The influx of shale gas flooding onto the North American market should keep the market’s natural gas prices low, according to ratings agency Moody’s.
“The shale-drilling revolution in North America has taken hold and will keep natural gas selling for historically low prices for some time,” said Moody’s in a report released on Monday this week.
“The shale-drilling revolution in North America has taken hold and will keep natural gas selling for historically low prices for some time,” added the report.
Driven largely by the maturation of horizontal drilling technology, US natural gas production in 2012 hit 25.3 trillion cubic feet for the year – having never execeded 22 trillion cubic feet per year before 2010. Moody’s projections show production continuing to increase over the next decade.
While North American gas supplies are increasing, so too is oil production from the oil sands in western Canada and from the Bakken shale oil formation in the US, according to the Moodys report.
However, Moodys also explains this shifting pricing situation brings both winners and some losers in the North American economy.
On the upside, refineries are benefiting from a plentiful supply of low-priced raw feedstock. So too are regulated electric and gas utilities, seeing lower prices for the commodities they sell.
“This amicable environment has helped utilities improve their cost recovery through base-rate increases, with very little impact on overall customer bills,” says Moody’s.
On the downside are the coal companies – with natural gas-fired generators having increased their market share at the expense of coal.