.8 cents in 2009.
That's because natural gas fuels 23 percent of U.S. generation, and is expected to fuel more in the future. Of 448 new power plants planned for the years 2011-2014, more than 40 percent, or 184, will be fueled by natural gas, adding 29,141 megawatts of generation capacity to the grid. Only 22 new coal plants are planned, with a total generation capacity of 9,993 megawatts.
As natural gas increases its share of electricity generation, shale gas will account for a larger portion of the natural gas in use, said Jack W. Plunkett in his newly published book, "The Next Boom."
First Published January 14, 2011 12:00 am
