quote:
Lex Kerkovius, Financial Post - Published: Tuesday, December 27, 2005Natural gas investors need only wait for the snow to fly to be able to frolic in the unprecedented winter wonderland that will be North American natural gas pricing for the heating season of 2005-2006.
...So let's summarize the key reasons why we think gas prices might hit these unheard of levels this winter. They include:
- Inadequate storage levels for a normal winter.
- Nearly 40% of Gulf of Mexico gas production is still shut down as a result of the fall hurricane season.
- Gas reserves and production are declining in North America.
- LNG prices will also be high due to similar gas shortages in Europe, and elsewhere.
- Long-range weather forecasts are calling for a relatively normal winter.
...The only reason demand was relatively flat was that there was insufficient supply available to satisfy it. This resulted in some demand displacement out of necessity, where, by way of example, a consumer may have sought out some other energy sources or a business may have moved its operations overseas.
...In a normal year, North America also relies heavily on Gulf production to help meet winter heating demand. This year, because of the rare severity of the hurricane season, a significant amount of Gulf gas production (nearly 40%) is still shut-in. Furthermore, it is possible that half again of this amount could remain shut-in for an extended period of time; a view recently expressed in the media.
...It was also interesting to note that save B.C.'s performance (a relatively small 16% share of reserves compared to Alberta's 75%), reserves would not have stayed flat. BC's relatively small gas reserves will have to take on a disproportionately heavier share of the replacement workload over time. There will soon come a time when Alberta's declines overwhelm B.C.'s additions.
...As a consequence, we continue to believe that the real energy story for this winter is not oil, but natural gas.
One of the sources Kerkovius quotes is Simmons and Company, which is Matthew Simmons, former energy adviser to President Bush, and an increasing voice for the near peak of oil.
Simmons points out that one of the reasons natural gas demand has not increased much lately is simply that there is no supply, and demand has been displaced by either finding other sources of energy, or moving the energy requirement to where the natural gas is.
Overall, they were talking about a near doubling of natural gas price over last year.
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posted 27 December 2005 11:23 PM
