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Politics : Politics of Energy -- Ignore unavailable to you. Want to Upgrade?

To: Brumar89 who wrote (75970)

4/7/2017 12:56:07 PM

From: Brumar89

Respond to of 86355

Competition With Natural Gas The naysayers generally follow up their “no demand” argument with a “natural gas is cheaper than coal” argument. As Mr. Denning noted, coal is competitive when natural gas prices are above $2.50/mmbtu. Natural gas is very cheap right now. However, it has been rising for more than a year:

Source: OilPrice.com

The shale boom led to an oversupply and a collapse in natural gas prices over the past decade. Much of this was due to the fact that oil prices remained high until late 2014. Liquid-rich gas was economic at very low gas prices with oil trading at >$100/bbl. The natural gas glut will soon come to an end:

Natural gas oversupply will not last forever: Industry executivesHuileng Tan | Akiko Fujita
Monday, 3 Apr 2017 | 11:02 PM ET

The natural gas industry has been plagued by low prices on the back of massive supplies from mega-projects coming online and low oil prices, but there may well be not enough output to meet growing demand in the longer term, industry executives said Tuesday.

“The industry needs extra supply by the middle of 2022, 2023,” said Jordan Cove LNG president, Elizabeth Spomer.

Current low prices and supply surplus sparks a cycle of slowing production amid growing demand, which will contribute to a future output deficit, she pointed out.

U.S. natural gas prices priced at the benchmark Henry Hub are around $3.15 per million British thermal units (mmBtu), 11 percent lower from a year ago.

Spot prices in Asia for liquefied natural gas (LNG) are above $5 per mmBtu currently and trend higher during winter demand, drawing shipment from the U.S. among other markets. However, Asian buyers have previously preferred longer-term contracts for supply security.

That is the case as well with demand up and coming in China where there is a government push to replace coal-fired plants with cleaner gas-powered electricity plants so as to curb air pollution.

Big buyers are also emerging from the Middle East, Pakistan and Bangladesh will soak up production from projects coming online in Australia and the U.S., said Spomer who was speaking to CNBC on the sidelines of the Gastech conference in the Japanese city of Chiba.

“It takes a while to build these things,” she added.

[…]

CNBC

Conclusion The U.S. coal industry is doing exactly what the oil & gas industry did from 2014-2016. In the face of oversupply relative to demand and a collapsing commodity price, the industry is making itself “leaner and meaner.” Mr. Denning referred to natural gas as the “enemy” of coal. That’s funny, I find oil & gas for a living and have never thought of coal or nuclear power as enemies. Fair competition is good for business… And as an electricity consumer, I don’t like paying more than 10¢ per kWh for electricity.

Natural gas prices are unlikely to remain this low for very long. $2.50/mmbtu is uneconomic in most of the shale plays and very uneconomic in the Gulf of Mexico, except on a cost-forward basis. When natural gas production and consumption come back into balance, it will probably be at a price of $3.50 to $5.00/mmbtu. Coal is very competitive with natural gas above $3.50/mmbtu.

cnbc.com