Is the roller-coaster going up, or down?

“Natural gas prices are likely to rise a lot — say $12+.” — Gail E. Tverberg of Tverberg Actuarial Services

“So if it does happen, and we do run out of storage, it could drive natural gas to $1.00 or even lower.” — Christopher Jylkka, principal/manager of Boston Energy Trading

“Natural gas prices are likely to rise a lot — say $12+.” — Gail E. Tverberg of Tverberg Actuarial Services

That’s quite a spread. So which will it be? $1 per 1,000 cubic feet or $12 per 1,000 cubic feet? Enquiring minds want to know . . . particularly Iris Evans, our provincial finance minister.

Her forecast for the strength of our economy over the next year or so is based on a natural gas price of about what it is now (ie, in the $4 range).

The people who work in the gas industry (or who have been laid off) also want to know. Investment in new drilling (and therefore jobs) would require even higher gas prices.

And I and a lot of other homeowners would like to know; $12 per 1,000 cubic feet means much higher heating bills in the winter. And it also means that we will be investing more in home energy retrofits . . . if we’re smart.

The people who see $1 gas in the future are thinking about natural gas storage.

Natural gas has an off season when it’s warm outside. It is still used for generating electricity all year round, but in the spring, summer and fall, a lot of production is fed into underground storage (mostly old depleted reservoirs, but also salt caverns).

The glut of natural gas from the recent investment in shale gas drilling has helped to fill these reservoirs almost to the brim. Once that gas reaches the brim, there is nowhere else for it to go.

And when there is nowhere for it to go, the price will drop like a rock.

The other factor in the $1 gas scenario is the forecast of an El Nino weather event for this winter. Environment Canada is telling us that we may not need nearly as many woollies (and natural gas) in the next few months.

So where is the $12 forecast coming from? Tverberg realizes the storage and weather factors, but she is looking a bit further into the future (perhaps several years, since most forecasts are for $5 or $6 in 2010).

She is also looking at the inherent shortcomings of the recent shale gas blitz.

Shale gas wells produce a lot of natural gas in a very short time, but soon thereafter, the production tends to drop off a cliff. The first year decline rates for individual wells in the various regions in North America range from 50 to 90 per cent.

This can be compared to traditional gas wells from the 1970s, which had yearly decline rates as low as 15 per cent or so.

So we know that the economics of shale gas production over a period of several years is likely worse than that of conventional gas production. In fact, Jonathan Wolff, from Credit Suisse Equity Research has estimated that U.S. gas production in general now needs prices over $8 in order to make a 10 per cent return on investment (compared with an estimated $3.58 in 2000).

The complicating factor is that shale gas production on a grand scale is relatively new, so we will probably only have a good idea of its economics in hindsight.

There have been colossal capital investments up front, resulting in the present glut.

Now, a year later, we have an equally huge disinvestment in active drilling rigs. That, combined with the steep decline rates in gas production from individual wells will eventually transform the glut into a drought.

The main question is: how soon?

But the other question is: can industry and governments cope with these types of situations over the long haul?

If you type “natural gas” and “roller coaster” into Google, you’ll wind up with 72,000 hits.

At this point though, I’m thinking that Iris Evans is hoping for a ride that’s a little more sedate.

Evan Bedford is a local environmentalist. Direct comments, questions and suggestions to

Just Posted

Men posing as repo men attempt to steal vehicle in Red Deer County

Two men attempted to steal a utility vehicle from a Red Deer… Continue reading

Red Deerian spreads kindness with one card at a time

One Red Deerian wants to combat bullying by spreading kindness in the… Continue reading

Bowden baby in need of surgery

“Help for Alexis” Go Fund Me account

PHOTO: First Rider bus safety in Red Deer

Central Alberta students learned bus safety in the Notre Dame High School… Continue reading

WATCH: Annual Family Picnic at Central Spray and Play

Blue Grass Sod Farms Ltd. held the Annual Family Picnic at the… Continue reading

Woman has finger ripped off at West Edmonton Mall waterslide

SASKATOON — A Saskatchewan woman says she lost a finger after her… Continue reading

Uncertainty looms over Canada’s cannabis tourism, but ambitions are high

TORONTO — Longtime marijuana advocate Neev Tapiero is ready for the cannabis-driven… Continue reading

Feds mulling safeguards to prevent ‘surge’ of cheap steel imports into Canada

OTTAWA — The federal government extended an olive branch of sorts to… Continue reading

Ontario govt caps off summer session by passing bill to cut Toronto council size

TORONTO — The Ontario government passed a controversial bill to slash the… Continue reading

Updated:Italian bridge collapse sends cars plunging, killing 26

MILAN — A 51-year-old highway bridge in the Italian port city of… Continue reading

Saudi Arabia spat affecting Canadians embarking on hajj, community members say

TORONTO — Members of Canada’s Muslim community say recent tensions between Ottawa… Continue reading

Tug carrying up to 22,000 litres of fuel capsizes in Fraser River off Vancouver

VANCOUVER — The smell of diesel filled the air as crews worked… Continue reading

Nebraska executes first inmate using fentanyl

LINCOLN, Neb. — Nebraska carried out its first execution in more than… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month