From Bureau of Economic Geology, The University of Texas at Austin (
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Bureau Seminar, March 24, 2006

Update on CEE Activities: Natural Gas Issues and Outlooks

Michelle Michot Foss


Highlights from CEE are our research support for the FutureGen Texas proposal, including tracking and responding to Congressional proposals related to climate change; seed funds to launch heavy oil economics/technology; and our growing presence in West Africa, in particular with regard to the West Africa Gas Pipeline. Natural gas remains a key component of the CEE 14-year research portfolio. This winter, natural gas markets and trade in the U. S. and beyond experienced periods of volatility more extreme than any recorded since we began trading natural gas as a commodity in the U. S. in 1990. In the U. S. and North America, Lower 48 production was heavily impacted by hurricane damage and sustained by the Barnett Shale fairway. Pipeline exports of natural gas to Mexico kept Mexico's market supplied, roughly equaling LNG imports to the continental U. S. Canadian developers have moved aggressively to LNG to make up for disappointing results in Atlantic Canada E&P and as a long-term strategy to hedge against maturing production in the Western Sedimentary Basin of Alberta.

Attainment of a workable framework for natural gas shipments from Alaska, but continued lack of a framework for the Mackenzie Delta pipeline in far northwest Canada, along with the never-ending story of upstream policy inertia in Mexico, all present a mixed picture for large-scale, continental projects going forward. Competition for LNG cargos pushed prices upward of $18/mmBtu in Europe, setting up intense Atlantic Basin competition with U. S. markets going forward. The ripple effect from these developments runs far afield: cost and lack of contract supply spurred a reality check for China's plans to dramatically expand LNG import terminal facilities but nudged forward frontier developments in Russia's Yamal Peninsula. Within the context of these and many other developments, North American natural gas scenarios will be discussed that are under development for an Oxford Institute for Energy Studies research paper. Mr. Dmitry Volkov, energy analyst at CEE, has provided research support.