Fitch Solutions / Energy & Natural Resources / United States /08 Jul, 2019

US natural gas supplies continue to rise to meet record exports and increases in consumption. However, the growth in gas supply will outpace the increases in demand and we expect prices to remain under pressure.

With further material production expected from shale producers coupled with more LNG exports projects receiving sanction, the outlook for prices should strengthen after 2020.

Beyond seasonal demand spikes, prices look to remain subdued for the remainder of 2019, with 2020 looking to be balanced as new efficient supply meets growing exports. Gas storage remains nearer to five-year lows, ……

This article from Fitch Solutions Macro Research is a product of Fitch Solutions Group Ltd, UK.

Reading-based UGI cuts natural gas rate in Penna.

Customers will see their monthly bills drop by an average of $1.81 beginning July 1.

Written by Dan Kelly, Reading Eagle, June 15, 2018

Reading, PA — Residential heating customers of UGI Utilities Gas Division will see their monthly bills decrease by an average of $1.81 beginning July 1 due to a tax credit contained in the federal tax cut.

UGI officials said the latest cut comes on the heels of a 2.8 percent rate cut credited to the reduced cost of buying natural gas and also set to go into effect July 1. The new rate is effective June 1, so the average monthly bill for June will drop from $71.38 to $69.36.

Adding the $1.81 across the board tax credit, the average monthly bills in the mailbox July 1 will drop from $69.36 to $67.55 per month.

UGI still is predicting an early Christmas present for ratepayers in the form of an almost 10 percent rate cut that would become effective December 1.

UGI spokesman Joseph Swope confirmed forecasts for a big December rate drop first predicted in May are holding steady as of Friday. The proposed cut would lower average monthly residential bills from almost $70 per month to about $60.

If the price of purchasing natural gas continues to trend downward, Swope said, the projected Christmas cut could lower average monthly bills from $69.36 to $60.95 after December 1.

“It’s a prediction right now, but we were just talking about December’s rate and it is still looking good for a roughly 9.5 percent cut,” Swope said. “It could go up, it could go down.”

Swope said the Pennsylvania Public Utility Commission directed utility companies to provide a credit to customers based on the decrease in federal corporate tax rates and other tax changes under the Tax Cuts and Jobs Act of 2017.

The main reason for the price drops is the abundance of natural gas in the Marcellus shale formation under much of western and central Pennsylvania.

Swope said UGI customers haven’t seen a $10 per month rate cut for about a decade. He said the big cuts started happening in 2008 when fracking wells tapping Marcellus natural gas began to go online.

UGI’s Gas Division is headquartered in Reading and serves about 400,000 customers in 16 southeastern Pennsylvania counties, including 85,000 households and businesses in Berks County.

Keep in mind that those figures are to get oil out of the ground.

To be used, crude oil must be transported to a refinery, converted into useful products, and the products transported to the point of use.

Increased efficiency of fracking is marginal. The improvement per well results from longer laterals. No secondary recovery is in sight, since fracking results in source rock broken by pressure, which goes in all directions following the weakest leads. The recovery is very small compared to conventional. Present yields are from sweet spots chose for the best yield.

The mess we are due in Appalachia involves gas, however, where the situation is somewhat different. Russia has about a quarter of the world reserve, Iran about one sixth, Qatar about one eighth and the United States somewhat less than one twentieth. Over seas reserves are largely conventional and low technology and cost to recover. Russia and Iran would be the natural suppliers of Europe and China.

Big pipelines are in the works from Russia to China. This wonderful article in the Financial Times, tells much about the gas line:

https://ig.ft.com/gazprom-pipeline-power-of-siberia/

It will cost $55B and is now over half done. It is 56 inches diameter. Compare that with 42 inches for the ACP and MVP! As much capacity as both. 1700 miles in length, compared to the MVP at 303 miles and about 600 for the ACP.

Russia is also exporting oil to China. The second pipeline recently completed puts it ahead of Saudi Arabia in shipping oil to China.

See the Breakeven Myth here:

https://oilprice.com/Energy/Energy-General/Saudi-vs-Shale-The-Breakeven-Myth.html

“This article misses the main point. The price of oil is set by Saudi Arabia, not anyone in the United States. If the Saudis want fracking to be economical, they can make it so with one phone call. However, the Kingdom decided several years ago that the United States, not the Kingdom, will become the swing producer. That decision allowed the price of oil to fall below the $80/bbl economic threshold that spurred fracking in the first place. At $80, fracking makes money. At $50, it does not. It’s really that simple.”