June 7, 2010

Shale Gas Blow-Out Ignites Natural Gas Prices

Last Wednesday, an EOG shale well in Pennsylvania's Clearfield County experienced "control issues" and proceeded to blowout for 16-hours before it was staunched. The market reacted by driving the price of the front-month natural gas up 11% last week. On Tuesday, before the blow out, natural gas was trading as low as $4.20 per mmbtu. Last Friday, in intraday trading, natural gas peaked at $4.98 per mmbtu, but settled at $4.79 per mmbtu. At 9:15 this morning (6/7/10) natural gas is down slightly to $4.791 per mmbtu.
The market's reaction reflects concern that shale gas exploration will be subject to more regulatory oversight, especially in light of the fallout from BP's Gulf of Mexico blow-out. New York State has a moratorium on shale gas production and Pennsylvania is also reviewing tighter oversight of its shale rigs. If I were a betting man, I would wager that state governments will impose tighter environmental regulations on shale gas drilling. The result for Northeasern consumers will be slightly higher prices and longer developmental times for shale structures.

Growth in shale gas projects has been exceeding growth in offshore rigs for over three years. Some analyst will cite a 10:1 E&P cost differential between offshore and land based rigs. Shale wells are also brought online faster and are much easier to monitor and maintain. The EOG blow-out demonstrates that the industry's capability to cap a land-based rig far outstrips its ability to cap an offshore rig.

The media will conflate the two drilling methods, which is simply an exercise in poor logic. Shale gas represents the future of the US natural gas industry, while offshore gas exploration represents its past. The revolution in unconventional drilling is the real story that will be overlooked. Shale gas production in the U.S. rose 71 percent in 2008 from 2007 to 2.02 trillion cubic feet, or about 10 percent of total U.S. output, according to the most recent Energy Department data. (Research: Bloomberg.com)

(Almost) Affordable LEDs Are in A Home Depot Near You
There is good news in the lighting efficiency marketplace for business and home owners. Home Depot's recent introduction of its new 4-Watt Ultra High Performance LED bulb for less than $21.00 per bulb will attract early adopters. (Pictured left) The pricing also indicates that lighting manufacturers are finding production efficiencies, which will hopefully continue to bring the prices of these next generation lighting units down to earth for businesses.

Through Power Management Company's LightSavers program, we can provide even greater cost savings than retail providers. Plus, our lighting experts can assess and manage the project from start to finish. If your state offers a lighting remediation grant or rebate program such as that offered by New York State through NYSERDA, we can help you complete all necessary paperwork, project design and post project certification.

 LightFair, which was held in Mid-May highlighted the new "affordability" of LED's. Lighting Science Group introduced cheap 40-watt and 60-watt replacement Definity LEDs. Philips introduces its EduraLED, a brighter, more expensive 60-watt replacement bulb. Osram Sylvania also introcuced a 60-watt replacement bulb that outputs at 810 lumens and will last over 20,000 hours. Pricing is still being developed for these bulbs.

LED per unit costs have, up until this year, been difficult to sell to factory owners who have not embraced the high up-front costs for low maintenance, much lower energy costs and zero mercury. As the competition for the 60-watt bulb standard heats up, lighting projects will probably include more LED options, especially for difficult to maintain locations. An LED bulb, depending on usage can last from ten to twenty years. Generally, they have 20 times the life span of an incandescent bulb.

To quote an article from the LC-LED web site: "Well designed LED bulbs are 80% efficient. The remaining 20% is lost as heat energy. Compare that with incandescent bulbs which operate at about 20% efficiency (80% of the electrical energy is lost as heat). In real money terms, if a 100 Watt incandescent bulb is used for 1 year, with an electrical cost of 10 cents/kilowatt hour, $88 will be spent on electricity costs. Of the $88 expense, $70 will have been used to heat the room, not light the room. If an 80% efficient LED system had been used, the electricity cost would be $23 per year - there would be a cost savings of $65 on electricity during the year. Realistically the cost savings would be higher as most incandescent light bulbs blow out within a year and require replacements whereas LED light bulbs can be used easily for a decade without burning out." (Reference: The Advantages of LED Lights by LC-LED http://www.lc-led.com/articles/ledlights.html)

Natural Gas Storage Rises 88 BCF
Working gas in storage was 2,357 Bcf as of Friday, May 28, 2010, according to EIA estimates. This represents a net increase of 88 Bcf from the previous week. Stocks were 38 Bcf higher than last year at this time and 306 Bcf above the 5-year average of 2,051 Bcf.


Natural Gas Rigs Decrease by 20
Baker Hughes reported that natural gas rigs decreased by 20 (5/28/10) compared to the previous week. There are 947 working rigs, 247 more than last year.

Natural Gas Market Watch- Intraday Prices Snapshot
Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at 11:12 AM for the next six months($ per mmbtu, intraday prices):

Jul. $4.843 +0.046
 Aug. $4.891 +0.049
 Sep. $4.918 +0.055
 Oct. $4.988 +0.048
 Nov. $5.251 +0.049
 Dec. $5.513 +0.023

Natural Gas Futures:
PMC 30-Day Natural Gas Futures Chart

Crude Watch
NYMEX Crude (WTI) front month future is down $0.21 to $71.28 at 10:44 AM.
 OPEC Basket Data
 
Electricity Watch-
Electricity for all Northeast markets is stable.
For more information view the Day Ahead Electric pricing data charts from the PMC database, updated every Monday.
 
Weather Trends-
09-2010.
NOAA Forecast for Next Week
8-14 Day forecast
NOAA Forecast- 30-Days
El Nino-La Nina (Pacific Ocean Temperature Levels)
Arctic Oscillation (Arctic Pressure Patterns)

Written and Researched by Martin Linskey; Energy Charts developed by Charles Myers.

Disclaimer: This information is provided for the use of our customers and potential customers. Power Management Company assumes no responsibility or liability for the accuracy or completeness of pricing or information in this document. Historical data was obtained from sources that we believe to be reliable, but we do not guarantee its accuracy or completeness. It is not intended to provide advice or recommendation. Views are subject to change without notice.