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January 2nd, 2014

2013 Energy Recap

by Andrew Price, President & COO

What kept CES busy in 2013? Too much for a single blog entry!  I have highlighted just a few of the most interesting projects and topics from 2013.

  • Natural Gas Basis Spikes – Natural gas users in New England have been dealing with a shortage of pipeline capacity during 2013. Coupled with supply outages in Atlantic Canada and high prices overseas for Liquefied Natural Gas (LNG), New England does not have adequate natural gas supplies on peak winter days when the combination of heating and power generation demand exceeds available throughput. Given the huge resource of cheap shale-gas just to the south of New England in the Marcellus, this is difficult for New Englanders to take. Spot prices for natural gas in New England have exceeded $30/MMBtu at times, $26/MMBtu higher than the rest of the US. These high prices forced several large manufacturing facilities to reduce production and send workers home. Look for relief in 2016/2017 as pipeline networks get expanded and cheap shale gas finally flows more freely into the region. Until then, New England may continue to see volatile winter natural gas and power pricing.
  • Energy Price Volatility – Increased market volatility has made strategic planning more important than ever in the Northeast US. Design and implementation of a procurement strategy for energy is perhaps the most important thing we do, day in and day out, at CES. Key ingredients to any successful strategy to handle volatile energy markets include: continuous market monitoring, a robust bid process with as many competitive suppliers as possible, evaluation of alternative product options, budgetary and credit limitations, and risk preferences. 
  • Trucked Natural Gas – Trucked natural gas (compressed or liquefied), as an economical alternative to oil, has increased in rural parts of the US not served by natural gas pipeline infrastructure. CNG is natural gas that has been compressed to 3,500 PSI and delivered to end users in over the road trailers. LNG is natural gas that has been cooled to -265F, turned into a liquid, and delivered in over the road trailers. CES had clients using both CNG and LNG in 2013 and has been involved in many more CNG/LNG feasibility studies. The continued expansion of trucked natural gas depends on the price advantage of natural gas compared to both oil and propane alternatives.
  • Shale Oil – The shale natural gas revolution is being followed by a shale oil revolution. North Dakota is bursting at the seams with workers rushing to get oil out of the Bakken Shale formation. The US has reversed a long slow decline in domestic oil production and is now projected to produce close to 10 million barrels of oil per day by 2016. This puts the US on par with Saudi Arabia and Russia as one of the top oil producing nations in the world.
  • Natural gas exports  - More than 2 dozen applications have been submitted to regulators requesting authority to export domestic natural gas in the form of Liquefied Natural Gas (LNG). Gas exports by ship are likely to start in 2016. Initially, exports will have little impact on domestic prices. As the number of export terminals increases, each terminal capable of exporting 1-3 billion cubic feet of natural gas per day, domestic prices must rise. A political battle is brewing about the best use of domestic natural gas, as a cheap feedstock to fuel a resurgence in US manufacturing and industry, or as a commodity with value that is best unlocked by sale into high priced foreign markets. Competition from new LNG export facilities in places like Eastern Africa and Australia could limit the ultimate number of facilities that get built in the US.

Thanks for reading the CES blog in 2013!

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