Strong supply fundamentals and a "robust and reliable" natural gas delivery infrastructure suggests the US price of natural gas over the next 10 years could range between $4 and $6.50/MMBtu at Henry Hub, the American Gas Association said in a paper released Wednesday.
The paper, "Rethinking Natural Gas," said an increase of natural gas demand from 64 Bcf/d to more than 80 Bcf/d by 2022 "could be supported by existing resources at a reasonable price level. Given the robust resource base, shale gas production would more than double to meet this demand."
The AGA said its forecast was based on a number of sources, including a Wood Mackenzie report issued in the spring of 2012. That report said if demand in 2022 is low, total US and Canadian production could be 88 Bcf/d and the price would be $3.98/MMBtu. The analysts said the base case "mid-range" for 2022 shows US and Canadian industry producing 89.2 Bcf/d with the price at $5.65/MMBtu.
If demand is high, they said US and Canadian production could top 93.9 Bcf/d and the price could be as high as $6.34/MMBtu.
The NYMEX November natural gas futures contract settled Wednesday at $3.47/MMBtu.
The AGA said that many identified shale gas plays become economically viable if the price is about $6/MMBtu. "This is precisely the foundation that accounts for the possibility of greater domestic natural gas production during the next 10 years," the AGA said.
The white paper said domestic production has the potential "to grow significantly, with a commensurate yet moderate increase in natural gas prices as well."
