What does natural gas consist of?

What is the chemical makeup of methane?

Where is natural gas produced?

I see natural gas measured in cubic feet, BTU and therms. How is one related to the other?

Are we running out of natural gas?

Can’t we just import more gas to meet our needs?

Is it true that only a handful of companies control the production and price of natural gas in the U.S.?

Many of your articles focus on the price of oil and the effects of peak oil, yet most of your projects are natural gas-related. What is the relationship between the two, because on some days when oil is up, gas is down, and vice-versa.

Natural gas is mostly methane, plus varying amounts of thane, propane, butane, pentane, hexane and heptanes. Wholesalers generally remove everything but the methane before selling to retail.

The methane molecule is made up of one carbon atom and four hydrogen atoms. Its chemical formula is CH4.

Yes it is. Methane represents approximately 20 percent of total U.S. emissions of greenhouse gases. However its environmental advantage over other fossil fuels like crude oil and coal lies in its simpler molecular structure, so that when burned, fewer particulates and other undesirable pollutants are released.

Natural gas is found in commercially viable amounts in 33 states and 50 countries around the world. The U.S. is one of the leading producers and is the largest consumer of natural gas.

There are six fundamental factors which drive the long-term price of natural gas:

• Levels of production (supply)
• Amount of imports
• End-user demand
• Oil prices (Some large industrial users can switch from oil to natural gas and back, depending upon its price. When oil prices rise, users may switch, thereby possibly driving gas prices higher.)
• Gas inventories
• Weather

One British Thermal Unit (BTU is the heat required to raise the temperature of one pound of water by one degree Fahrenheit.

One therm equals 100,000 BTUs.

An Mcf is one thousand cubic feet of gas, which equals approximately 1 million BTUs, or ten therms.

Are we running out of natural gas?

No. The United States possesses adequate natural gas resources -- if government permits them to be developed. The continental U.S. contains an estimated 213 trillion cubic feet of natural gas (a 10-year supply at today's demand rate). However much of that gas is now off limits due to environmental regulations. This is one reason U.S. production has leveled off in recent years, despite rising demand.

Can’t we just import more gas to meet our needs?

Not in the short to medium term. Liquified natural gas is very expensive and at present there are few terminals in the U.S. which can accept it. This is why 85% of the natural gas consumed in the U.S. is produced in the U.S. Most of the rest is imported by pipeline from Canada.

Is it true that only a handful of companies control the production and price of natural gas in the U.S.?

No. Currently there are about 2000 companies producing natural gas in the U.S., with the top five together producing only about 18% of the total.

Why have natural gas commodity prices fallen since 2005?

In the late summer of 2005, hurricane activity in the U.S. Gulf Coast damaged natural gas infrastructure in the region and shut in significant amounts of natural gas production. As a result, North American natural gas prices reached unprecedented highs.
Since then, prices have declined considerably, due primarily to significant production recovery from hurricane disruptions. In addition, two weather factors in 2006 have supported lower natural gas prices – warm winter weather in 2005/06 and an inactive hurricane season in the U.S. Warmer weather throughout the 2005/06 winter resulted in lower residential and commercial demand, allowing more natural gas to be injected into storage. Second, a relatively inactive hurricane season this year has meant that there have been no further hurricane-induced natural gas production shut-ins. At the same time, this has also allowed producers in the U.S. Gulf Coast to restore infrastructure and production to near pre-hurricane levels.

Many of your articles focus on the price of oil and the effects of peak oil, yet most of your projects are natural gas-related. What is the relationship between the two, because on some days when oil is up, gas is down, and vice-versa.

While it is true that oil and gas prices do not always track each other on a day-to-day basis, over the long term, they tend to trend together. Over the past year, oil futures were up 385% while natural gas futures were up over 300%. So, both markets have appreciated considerably long-term.

Since direct gas investments (as opposed, say, to futures speculation) are a long-term play, our focus with regard to peak energy is long-term as well. Natural gas plays are known to deliver returns for years, if not decades, to come, and the long-term price trend in gas is clearly higher.

The reasons behind the continuing strength in the gas market due is in part to the ever-increasing amount of natural gas which is being consumed for electrical generation. Reportedly, more than 25% of the electricity generated in the U.S. is now fired by natural gas, and that number is rising every year.

We expect this trend to continue as few new nuclear power plants are being planned in the U.S. and gas remains the cleanest burning fossil fuel alternative.
  
One final thing to keep in mind: Middle Eastern terrorists have clearly stated their desire to attack oil installations in their homeland in order to hurt Western commerce. Natural gas produced in North America bears less risk of attack. This has given rise to a “terror premium” in the crude oil market which explains much, if not all, of the extra 85% advance in the price of oil vs. gas over the last decade.