US Report Predicts Rising Natural Gas Prices in 2013-14

From Pittsburgh Post-Gazette

By Erich Schwartzel

Marcellus Shale drillers who have had to cut costs and disassemble rigs because of recent record-low natural gas prices should expect a reprieve over the next two years, according to the latest projections from the U.S. Energy Information Administration.

The average price of natural gas is expected to increase by almost a dollar in 2013, hitting $3.74 per million British thermal units.

That’s a significant jump from the $2.75 average seen last year, when accelerated drilling created a glut in supply that caused prices to drop and made drilling in many places unprofitable. Increases are expected to continue into 2014, when prices are predicted to hit $3.90.

The EIA report released Tuesday is the first look into 2014 for the domestic and international energy scene, and it includes projections that could affect gas and coal activity in Pennsylvania and surrounding states.

The report is the latest set of tea leaves for an industry that’s been in flux: Enthusiasm for drilling was tempered in recent years by economic realities that made it risky for every rig to turn a profit. The low prices made natural gas an easy sell to large, industrial customers who consume a lot of energy, but slowed lease activity as companies waited for prices to rebound.

Higher gas prices would send reverberations across multiple sectors, helping coal become competitive with natural gas again as an electricity source and allowing drillers to broaden their focus beyond shale formations that are rich in oil. In addition, the federal energy agency projects increased domestic oil production will break new records over the next couple of years and eventually lead to lower prices at the gasoline station.

If natural gas prices continue an upward trend toward $4 per mcf, companies that had drilled wells but weren’t bringing the gas to market could decide it is worth hooking those wells up to pipelines and selling the gas, said Adam Sieminski, the EIA administrator.

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