Natural Gas Futures

In the last month I have been approached about developing a specialty product for the natural gas extraction process. When researching the futures of natural gas exploration; the findings are very much in conflict with each other from being the next boom to bust. Curiosity has sparked my interest in this and before approaching potential investors I was seeking what the forum may think the futures are in this market?

Thanks

Hvycivileng

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Permalink Reply by neil cox on April 9, 2011 at 3:05pm

Telling lies seems to be the new standard of doing business, "so much in conflict" is not surprising. My guess is CNG = compressed natural gas will average about 70% of the price of gasoline for the next 20 years, with both moving up and down, not always togetgther. Natural gas, perhaps 50 % of the equivelent amount of gasoline as there is significant cost compressing and filling the vehicle with CNG. Neil

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Permalink Reply by Hvycvileng on April 12, 2011 at 12:30pm

Well we are looking at providing proppant sand to the industry. In researching industry past few years and with industry reports this product is in high demand. The industry shows that 70% come from imports.

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Permalink Reply by Brian Carpenter on November 7, 2011 at 10:47am

Hvycvileng,

You ask an interesting question. Right now there is a glut of gas in the U.S. and at current production and consumption rates that's not going to change anytime soon. So unless your product will significantly reduce operating costs or increase gas flow from a given well, conventional wisdom would say that now is probably not the time.

The only problem with making decisions this way is that as soon as someone in authority says "Natural gas prices will stay low for the forseeable future", then industries that can switch to natural gas do so to take advantage of the cost savings. We are starting to see gas-fired power plants being built again in my area, and some coal fired ones being retrofitted to burn gas, for instance.

This, of course, reduces excess supply and tends to buoy prices.

I personally believe we're on the cusp of a natural gas revolution in this country, particularly as regards using it as a motor fuel. I don't think the industry has yet realized how big the consumption spike could be from just a modest number of vehicles converting to run on natural gas. My diesel pickup will burn quite a bit more gas in a year of driving than my house uses in that same year. Even running a 4 cyl gasoline engine primarily on natural gas will double my household's gas consumption.

On that theory, then I think that now is probably an excellent time to lay the groundwork for your product and have everything in place. When prices start to rise, you will be ready to move. FWIW, I think that fact that we've seen big oil move into the gas industry by purchasing gas operations or expanding existing gas operations, and we're now seeing commericals like this in prime time:

http://www.youtube.com/ConocoPhillips#p/a/u/0/urTYPe9j0WM

tells me that the best and brightest in the energy industry are thinking that natural gas is going to be a more significant energy source going forward than it has been in the past.

The only wild card in my mind is the potential environmental stink over fracking. There was a nice little first person editorialized hatchet piece on fracking in the NY Times that I found just this past week, and a cursory googling of "ny times fracking" produces these results:

http://www.nytimes.com/interactive/us/DRILLING_DOWN_SERIES.html

As you can tell, the TImes is flirting with joining the BANANA crowd (Build Absolutely Nothing Anywhere Near Anything.)