Canadian Natural Gas Prices Forecast to be below $4 for a decade!!!

One of Canada’s key energy producers (Canadian Natural Resources) is warning that natural gas prices will continue to sag for a very long time – perhaps as long as a decade.


Gas prices have been depressed for the past few years, amid a surge of supply from newly accessible shale-gas reservoirs that has created a substantial glut. Prices below $4 (U.S.) per million British thermal units (BTUs) are so low that most conventional wells are operating at a loss.

And the bad times may be here for a while.

“We now expect gas prices to be low for the next five to 10 years,” Steve Laut, president of Canadian Natural Resources Ltd. (CNQ-T39.780.421.07%), said Thursday, when the company reported third-quarter earnings of $836-million, up 40 per cent from the same period last year, but down 10 per cent from the second quarter.

He pointed to the huge amounts of natural gas that have been discovered with new drilling techniques, such as horizontal wells and underground fracturing. By some estimates, North America now has enough gas to maintain current supplies for a century.

That is an “overwhelming” amount of gas “that can come at relatively low cost. And it doesn’t look like the economy is going to drive demand too much higher, in a big way, to make up for that oversupply,” Mr. Laut said.

The dire outlook comes amid broader industry moves that suggest increasing skepticism about a North American price recovery. Weak gas prices are a boon to consumers, who benefit from lower heating and electrical costs, and to the manufacturing and petro-chemical industries that use gas a major input.

Encana Corp., the largest independent producer, has backed away from a five-year plan to double its output, and is selling billions in assets this year to avoid a cash-flow pinch. Industry is also seriously looking at alternative markets.

Encana, Apache Corp. and EOG Resources Inc. are months away from a decision to build an LNG terminal on the West Coast that would enable exports to Asia, where prices are substantially stronger. Global giants such as Royal Dutch Shell PLC and Malaysia’s Petronas are looking at similar plans.

Talisman Energy Inc., meanwhile, is looking to convert natural gas to petroleum products such as diesel, an expensive plan that depends on gas prices lagging oil far into the future. Low prices, however, will hurt the company’s dive into new gas plays, and on Wednesday, chief executive John Manzoni acknowledged a recovery could be some time in coming.

“Maybe we are here or hereabouts for a while,” he said. If that happens, the company will “re-examine” some of its strategies, Mr. Manzoni said.