Canadian Natural Gas at $10/MMBtu

Happy times again for natural gas firms
Cold in the second half of winter in the East has depleted gas in storage and boosted prices
Jon Harding, Canwest News Service
Published: Saturday, May 03, 2008

Analyst Steve Calderwood of Raymond James is one of the few dissenters, saying rising production from the U.S. Rockies will drive North American gas prices down to $7 US per million British thermal units by year's end.

Long term, however, Raymond James sees gas trading above $10 US, which is the same territory that FirstEnergy sees it -- at $11 US per million British thermal units or higher between 2012 and 2015.

Tristone Capital Inc. has also lifted its natural gas pricing forecasts higher, near term and long term.
Chris Theal, head of research at the energy advisory firm, believes LNG's importance as a supply source to North America will grow, forcing the continent into a more global natural gas game, in which large importers of LNG, such as Japan and China, are already locking up long-term contracts with suppliers and paying $16 US per million British thermal units.

Theal also predicts, as many do, that global natural gas pricing will converge with oil, and ultimately the two fuels will trade in a close tandem.

"There's an awful lot of LNG that's going to get locked up under long-term contract and we believe it'll leave a scarcity of gas beyond 2010 and 2011," said Theal. "And if you want to meet your power generation requirements with natural gas, you're going to have to pay an oil-link price to land that gas ashore."

While juniors like Silverwing Energy may enjoy a financial lift from the impressive recovery of natural gas, it remains to be seen how, and even if, large conventional producers of the resource will pour investment back into the Western Canadian sedimentary basin.

Northeastern B.C.'s Montney and Horn River unconventional gas plays aside, large finds are few and far between across the West, where finding-and-development costs remain among the highest in the world.

Natural-gas production in Western Canada has fallen by about 900 million cubic feet per day since 2006, according to Theal, while the Canadian Association of Petroleum Producers (CAPP) anticipates invest- ment by conventional oil-and gas-companies in Alberta, alone, will have declined by $7.5 billion this year compared to 2005.