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The price of natural gas, high cost equals better economy - KTBS.com - Shreveport, LA News, Weather and Sports

The price of natural gas, high cost equals better economy

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SHREVEPORT, La. (KTBS) -

The drilling boom is most definitely over. Haynesville Shale activity has all but dissipated in Caddo Parish. The reason is simple supply and demand. Plentiful natural gas drove prices down. While that's good for natural gas consumers, it isn't our local economy.

The drilling boom didn't only mean oil and gas royalty checks for landowners but hundreds of good paying jobs for our local economy. Since the price of natural gas dropped from it's high price, around $12, to a dramatic low,  around $2, many jobs have disappeared.

"Our economy is really enjoying the up tick in the Haynesville," Regan Dickens, with the Louisiana Oil and Gas Association, said. "So, with low prices, we're seeing vast number of jobs having to leave the area, hopefully temporarily to go find work other places."

Dickens says that's because a low price is bad for energy companies. They can't break-even by drilling in the Haynesville Shale, which produces only dry natural gas.

"These operators have to look at the pure economics of drilling a Haynesville well," Dickens said. "Haynesville well runs around $10 million per well."

Energy companies have moved to other sites, a large amount in Texas, where the gas comes up with liquid material. The liquids make those drilling sites more profitable for companies. Natural gas prices change throughout the year, usually peaking in the winter due to high demand for home heating fuel. Thanks to month's severe cold, natural gas' price came to around $4.30. Dickens says it probably won't stay that high but needs to stay above $5 to really impact our natural gas economy.

"We're hoping that price does get up to a $5 to $5.50 price range," Dickens said. "That would be good."
Dickens says most companies will return to stable drilling at that price and admits that means you'll pay more for heating or compressed natural gas for your vehicle.

"Where you have crude oil prices $92 to $93 is zero significance for you or I at the pump," Dickens said. "For natural gas where it's trading for $4 to $5 you see some drastic change in the economy."

SWEPCO, which uses natural gas at some of its power plants, says that increase doesn't make natural gas attractive. Scott McCloud, with the company, says that's why the electric company relies on coal and lignite.

"In the past, it did come down in prices, in the 2009-11 period, but now it's starting to go back up," McCloud said."In the meantime, coal and lignite prices have always stayed low. So, we're going to use those fuels for the majority of our to meet our customer demand."

McCloud says consumers shouldn't see any dramatic change to their electric bills from natural gas prices because the company pools the cost of gas, coal and lignite. It will lower gas usage if prices are too high and generated only around 17 percent of 2013's electricity with gas. 
CenterPoint's Eric Barkley says the company tries to buy natural gas in bulk, when prices will benefit both consumers and the company. If the price is low, you'll pay a lower rate no matter if prices increase months later.

"As a result, our customers benefit from a very stable and relatively low cost of gas," Barkley said.

However, if CenterPoint's reserves lower, say during the winter when prices get higher, and the company needs to purchase more gas, that new price may affect your bill.
Dickens insists a higher natural gas price only adds a few dollars onto most consumers' bills. He says demand for natural gas seems to be on the rise but that doesn't mean hundreds of new drilling sites will be coming back to our area.

"We don't ever see the rig count getting back that high," Dickens said. "That, really, was a perfect storm of lots of resources on the ground. lots of financial dollars around."

Dickens says 50 to 60 sites are more feasible for the Haynesville Shale. Currently, only 33 wells are in operation.


 

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