Stable Gas Prices and Supply at Last?

Natural gas prices holding steady at $5/mcf for the next five years or so is what Jim Rollyson, senior vp at Raymond James, says is a likely scenario.

Price and supply both are expected to be relatively benign and predictable for several years. The stable market is due to the emergence of so-called “unconventional” natural gas fields, which are largely in shale geologic formations. Horizontal drilling and other techniques developed when gas was in the $10 to $12 range are being put to work. Although gas well completion costs are higher, production rates are even higher, Rollyson said. On average, U.S. nonconventional gas is around 3 times more productive than conventional plays. The Barnett Shale near Ft. Worth, Texas, which started the shale gas boom mid-decade, is twice as productive as the U.S. average. More recent plays are as much as 10 times as productive.

As recently as 2008 natural gas producers needed prices of $8/mcf to grow supply, Rollyson said. “Now in a $5 world you can make money.”

Rollyson spoke at the 11th annual Burns & McDonnell Coal Symposium, held at the engineering firm’s world headquarters in Kansas City.

Stable prices and supply are two things that have eluded the gas industry in recent years, helping to restrain enthusiasm for developing large amounts of natural gas-fired generation. Uncertainty over gas price and supply was cited as a big concern for executives who took part in our annual Gas Development Executive Roundtable, which can be found elsewhere on this page and in the May issue of Power Engineering magazine.

Rollyson said that natural gas and oil prices have decoupled entirely. He said his firm estimated oil prices likely will head back to the $100 a barrel range.