HOUSTON & DENVER--(BUSINESS WIRE)--A joint market study from RBN Energy and BTU Analytics assesses the impending gas-on-gas competition between natural gas from the Marcellus and Utica plays in the Northeast with gas sourced from high-BTU and associated gas in the western half of the U.S. Due to the interplay between natural gas production growth, new pipeline projects, capacity constraints and flow patterns, the onslaught of gas supply is aimed directly at the Henry Hub, price reference point for essentially all natural gas in North America.
“We’ve seen this movie before, in the 2008-10 timeframe when Rockies gas battled it out with new shale supplies from the Haynesville and Fayetteville. But this time there is a big difference in the economics of production,” noted RBN President Rusty Braziel. “In that earlier battle for market share, the breakeven prices for Rockies and Southeast producers were in the $4 to $5/MMbtu range. Most of the production was dry, and producers had yet to realize the significant productivity improvements in drilling and completion technologies seen over the past five years. Today market conditions are quite different.”
The report demonstrates how many producers in Northeast Pennsylvania can profitably produce gas at prices less than $2.50/MMbtu, and how wet (high BTU, high NGL content) gas producers in Southwest Pennsylvania, West Virginia and Ohio can operate profitably at prices well below $2.00/MMbtu by selling higher value natural gas liquids (even at today’s lower NGL prices). Those supplies will compete directly with producers of associated gas from the Bakken, the Permian, the Anadarko and the Eagle Ford, who are making most of their money on the sale of crude oil and condensate, meaning that they are essentially immune to the impact of low natural gas prices – down to a breakeven price of zero.
“These developments have important implications for U.S. natural gas markets over the next few years,” added BTU Analytics Principal Andrew Bradford. “Natural gas surpluses will be competing for market share in and around the Henry Hub, armed with economics far different than the situation back in 2008-10. It will certainly put a lot of pressure on Henry Hub prices. Only demand could provide a reprieve and that looks dicey, at least in the medium term. The infrastructure development required for significant demand growth is years away and must navigate a minefield of permits, local logistics, complex offtake agreements and the ever-present risk of construction delays.”
To provide insight into these issues, RBN Energy and BTU Analytics have jointly prepared a comprehensive analysis of natural gas markets titled Battle for Henry Hub. The report is available for purchase from either company. In addition to the report, backup data files and a presentation of report results are also available.
RBN Energy, LLC
RBN is an energy markets information company and consultancy, based in Houston, TX. The company provides a broad range of consulting services across the natural gas, crude oil, condensate and NGL markets. Services range from strategic advice in fundamental shifts such as evolution in an energy market, to due diligence in mergers and acquisitions, to expert help in legal/regulatory arenas, to assistance in the development of new markets. RBN’s unique market position is a result of basic grounding in deep analytics and extensive fundamentals data, with an overlay of the world-class expertise embodied in our senior professionals, enabling us to be a trusted advisor to senior management. Additional information about RBN Energy is available at www.rbnenergy.com.
BTU Analytics, LLC
BTU Analytics provides independent fundamentals-based consulting and analytical reports to the North American oil, NGL, and natural gas markets. We utilize our in-depth understanding of North American energy data to help clients better navigate the market and determine opportunities and risks in the upstream, midstream, and downstream sectors in the face of ever-evolving market conditions. See www.btuanalytics.com for more information about the company.