Shale sources help natural gas supply, prices
Although the price of crude oil has risen over the past year, the same cannot be said of natural gas prices. "Natural gas extracted from domestic shale fields is becoming a significant contributor to our supply situation and current price stability," said John Jicha, MGE's manager of energy trading. Natural gas has been trading on the New York Mercantile Exchange in the $4 to $6 per dekatherm range, which is significantly lower than several years ago.
Jicha noted a dramatic rise in shale gas production from two recently established shale fields in Pennsylvania and the Texas Panhandle. Shale gas currently represents more than 20% of all U.S. natural gas production. A third new source comes from fields in Alberta, Canada.
"At the current rate of demand and availability, it's widely expected that shale gas production will account for nearly half of all domestic natural gas production in 20 years," he added. Shale gas output now stands at roughly 5 trillion cubic feet annually and is projected to more than double by 2035.
A number of factors contribute to natural gas supply and prices.
The development of shale gas sources is particularly timely due to the nation's reliance on natural gas as a fuel for electric generation. In 1993, electricity from natural gas accounted for less than 10 billion cubic feet (Bcf) per day. Today, gas used for electric generation exceeds 20 Bcf and is expected to continue climbing.
Weather also plays a major role. "The current La Niña effect was projected to bring an overall cooling trend to our region this summer," Jicha said. "Yet, we have experienced hot weather in June and July. So we must always be prepared."
Gas storage is another factor. Currently, gas storage is slightly lower than historical norms, which will impact demand as utilities buy up their winter storage supplies over the summer months.
Still, barring sudden weather extremes or other major incidents, Jicha expects natural gas prices to remain stable in the short term. Possible regulations on shale gas or on the process used to extract the gas from the shale layers could result in higher prices, he noted."Regardless, we anticipate that prices may increase somewhat over the next decade," he said. "We presently see the benefit of natural gas being primarily a domestic fuel as opposed to relying on foreign suppliers for oil and gasoline."