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Average Wholesale Natural Gas Prices Fell 31% in 2012

January 11, 2013 By Jessica Lyons Hardcastle

Average wholesale prices for natural gas fell significantly throughout the US in 2012 compared to 2011, according to the US Energy Information Administration.

The agency says the average wholesale price for natural gas at Henry Hub in Erath, La., fell from an average $4.02 per million British thermal units (MMBtu) in 2011 to $2.77 per MMBtu in 2012 — the lowest average annual price at this key benchmark location since 1999.

A mild 2011-12 winter, sustained high natural gas inventories and rising natural gas production in the Marcellus and Eagle Ford basins contributed to lower average spot natural gas prices at Henry Hub.

Prices continued to drop despite rising natural gas use for power generation, lower overall natural gas net imports from Canada by pipeline, reduced liquefied natural gas imports, higher natural gas exports to Mexico, and temporary production shut-ins related to Hurricane Isaac.

EIA reports total natural gas production was higher in 2012 than in 2011. In contrast to 2011, however, when production grew steadily over the course of the year, 2012 saw production generally remain flat, close to the level reached towards the end of 2011.

The agency says the decline in average wholesale natural gas prices was roughly uniform throughout the US, with most trading points averaging within plus or minus $0.25 per MMBtu of Henry Hub. An increased supply of natural gas contributed to higher inventories and lower prices nationwide.

Total dry natural gas production for the Lower 48 states rose to an average of 63.6 billion cubic feet per day (Bcf/d) in 2012, an increase of almost 4 percent over 2011, versus a rise in consumption of about 3 percent, EIA says. It attributes this increase to greater production from the Pennsylvania portion of the Marcellus Shale Basin, and the adoption of more efficient drilling techniques and the continued targeting of liquids-rich shale gas formations.

Forbes forecasts natural gas will continue its reign over oil in 2013. The January article says high natural gas inventories should keep prices down this year, and says CEOs will continue to choose relatively cheap natural gas over pricey oil.

 



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