Natural gas supply concerns top US energy policy agenda

Maureen Lorenzetti
Washington Editor
WASHINGTON, DC, June 12 --With the prospect of natural gas prices escalating this winter, US policy makers are scrambling to look proactive even though Mother Nature carries more influence than politicians regarding possible gas price spikes.

In its forecast, the Energy Information Administration said Tuesday the natural gas market is tight, with gas storage levels lagging well behind normal levels. Spot natural gas prices likely will average $5-6/MMbtu through December, the agency said.

But EIA Administrator Guy Caruso told the House Energy and Commerce Committee that prices could go higher if there is an abnormally hot summer followed by a cold winter. Shifts in near-term production could also impact prices, he said.

"It appears that for every 1% that production falls below our base case assumptions, we can expect 5-10% higher peak prices this winter," Caruso said. "These estimated average impacts mask the potential for much more dramatic spikes in prices for short periods."

Energy traders are anticipating a tight market, with option prices implying a 25% chance that the peak price will exceed $7.40/MMbtu, according to the US Federal Reserve Board.

Meanwhile, Republicans and Democrats are hoping to deflect any political damage those higher prices could inflict on their reelection chances. And with a US presidential primary season around the corner, energy issues could become an early campaign issue, especially if home heating and motor fuel prices soar, political analysts say.

Responding to a request by Sec. of Energy Spencer Abraham, the National Petroleum Council plans a June 26 emergency meeting to discuss natural gas supplies.

Congress also is weighing in. The House Energy and Commerce Committee held a high-profile hearing on the subject June 10. Alan Greenspan, chairman of the Federal Reserve, was the star witness. Senate hearings also are planned on gas price concerns.

Last month, Greenspan grabbed the attention of industry lobbyists and energy analysts when he told the congressional Joint Economic Committee that US natural gas supply issues were a "very serious problem" that needed to be examined.

At his most recent congressional appearance, Greenspan expanded on that statement, touting LNG imports as the most efficient way to alleviate supply concerns (OGJ Online, June 11, 2003).

Policy options
His speech focused almost exclusively on supply issues and did not specifically address what influence that mandated energy efficiency measures could have on demand.

Greenspan generally avoided offering an opinion on pending legislation, although he did seek to discourage Congress from enacting subsidies as a way to boost domestic production or build an Alaskan Highway gas pipeline.

LNG, he said, is not the only answer to narrowing the supply gap; there are still "numerous" unexploited sources of US gas production. But, both regulators and Congress need to be more consistent about what is the "agreeable" tradeoff between energy and environmental concerns, he suggested.

"I do not doubt we will continue to finetune our areas of consensus. But, it is essential that our policies be consistent. For example, we cannot, on the one hand, encourage the use of environmentally desirable natural gas in this country while being conflicted on larger imports of LNG. Such contradictions are resolved only be debilitating spikes in price," he said.

Road ahead
Political realities may get in the way of finetuning the consensus Greenspan envisions.

The House passed a sweeping energy bill in April designed to dovetail with the White House's energy blueprint. But the energy bill includes new tax incentives that the Bush administration does not specifically endorse, and that Greenspan himself discourages.

At the same time, the House voted to strip from the bill a proposal that called on the federal government to inventory all oil and gas resources on federal lands and waters, including areas now under a drilling moratoria.

In the Senate, an inventory provision survived in the pending energy bill. That legislation also is expected to include tax incentives as well as government incentives for an Alaskan gas pipeline. The bill also requires President George W. Bush to issue periodical reports on the state of the US natural gas market through 2015.

Final negotiations between the House and Senate over an energy bill are expected during September, at the earliest. But the volatile natural gas market is expected to dominate the summer energy policy agenda.

House Republican leaders, many of whom are from oil and gas producing states, are expected to make the case that short-term natural gas price concerns will turn into a long-term crisis, unless a comprehensive energy bill becomes law.

"If the train wreck occurs, and natural gas prices skyrocket, and shortages occur; who will be at fault? The producer? The consumer? Or perhaps, the federal government? We see a storm brewing on the horizon. We need to prepare for it," said House Energy and Commerce Chairman Billy Tauzin (R-La.).

But, Greenspan rejected assertions by Tauzin and other lawmakers, including Rep. Joe Barton (R-Tex.), that the US needs to boost domestic production to stabilize prices and reduce reliance on potentially unstable foreign energy suppliers.

"If North American natural gas markets are to function with the flexibility exhibited by oil, unlimited access to the vast world reserves of gas is required," Greenspan said during his testimony.

Later in an exchange with Barton, Greenspan said the US is "committed irrevocably to globalization for a good reason," and that "it is in the "interest of the country not to be protectionist. We don't have a choice."

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

Quicksilver Canada gets LNG export approval

07/02/2015 Quicksilver Resources Canada Inc. has received approval from the National Energy Board of Canada to export 20 million tonnes/year of LNG from a pos...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...
White Papers

Definitive Guide to Cybersecurity for the Oil & Gas Industry

In the Oil and Gas industry, there is no single adversary and no single threat to the information tech...

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected