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Lower natural gas prices could cool Oklahoman's heating bills

JAY F. MARKS Published: August 21, 2009
No matter what winter brings to Oklahoma this year, state residents likely will pay less to keep their homes warm.

Natural gas prices already are lower than they were at this time last year, dropping below $3 per thousand cubic feet on Thursday.

Oklahoma Natural Gas spokesman Don Sherry said he hopes heating costs will be lower this winter, but he was reluctant to make any predictions.

"It’s about as tricky as predicting Oklahoma weather,” he said.

Analyst Tony Say said it is hard to predict what will happen with natural gas prices.

He said hurricane season could slow production or a harsh winter could increase demand.

"I don’t expect to see extraordinarily high prices this winter, but the verdict is still out,” said Say, president of Oklahoma City gas marketing company Clearwater Enterprises.

Costs decline
ONG customers likely won’t see the full benefit of the lower prices because the company already has been buying gas for the winter, Sherry said.

"We buy gas through multiple contracts over an extended period of time,” he said. "We’re out there buying every month.”

Sherry said ONG’s gas procurement plan spreads purchases out over time, but the utility company is buying substantial quantities at current prices.

ONG customers already have seen a drop in the natural gas-portion of their monthly bills, Sherry said.

Last year, gas cost $10.72 per decatherm, he said.

What is a decatherm?
A decatherm is a heating value roughly the same as 1,000 cubic feet of gas.

Producers, processors struggle as natural gas hits seven-year low
Natural gas prices are hurting with a seven-year ache, and only time will tell how much producers and processors’ hearts can take.

Henry Hub spot market prices Thursday fell as low as $2.98 per million British thermal units before closing at $3.02 for a second straight day on the New York Mercantile Exchange. The NYMEX price is at its lowest point since August 2002, according to Bloomberg data.

"It’s amazingly low,” said Mark Sutton, executive director of the Tulsa-based Gas Processors and Suppliers Association. "But I think folks (in the industry) are optimistic for some relief in the next year.”

While consumers benefit from the lower prices, the trend puts pressure on companies in the business, which can have an impact on both employment and exploration plans to find tomorrow’s reserves.

On a downward slide
Natural gas prices typically flowed in tandem with the oil futures market up until last year. They hit historic highs above $13 per MMBtu when oil reached $147 per barrel, then dropped when energy demand ebbed during the worldwide economic collapse.

Yet while oil dropped as low as the $30 range and then rallied to $70, natural gas has just kept falling.

One culprit may be supply.

"We are doing such a good job technologically,” Sutton said of the horizontal drilling in the unconventional shale plays around the U.S. "We don’t drill too many dry holes anymore.”

Production cuts
The downhill slide has forced many companies to put the brakes on production levels. Most everyone in the business from producers to processors and providers believes that natural gas prices will find their way up again. Historic inventories and other economic factors make it hard to figure when that rise might return.

"I don’t see the price moving for a while,” said Sutton, whose GPSA represents midstream companies. "One positive effect: The prices of everything go lower, then prices do turn around. At least we have reason to be optimistic.”

Rod Walton, Tulsa World


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