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Published: Friday, 9/23/2011

Natural gas prices fall as Ohio, Pa. supply more

Forecasts on cost low for 2 heating seasons

BY JON CHAVEZ
BLADE BUSINESS WRITER
A worker carries out a routine check at a natural gas control centre of Turkey's Petroleum and Pipeline Corporation, 35 km (22 miles) west of Ankara. A worker carries out a routine check at a natural gas control centre of Turkey's Petroleum and Pipeline Corporation, 35 km (22 miles) west of Ankara.
AFP/GETTY IMAGES Enlarge

Consumers nervous about the economy might have one less thing to worry about this winter: their natural gas bills.

A combination of abundant shale gas from western Pennsylvania and eastern Ohio, sluggish demand for the heating fuel, and slowed industrial activity is driving down commodity prices.

That, in turn, appears to mean customers should not see any price spikes or tightness in supplies this winter — and possibly next.

“I’m looking at about a 15 percent reduction in rates going into this winter,” said Bob Eyre, vice president of Ohio Gas Co. in Bryan.

There is little deviation in the prices for natural gas now versus in 18 months on the commodity market, he said.

“We’re set for a long time with these nice rates. … Even with an extremely cold winter, I don’t see any issues. The supply is there,” he added.

Columbia Gas of Ohio Inc., the major utility serving northwest Ohio, this month charges customers a rate of 57 cents per 100 cubic feet.

Mike Anderson, the utility’s director of supply planning, said that rate could go lower by November because by that point underground storage fields in Ohio and elsewhere will be at capacity but wells will be producing a significant amount of natural gas that will need to be used.

The most recent government report on natural gas inventories showed 3.2 billion cubic feet in storage, or just slightly below the amount at the same time in 2010. The U.S. Energy Information Administration estimates this year’s final inventories will fall short of last year’s record 3.84 billion cubic feet, they should amount to 3.74 billion cubic feet. The five-year average is 3.2 billion.

Meanwhile, the Energy department said natural gas consumption by electric power plants declined in August and it expects natural gas consumption to rise just 1.8 percent in 2011 and 0.6 percent in 2012.

The fuel, used mostly in the winter for heating buildings, spiked in price in 2000, 2001, 2005, and 2008 because of terrorism, natural disasters, and other reasons.

But spikes are highly unlikely in the near-future, said Robert Stitt Black, president of Waterville Gas & Oil Co.

“Prices are going to be flat, just like last year. That shale gas has made a big difference,” he said.

Mr. Eyre said the development of new shale gas supplies was “the biggest game-changer for us and our industry.”

Nearly 25 percent of the nation’s natural gas supplies come from the Marcellus shale regions in western Pennsylvania and parts of eastern Ohio, developed in the last five years. It has added to supplies and stabilized prices, and can cost less wholesale than more traditional supplies, experts have said.

Mr. Anderson said another factor that has lowered and stabilized prices is continued pipeline construction. Bottlenecks in eastern states such as Ohio have been reduced or eliminated, making it easier to ship gas.

Five years ago a pipeline connecting Colorado with Ohio, known as the Rockies Express, was built to ship lower-priced natural gas east. The pipeline came online in 2009, but since then Ohio and Pennsylvania shale gas has become so cheap and plentiful that owners of the Rockies Express are seeking ways to reverse the pipeline and ship eastern gas out west.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.



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