Monthly Archives: August 2009

Chris McGill Natural gas market indicators

As the country approaches the traditional shoulder months of September and October that separate the peak for gas consumption (due to summer cooling loads) from the peak consumption of the winter heating season, several fundamental aspects of the short-term natural gas market remain overtly observable and eloquently simple – underground storage and domestic gas supply remain strong, while large-volume natural gas demand continues to trail recent years.

At the same time, acquisition prices have been ruled by the law of the prevailing market fundamentals for virtually all of 2009 and even with price fluctuations in the world oil complex have not been significantly diverted from their current path. Beyond that there are observations of interest that can be made by those trying to uncover the vagaries of today’s natural gas market complexity.

For example, instances where LNG imports have probably limited localized price volatility may have occurred this year. In one case, send out from the Canaport terminal in New Brunswick may have helped keep prices down in the U.S. northeast despite a 20 day outage at Sable Island, which supplies the Maritimes & Northeast Pipeline. In another case, increased send out from Gulf of Mexico terminals was partially responsible for limiting the impact of an offshore compressor accident that led to a force majeure on the High Island Offshore System earlier this summer.

To be sure, the overall strong supply position around the country probably had much to do with limiting any price increases in the aforementioned regions, however, these two events at least suggest that the existence of underused LNG capacity may limit upside price volatility in some cases.

Visit this link to download the full Natural Gas Market Indicator. Topics covered include: Reported Prices, Weather, Working Gas in Underground Storage, Natural Gas Production, Rig Counts, Pipeline Imports and Exports, and LNG Markets.

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Mike Pomorski An answer for Grist: Environmentalists should value electric power supply diversity

In an engaging and thought provoking post, David Roberts over at Grist is torn, asking “should greens ally with natural gas against coal.”  Mr. Roberts notes that on one hand, producing and burning natural gas leaves an environmental footprint.  On the other hand, natural gas has lots of properties (widespread availability, scalability, and relatively lower carbon content) that make it attractive.  What’s an environmentalist to do?

The answer depends on what kind of a green (to use Mr. Roberts’ term) you are.  If you value environmental purity above all other goals then no, you absolutely should not support natural gas (or coal) use, since it would violate your core principles.

If, however, you are more pragmatic shade of green (politically, economically, etc.) and believe that the perfect is not the enemy of the good, then an out of hand rejection of any generating source (certainly natural gas but also coal and nuclear) makes much less sense.

Consider the Energy Information Administration’s (EIA’s) analysis of the American Clean Energy and Security Act (ACESA, a.k.a. Waxman-Markey).   As Joseph Romm notes elsewhere in Grist, EIA’s analysis is not without its flaws (nor is Waxman-Markey).  Nonetheless, EIA’s effort is a useful starting point for discussion.

In their ACESA Basic Case (EIA does not assign probabilities to any of their 11 cases, but the Basic Case has gotten the most press), EIA projects that the top two electric power sector sources by generation in 2030 are nuclear (36%) and coal (31%).  Renewables (which include hydro in EIA’s formulation) come in third at 20%.  We meet our ACESA requirement though new technology (a lot of it nuclear) and international offsets, which are the two main reasons why costs are contained.

You might argue that the Basic Case is technology pessimistic.  Well, in their High Technology Case, EIA projects that the largest generating sources in the electric power sector are, again, nuclear (39%), coal (27%), and renewables (24%, again including hydro).

Now suppose that you are skeptical of new technologies like nuclear and clean coal and you are also worried about the availability of international offsets (or you think that the United States should not be able to use international offsets to meet a domestic commitment).  In EIA’s No International/Limited Alternatives Case, which includes these restrictions, the single largest contributor to electric power sector generation is natural gas (36%).   To be sure, less restrictive assumptions about renewables might eat into this share, but still.

The United States meets its ACESA commitment in each of these cases; it just does so in different ways.  Notice that the generation mix in all three is heavily reliant on either a fossil fuel (natural gas or coal) or nuclear, two things that make many environmental purists very angry.

In EIA’s (imperfect) analysis, the idea that climate change regulation can be affordable is inconsistent with rejecting a robust mix of electricity generating options.   If you are an environmental purist you might not care, since cost containment is simply not the issue.  But most people (and I think environmentalists) are more pragmatic.  So my short answer to Mr. Roberts’ question is that greens should ally with low-carbon electricity sources including natural gas, but not to the exclusion of alliances with clean coal and nuclear (natural gas is also like an insurance policy).  That we need a healthy generation mix to meet environmental goals at a reasonable cost is not just an industry tagline.

I should also mention that there is a compelling environmental case to be made for the direct use of natural gas in homes (e.g. your gas space heater).  I won’t spend a lot of time on it here, but I would encourage anyone grappling with Mr. Roberts’ question to consider the AGA/NRDC joint statement regarding direct use of natural gas and decoupling (endorsed by the Alliance to Save Energy and the American Council for an Energy Efficient Economy).  You can also learn more about decoupling here.

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Lauren Blosse Solving the Climate Change Puzzle; Natural Gas- Clean, Abundant, Efficient, American

The answers to many of the questions our association receives may seem like second nature to our staff, but are unknown or unclear to the general public, such as: what are the chemical elements of natural gas? Where does it come from and how does it get to our homes and businesses? How can it help us reach our environmental goals as a nation?

Recently, the four groups that comprise the Natural Gas Council (AGA, the Interstate Natural Gas Association of America, the Natural Gas Supply Association, and the Independent Petroleum Association of America) set out to create a blueprint of the natural gas industry as a whole- from the burner tip in our kitchens back to the wellhead where the gas is produced.  The result is a comprehensive booklet, “Solving the Climate Change Puzzle;  Natural Gas- Clean, Abundant, Efficient, American,” which is now available to the public.

As our lawmakers try to secure America’s energy future by promoting clean, domestic energy, natural gas is both an immediate and long-term piece of that solution.

Be sure to let us know what you think.

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Dan Gibson Chris Hogan joins the AGA communications team

I’ve got some good news today if you haven’t already heard. Chris Hogan has joined the AGA communications team as communications director.  Chris is a great guy and I’m excited because his new role will give him a more active role in the AGA blog. This is a good thing because Chris is also the founder and editor-in-chief of the award winning menswear blog Off the Cuff.  So, if you want to update your look or just see who makes the best khakis, he’s your guy.

Chris is an AGA veteran. For the past six years, he served as AGA’s director of corporate affairs and investor relations. During his time in that role Chris was the lead on quite a few successful programs for AGA including the financial forum and defend my dividend. He’s going to be a great addition to the communications team and we’re all excited to have him on board.

For those of you that have worked with Chris in those areas, no need to worry because Liliana Fonnoll, who has worked closely with Chris for the past six years, has been promoted. Liliana will take on many of Chris’ previous responsibilities in outreach with the financial community including responsibility for future Finance Committee meetings, regional financial community presentations, NARUC financial meetings, the Financial Forum, and the Investor Relations Subcommittee.  Liliana will continue to manage the financial community database and coordinate international activities related to IGU, the World Gas Conference, and LNG 17.

You can leave Chris a welcome message or a congratulations for Liliana in the comments below.

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