Energy Ink

Better days ahead for natural gas?

The long term price outlook for the fuel is promising, AJM Petroleum Consultants says

Guest Post

April 05, 2011

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North American natural gas producers looking for a pick-me-up this week would do well to scan AJM Petroleum Consultants latest oil and gas price forecast. As companies in the business of exploring for – and producing – the cleanest burning fossil fuel face down forecasts predicting low North American natural gas prices for the foreseeable future, the Calgary-based oil and gas consultant firm holds a contrarian view. It expects natural gas prices to rise significantly by 2016.

AJM’s crystal ball sees the AECO price for natural gas reaching $6.50 per thousand cubic feet (Mcf) by 2016, while the NYMEX price is forecast to reach US $6.10 in that same year. AJM cites three reasons for its upbeat long-term forecast.

1. Low natural gas prices – brought on by large volumes of unconventional gas that are flooding the market – will drive North America away from high-priced oil and dirty coal towards natural gas as a preferred energy source.

2. Canada will develop alternative offshore markets for its natural gas – perhaps as soon as 2015 – and this will reduce the oversupply situation in North America, which will also drive prices upward.

3. The high price of oil is resulting in Canada and U.S. drilling activities shifting away from natural gas to oil. But with fewer companies drilling for natural gas, there will also be fewer supplies finding their way to market and into storage, which will drive up prices as well.

Some pretty big players are already advancing plans to access offshore markets as a way to ease the North American gas supply glut, so there is plenty of merit in AJM’s forecast logic. The pity for North American natural gas producers, and their shareholders, is that the prediction of $6 per Mcf natural gas prices couldn’t come in, say, 2012, as opposed to 2016.

Still, it’s a rare bit of encouraging news for the industry on the natural gas front. Perhaps the so-called “prince of hydrocarbons” is about to make a pricing comeback.

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