LOCAL ECONOMIC SNAPSHOT | FOSSIL FUELS

Natural gas prices double, but energy industry stays skittish

By JAMES OSBORNE
Staff Writer josborne@dallasnews.com

By TOM SETZER
Staff Artist tsetzer@dallasnews.com

In the last 12 months, natural gas prices have climbed a whopping 103 percent to more than $4 per million BTUs (British thermal units). But thats still a long way from the summer of 2008 when prices were closing in on $12. This is leaving oil and gas executives reluctant to increase production, which has plateaued in areas like the Barnett Shale. For now, analysts believe companies are waiting to see whether the federal government lets them expand liquefied natural gas exports to countries like Japan and China.

Monthly average price climbs

Driven by an abnormally cold winter in the Midwest, monthly average prices have doubled from a low of $2.05 per million BTUs in April 2012 to $4.16 in April 2013.
(New York Mercantile Exchange natural gas futures in dollars per million BTUs) $5 May: $4.13* April 2013: $4.16 January 2012: $2.71 April 2012: $2.05

Texas natural gas production levels off

The industry saw production grow 40 percent between 2005 and 2008. But output since then has plateaued.
(Gross withdrawals in billions of cubic feet per day) 30

25

November 2008: 22.22

September 2012: 22.61 January: 21.80

$4

20

$3

15

January 2005: 15.90

$2 10 $1 5 0 J FMAM J J A S OND J FMAM 2012 2013

*First three days of the month

0 05 06 07 08 09 10 11 12 13

Texas drillers look to oil, not gas

The number of natural gas wells being finished has dropped more than 60 percent since 2008. Meanwhile, oil well completion doubled last year.
20,000

Electricity prices hold steady

Electricity prices in Texas are tied to natural gas. In the last 12 months prices have held relatively steady. But that could soon change.
(Cents per kilowatt-hour)
15

In 2012:
14,516 total wells

15,000

Oil wells completed

10,000
10,936 oil wells

Residential
10

11.07

Commercial Industrial
5

8.04 5.69

5,000

Gas wells completed

0 2007 2008 2009 2010 2011 2012

3,580 gas wells

J F MAM J J A S O N D J F MAM J J A S O N D J F 2011 2012 2013

SOURCES: U.S. Energy Information Administration; Bloomberg News; The Railroad Commission of Texas; Dallas Morning News research

The bottom line

The industry remembers $2 gas. They are probably not interested in increasing production where theyre going to flood the market and cause prices to come down again. Price rises [in electricity] are coming, and theyre going to come pretty stiffly over the summer. First you have the increase in the natural gas market. And you are starting to get a little bit of a building panic in the market [that] were going to have a really hot summer. Rob Snyder, chairman and co-founder, Stream Energy Everyone is waiting to see whether the federal government opens up exports for liquefied natural gas. Right now, refineries can only export to U.S. free-trade partners. But Japan and China are desperate for LNG, and if U.S. companies can start exporting there, that could push up domestic gas prices. James Osborne, staff writer, The Dallas Morning News

Marcela Donadio, partner, Ernst & Youngs Oil and Gas Center