2013 Natural Gas Report Overview





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Published on Oct 30, 2013

Peter Abt, Managing Director, explains how power generation and LNG exports are driving optimism across the industry. Find out more in our report: http://bit.ly/1cpX6xq

The industry outlook is very positive right now. While current gas prices are low, expectations driven by oil focused drilling and natural gas liquid focused drilling gives people reason for optimism that the industry will be well positioned going out into the future.

Perhaps the most surprising element to me was the general consensus that demand growth is going to be driven primarily by electric power generation with LNG exports following a close second. What's a little bit surprising about that is that there is some general pessimism over the level of exports that will ultimately be authorized by the government.

The industry generally feels that the natural gas prices will settle in about a $5 - $6 band over the course of the next 15-20 years. That is consistent with Black & Veatch's long-term forecast as well in our energy market perspectives. However, one of the things that's interesting to note is that due to the efficiencies and the aggressive nature of the producing community, if they see strong price signals, perhaps north of $6 for any period of time, they will immediately ramp up drilling activity and as we've seen based on past history, what that will result in is prices probably down in the $2 - $3 range once again. So we continue to go through a number of cycles in the gas business. It's really boom or bust.

While in general we believe that the industry outlook is very positive, there are tremendous opportunities for growth and demand, which will really drive the overall outlook for natural gas. That will benefit not only the consumers but also benefit the producer and enable them to continue their gas focused drilling out into the future.


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