ICF says $4 natural gas could occur within a year

Natural gas prices just north of $2/mmBtu are not sustainable and consultants for ICF International (ICF) expect to see gas prices in the “$4 ballpark” within a year.

During an April 10 webcast, ICF consultants Kevin Petak and Frank Brock offered up a slightly more cautious outlook than many observers on the near-term fate of bargain basement gas prices. The unusually low price range of $2-$3 for gas is not sustainable much longer, the analysts said, adding that $5/mmBtu gas prices are possible by the end of 2013.

Thanks to the allure of cheap gas to fuel combined-cycle plants, electric generation has been a big growth area for gas production recently. But firming gas prices are one reason the pace of coal-to-gas power switching could ease in 2013, according to ICF.

On the other hand, the ICF analysts see no return to the days of high natural gas prices. Overall they expect natural gas prices will stay in the $5 to $7 range over the next 10 years. They also add that the overall, long-term trend will continue to favor natural gas gradually taking away a greater share of coal’s power market share.

The warmest winter in 80 years plus steep growth in shale gas production have brought us to $2 natural gas, the ICF officials said. “Basically, the winter was a spring,” Petak said.

But the current natural gas price is so low it has already caused producers to significantly cut the number of active wells devoted to gas between 2011 and 2012, Petak said. This is especially true for the important Haynesville field in Louisiana and Texas, he added.

“The drilling activity is way off,” Petak said.

Looking toward 2035, ICF does expect to see steady growth in natural gas demand in the United States and Canada with much of the momentum provided by power generation. By 2035, shale gas should account for over half of the production in both the U.S. and Canada, ICF said.

The ICF assessment provided the usual array of caveats and wildcards. The weather, economic growth, timing of air quality regulations, development of pipeline infrastructure and how producers respond to market forces will all affect gas prices, the ICF officials said.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.