A glut at Henry Hub? Hardly, says analyst.

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El Paso Corp.’s Cheyenne Plains Gas Pipeline under construction. (AP Photo/Jerry Cleveland)

We recently wrote about a study by Bentek Energy predicting more natural gas price volatility and an eventual downward push on prices around the Henry Hub due to a surge in new pipeline construction. Not everyone agrees with the analysis.
Kevin Petak, director of energy modeling and forecasting at Energy and Environmental Analysis Inc. ICF International in Virginia feels the analysis is overstating the impact of liquefied natural gas imports and new storage facilities and not giving enough consideration to falling Canadian imports.
Right now overseas markets are effectively drawing LNG shipments away from U.S. ports, despite our recent run up in gas prices, because prices in Europe and Asia are even higher, Petak notes.
And Canadian natural gas imports will continue to drop due to new taxes imposed by the Alberta government discouraging drilling, the ongoing decline in Canadian gas fields and greater demand for the fuel to power the energy-intense Canadian oil sands projects.
That all should mean the supply/demand balance still leans toward more demand and higher prices, he said.
“I am really struggling to find why price volatility would increase with this,” Petak said. “I can buy there’s a shakeout during the first few months, but more storage should actually calm volatility. That’s why a lot of it is being built.”
U.S. natural gas demand has been pretty flat for many years, but there are signs of increases. Last year was the first time since 2004 demand increased, by about 6.2 percent according to the Department of Energy, to 23 tcf.
And fertilizer maker Terra Industries will reopen a unit of its giant Donaldsonville, La. ammonia plant this year “after a three-year shutdown as demand for its product continues to rise and natural gas prices level off,” according to Platts. The plant is expected to produce 400,000 tons of ammonia per year, which will consume about 13.6 Bcf per year of gas.