Last Friday (July 19th, 2013) temperatures in New York City rose to 100 degrees Fahrenheit for the second day in a row. At 4:00 PM that day the New York Independent System Operator (NYISO) recorded a new State record peak power demand of 33,956 MW. In New York City (known as “Zone J”) real time power prices jumped as high as $1485/MWh. Today we examine the power price volatility.
Daily Energy Blog
Thursday, 7/18/2013
Canada enjoys vast natural gas resources and domestic demand for its gas is growing. But Canadian gas exports to the U.S. are plummeting, and it seems the only way to avoid a major gas glut north of the border will be to export large volumes of LNG to the Pacific Rim. The catch is, there’s a lot of competition out there, both from reigning LNG export giants like Australia and prospective players like the U.S. And Canada has its own issues with environmental concerns and permitting for natural gas pipelines and LNG terminals. What happens if Canada’s LNG export initiatives don’t happen?
Sunday, 7/14/2013
Rapid growth in U.S. gas exports to Mexico already is having profound effects north of the border, and things will only get more interesting. Gas producers in the Eagle Ford and other Texas shale plays are finding the new buyers they need. But gas consumers in the Southwest—caught with a losing hand of stagnant regional gas production, rising gas demand, increasing gas exports to Mexico, and pipeline capacity tightness—face potentially serious delivery concerns and price premiums in the not too distant future.
Thursday, 7/11/2013
The shale revolution has done away with natural gas price volatility, at least for now. And that has been a bad thing for natural gas storage. Merchant storage facilities make most of their money on either seasonal gas price differences or short-term price fluctuations, or both. Unfortunately, the oversupplied market has flattened out prices, removing the primary source of storage value. But there are other ways of extracting value out of natural gas storage. Today we explore several of these strategies.
Tuesday, 7/09/2013
“Hey Joe, I said, where you goin' to run to now … where you gonna go?” now that no other options are left, Jimi Hendrix asked in his debut single, “Hey Joe.” Joe’s answer? “ I'm goin' way down south, way down south, way down south to Mexico way!”
Texas and other Southeast Gulf gas producers are in the same boat as Joe, Bentek says in a recent report titled “Growing Mexican Gas Market Creates Southwest Price Premiums.” Having lost some of their old buyers in the Northeast to shale gas producers closer to that market – and with the prospects of losing more - producers in the Eagle Ford and the Permian and Anadarko basins need new options, and are looking to the fast-growing Mexican market as a way out.
Thursday, 6/27/2013
NYMEX natural gas prices have fallen 16 percent since reaching their high for the year so far of $4.408/MMBtu on April 19, 2013. The NYMEX August contract closed at $3.582/MMBtu on June 27, 2013.The market is currently in the low demand shoulder season. Winter is over and summer heat is on the way but temperatures in May and June are not typically high enough to significantly increase demand for air conditioning. Today we review shoulder season gas market fundamentals.
Thursday, 6/20/2013
Two years ago in June 2011 the forward curve for NYMEX natural gas pointed to $5/MMBtu for gas in 2012 – rising to $8/MMBtu by 2022. This week (June 2013) the forward curve structure looks much the same except that expected prices in 2022 are down two bucks at $6/MMBtu. In between those forward curves, spot prices for natural gas plunged to less than $2/MMBtu in April 2012 and climbed back up to $4/MMBtu a few weeks ago. Today we consder how changing production and new patterns of demand look set to change gas market price structures for good.
Monday, 6/17/2013
The natural gas trading market has been getting a lot of attention lately and not in a good way. A couple of weeks ago the Wall Street Journal published two articles describing the fact that traders have started to reduce their presence in natural gas storage. At about the same time, Oneok, once a big player in energy services shut down its operation that had used natural gas storage and pipeline transportation capacity to provide those services to the industry. With gas production still coming on strong, more gas being used for power generation and the possibility of serious LNG exports on the way, what’s the problem? Today we look deeper into turmoil in the natural gas markets.
Sunday, 6/09/2013
Aside from dwindling oil production (that we discussed last week) the State of Alaska is also home to 35 Tcf of proven conventional natural gas reserves. These could be consumed domestically or exported as liquefied natural gas (LNG). Alaska is closer to Asian markets than the 20 LNG export projects currently sitting in the Department of Energy approval queue. But the massive infrastructure investment required to get Alaskan gas from north of the Arctic Circle to market requires complex alignment of competing producer, shipper and government interests. Today we review efforts by the 49th State to find markets for its natural gas.
Wednesday, 6/05/2013
By: Eric Penner
A lot of natural gas storage follows a time honored pattern – put gas in during the summer and take it out during the winter. But it is getting much more complicated than that. Developments in natural gas production – particularly in the Appalachian (Marcellus) region will be driving big changes through the gas storage business. Today we pick up on a blog series we started last month to examine the two fundamental value generating gas storage mechanisms, and how they match up with the physical characteristics of storage facilities.
Tuesday, 5/21/2013
Production forecasts for natural gas in the Appalachian Marcellus shale have doubled from 7 bcf/d to 14 bcf/d in less than two years. As a result northeast demand for natural gas will be almost entirely met from local production in coming years. Significant re-plumbing of the US natural gas pipeline distribution system will be needed and in many cases has already commenced. Today we review accelerating changes to US gas flows.
Tuesday, 4/30/2013
Early in 2012, soon after Japan’s Fukushima disaster, two California nuclear power plants called SONGS 2 and SONGS 3 (stands for San Onofre Nuclear Generating Station) shut down for the foreseeable future. This pulled roughly 2,200 MW of base load generation out of the Southern California supply stack. The California System Operator (CAISO) scrambled for several weeks to bring replacement power into the system, and succeeded admirably. The grid held together and weathered last year’s hot summer. Now as the summer of 2013 starts to come into focus, there are lots of questions about the SONGS units –which are still off line – and what California’s overall power generation load will mean for natural gas demand and prices. Today we survey the measures that made things work last year and examine the most likely market developments expected for Summer 2013.
Thursday, 4/25/2013
Last year natural gas power burn increased by 6 Bcf/d over 2011. This year power burn levels in the first quarter were down 10 percent from 2012. Peabody Energy reported last week that coal consumption for generation is growing this year versus 2012. Today we ask whether 2012 power burn was an anomaly and what we should expect in 2013.
Monday, 4/15/2013
Last week (April 9, 2013) South African firm SASOL held an investor strategy day in New York. The company confirmed it is moving ahead with plans to build a 100 Mb/d gas-to-liquids (GTL) plant in Lake Charles, LA. Shell is evaluating plans for a similar plant in LA. The plant feedstock will be up to 1 Bcf/d of dry natural gas and output will be very low sulfur diesel, naphtha and liquefied petroleum gas (LPG). A year ago in April 2012 the economics looked very positive because of the wide spread between gas prices and refined products but the margins have narrowed since then. Today we look at prospects for this plant and others like it.
Thursday, 4/11/2013
These days natural gas can be traded in spot, term, or financial at over 120 locations across the US. Deals can be executed by Apps, by instant messages and by high-speed algorithm. And it is reported that a few human beings actually still trade gas bilaterally over the telephone as was done in the time of the Cro-Magnons. None of that would be happening without the big bang. Today we recall how the dust settled after the big bang in natural gas markets.
