The Emergence of Global Gas Markets: North America
Gas markets around the world have undergone some major shifts in the past decade. Production and storage levels have risen to historic levels in North America, where speculation over liquefied natural gas has reached fever pitch. Add environmental and political concerns to the mix, and you have a recipe for a lot of misinformation across the market.
In a new five-part series looking at Canadian, European, Asian and African gas markets, our team at ZE will focus on individual regions to give you a deeper look at this rapidly changing industry.
My goal for this article is to provide a brief look at where the North American gas market stands today.
Shale gas across North America
With shale making up the largest proportion of expected future gas production, it’s become a popular topic in the media. But where is the shale gas actually located?
Figure 1: North American shale plays as of May 9, 2011. (Source: EIA, Canada/Mexico plays from ARI)
There are shale plays across numerous states with varying terrains. Estimating the amount of economically and technically recoverable shale gas has always been a tricky subject. With gas residing at different depths and technology rapidly changing, it’s been difficult to predict just how much gas is in the ground.
Estimates in recent years have shown high variation. As more drilling takes place the estimated amount of recoverable gas will likely change as well.
Gas prices in North America
With development springing up all over North America, the price of natural gas has fallen over the past 10 years:
Figure 2: Henry Hub and EEX NCG average prices. (Source: ICE, EEX, Graph generated in ZEMA)
A significantly lower gas price has opened up many possibilities for producers in North America. Figure 2 shows that prices have recovered from last year but remain significantly lower than other international markets such as NetConnect Germany (NCG).
Liquefied natural gas exports and future outlook
With so much natural gas being extracted around the US, the idea of exporting this cheap resource has become a major topic of discussion in the industry.
In order to enable the export of LNG, export terminals are being proposed along coastal areas in North America. As of last month, there is one terminal under construction in Sabine, Louisiana. However many more are likely on the way, with 22 terminals proposed in the US and Canada.
Figure 3: Import/Export Terminals in North America as of February 21, 2013. (Source: FERC)
The growth in the number of new terminals means LNG is likely to become a major driver of gas markets in North America.
Shale gas deposits are being explored, tested and drilled all over North America. There is a great deal of opportunity in low-cost domestic energy which has completely changed the landscape for the industry. As North American gas becomes even cheaper relative to international prices, LNG exports begin to look very lucrative.
While the US is clearly the front-runner in the LNG and shale gas market, there are other regions that are worth looking at. Check back later this week for our look into the Canadian gas market.
What a lot of people don’t know is that meathnol can be made fro natural gas.Is there anyone who does not know this, really? Short of changing one element to another, you cna make nearly any hydrocarbon from any other hydrocarbon. It is just a Question of Cost. A lot of natural gas is used to make fertilizer, among many other things.Yep, you can liquify natural gas, but you have to supercool it to do it. as Vange points out, it takes a lot of energy to do this, which means you use a lot of NG to make CNG, which raises the price.Methanol is CH3OH and Ethanol is C2H5OH and Butanol is C3H7OH. Same as Methane is CH4, Ethane is C2H6 and Butane is C3H8. When you burn them you convert the carbon to CO2 and the Hydrogen to H20. In either case, the longer the chain the more energy released.The lighter the molecule the higher the vapor pressure and the easier it is to create an explosive mixture with air. Methanol explodes easily and has an almost colorless flam when it burns, hence it is very dangerous as a fuel, which is one reason Indy cars no longer run on it.As far as I can tell, Vange is 100% correct in his critique. We can do damn near anything, the trick is to make it pay. But anything we do has cost trade offs, and sometimes those trade offs are in things that are not priced or not properly priced. Until we get a whole lot better at agreeing on what people own and how they should be valued, we are going to make a lot of suboptimal decisions.It is hard to figure why one producer is flaring gas becasue it is not worth delivering, when another porducer at the other end of the continent is drilling holes to get the stuff.