To closely analyze the natural gas market is to be constantly bombarded with vast amounts of information — weather forecasts, pipeline flows, LNG feedgas, power demand and storage — that is frequently updated, impacting both spot and future prices. But before you can get into the deeper analysis, you’ve got to understand the natural gas value chain and its terminology. In today’s RBN blog, we’ll explain the various terms used to describe natural gas as it moves from wellhead to consumer.
Natural gas is one of the most widely tracked and traded commodities in the world and, while it may seem straightforward on the surface, the devil is in the details. There’s way too much terminology in the gas business to try to cover it all in a single RBN blog so we are going to sidestep topics like landfill gas, biogas, acid gas and any other gas that differs from the norm, either by its origin or its chemical makeup. And we will also stay away from certain terms crucial to the engineering side of the business, such as flanges and casing heads. Instead, our focus will be on the main metrics of gas production and how they diverge. When trying to analyze production data, outsiders often quickly become tangled up in the different figures for gross withdrawals, marketed production and dry gas production. Today, we will dispel some of that confusion.
In this journey through gas industry lingo, we will be referring to the terms used by the Energy Information Administration (EIA). As the federal government has access to data sources on the U.S. energy business that are inaccessible to others, its historical data serves as a baseline for natural gas-related statistics. That is not to say that market participants and observers never disagree with the EIA’s data, just that they generally go by the same nomenclature and definitions. We’ll be diving into the way EIA defines supply and demand measures, so see the schematic in Figure 1 below if you need to get your bearings on how the definitional chain operates. These definitions don’t precisely follow points in the physical flow of gas — keep that in mind as we discuss these terms. The four steps noted below are used to establish the different classifications of natural gas production. Later, we will compare these four steps to the actual movement of gas in the system and discuss how it differs from the definitional framework.
Figure 1. Natural Gas Production Classifications. Source: RBN
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