The American and worldwide natural gas markets have changed so much in the past year that they are unrecognizable.
American national politics have them so distorted that they’re still only a shadow of what they could become, but raging worldwide demand and dramatically elevated prices are driving West Texas producers to kick out all the stops.
Odessa oilman Kirk Edwards and Pinnacle Midstream II Partner and Chief Commercial Officer Drew Ward of Houston look for the futures market to stay strong for the rest of this year and next year.
Noting that the price per thousand cubic feet is holding at around $8, up from $3 last year, Edwards said, “The biggest energy exporter, the Freeport liquefied natural gas facility on the Texas Gulf Coast, had an explosion June 8 that caused a tremendous amount of gas not to be exported to Europe, so it had to be utilized in the United States.
“Then a lot of gas that would have gone into storage headed straight to the NG power plants and was burned and used,” he said. “Producers kept the price propped up when normally that would have created such a glut that the price would have cratered.”
Asked what he expects for the rest of 2022, Edwards said, “It depends on Russia.
“If they decide to pipe gas to Germany, things will be much better. If Russia keeps choking off Europe, there’ll be very high gas prices this winter and that will cause shortages in the U.S., too.”
Edwards’ company, Latigo Petroleum, is one of the largest natural gas producers in the Texas Panhandle.
“There is no exploration right now because everyone is drilling the shale plays,” he said. “The plays are more of a manufacturing process than exploration because they know what they’re going to hit.
“There is a lot more natural gas here in the Permian Basin, but it’s having a hard time making it to the gas plants and being processed. With the LNG market, the U.S. has gone from being a net importer to now exporting 12 billion cubic feet per day and that number is only projected to grow in the future.”
Ward said he is “bullish on hydrocarbons for the foreseeable future as we are under-supplied worldwide as well as dealing with the Russian-Ukrainian instability.
“I believe we’ll continue to see strong NG prices for the balance of this year and next year,” he said. “Geopolitical factors as well as under-investment in the sector have created a perfect storm for strong commodity process for the near term.”
Edwards said President Biden’s commitment to send Europe another five billion cubic feet per day “definitely puts some weight under that market.”
The Odessan said producers like him can’t get in on the European prices of $40-50 per thousand cubic feet because LNG is sold by the companies that own the gas plants and major pipelines.
Edwards said futures contracts are going for a very healthy $7.80 through the rest of this year and into April 2023.
“These prices are unprecedented,” he said. “The Basin is the Saudi Arabia of natural gas in this country and we could easily supply all of Europe’s needs if the Biden administration would let us do what we could do.
“But President Biden and the environmentalists and states are blocking the pipelines we need to make that happen. People in Europe will freeze because we can’t get the pipelines built here in the U.S., which is a shame.
“New York State is blocking a pipeline from the Haynesville Shale in Pennsylvania, so we can’t move the gas east to liquefy it and put it on the LNG ships,” Edwards said. “Those northeastern states will not allow an LNG facility to be built, either.
“Education and leadership could really help this country right now and help save Europe from being extorted and frozen to death by Russia this winter, which is exactly what’s going to happen.”
