This presentation will examine recent developments in the U.S. natural gas market and cover likely scenarios for the commodity that is so vital to independent E&P companies. In particular, the drivers of recent natural gas pricing developments will be outlined, along with explanations of why natural gas in the United States could begin to trade at a discount to natural gas in Europe and Asia. Given the vast amounts of indigenous reserves and the impending arrival of LNG, natural gas prices in the United States could begin to consistently trade lower—even lower than current levels. Several questions, however, remain:
- Is there adequate supply in the U.S. rig market to develop current reserves and bring on significant new supply?
- What is the cost of this indigenous supply?
- How long will it take to bring on line?
- What role will LNG diversions to Europe have on U.S. pricing?
- What effect will refining capacity additions have on the pricing of natural gas substitutes and switching economics?