Natural Gas Marketing research

This is marketing research on the natural gas industry and can include information on the background, market structure, definitions, competitors, trends and developments of natural gas and is related to other topics such as oil, energy and power. Table of Contents

Background
The crude oil and natural gas extraction industry (SIC 1311) consists of establishments engaged in operating oil and gas fields. The industrys activities include exploration for crude oil and natural gas; drilling, completing, and equipping wells; operati ng separators, emulsion breakers, and desilting equipment; and all other activities involved in making crude oil and natural gas marketable up to the point of shipment from the producing property. This industry also includes the mining and extraction of oil from oil shale and oil sands and the production of gas and hydrocarbon liquids through gasification, liquefaction, and pyrolysis of coal at the mine site. World reserves of natural gas as estimated by are around 5,210.8 Tcf (trillions of cubic feet).

As shown in the chart below, natural gas consumption is greatest in the industrial sector, followed by residential sector.

The world's natural gas reserves:

Contents

1 Market Structure 2 Industry Definitions 3 Market Metrics 4 Industry Players 5 Recent Trends and Developments 6 Sources

Market Structure
Natural gas production in the United States occurs chiefly onshore, but offshore production generally has been increasing its share of the total. The two areas that produce the most natural gas are the Gulf of Mexico and Texas. As was noted previously, drilling in the deepwater parts of the gulf has increased greatly in the last few years; however, in 1997, Texas had the most reserve additions by means of extensions at already discovered reservoirs. Increases in U.S. natural gas production have lagged behind increases in demand in recent years, leading to increased imports. Canada is the source of virtually all U.S. natural gas imports because natural gas is generally cheaper to transport via pipeline, and Canada has an extensive and growing gas pipeline system that is integrated with the U.S. system. Between 1986 and 1996, Canada more than doubled its dry natural gas production, while U.S. production experienced only modest growth. Canada is expected to continue increasing exports of natural gas to the United States in the future. An additional expansion of the trans-Canada pipeline near the end of 1999 and the new Alliance pipeline to the U.S. midwest, which will be completed in the year 2000, are expected to allow for increased imports beginning in that year. Natural gas consumption in the United States is expected to grow over the next few years. Most new electricity generation capacity planned for the next 5 years is expected to be natural gasfired. There are several reasons that may account for this. New technologies are expected to allow natural gasfired electricity generation to be as cheap as if not cheaper than coalfired generation, formerly the lowest-cost fuel for generation. Natural gas has an environmental advantage over coal and crude oil. In addition, gas-fired generation has much lower capital costs, giving it a financial advantage in the uncertain environment surrounding electricity deregulation.

Industry Definitions
City-gate - A point or measuring station at which a gas distribution company receives gas from a pipeline company or
transmission system.

Dry Natural Gas Production - Marketed production less extraction loss. Extraction Loss - The reduction in volume of natural gas resulting from the removal of natural gas liquid constituents at natural
gas processing plants.

 Heating Value - The average number of British thermal units per cubic foot of natural gas as determined from tests of fuel
samples.

Independent Producers - Any person who is engaged in the production or gathering of natural gas and who sells natural gas in
interstate commerce for resale but who is not engaged in the transportation of natural gas (other than gathering) by pipeline in interstate commerce.

Industrial Consumption: Natural gas used for heat, power, or chemical feedstock by manufacturing establishments or those
engaged in mining or other mineral extraction as well as consumers in agriculture, forestry, and fisheries. Also included in industrial consumption are natural gas volumes used in the generation of electricity by other than regulated electric utilities.

Wellhead Price - Represents the wellhead sales price, including charges for natural gas plant liquids subsequently removed from
the gas, gathering and compression charges, and State production, severance, and/or similar charges.

Market Metrics
Net imports of natural gas accounted for 15% of natural gas use in United States in 2002. About 95% of U.S. natural gas imports are from Canada. Under the terms of North American Free Trade Agreement (NAFTA) producing companies operate freely across the U.S./Canada border. The natural gas pipeline transmission systems of U.S. and Canada are highly integrated. The U.S. is a net exporter of natural gas to Mexico.

U.S. Natural gas Imports and Exports by Country IMPORT VOLUMES (volumes in Million cubic feet) PIPELINE Canada Mexico

2006 3,603,676 3,590,928 12,749

IMPORT PRICES (prices in Dollars per thousand cubic feet) PIPELINE Canada Mexico EXPORT VOLUMES (volumes in Million cubic feet) PIPELINE Canada Mexico

2006 6.83 6.83 5.65

2006 663,729 341,774 321,955

EXPORT PRICES (prices in Dollars per thousand cubic feet) PIPELINE Canada Mexico

2006 6.90 7.32 6.46

The natural gas market is highly dependent on supply and demand. Producers and consumers react rationally to changes in prices. Fluctuation in gas prices and production levels are a normal response of the competitive and liquid gas market. The worlds market for energy consumption is projected to increase by 57% from 2004 to 2030. Total natural gas consumption in the U.S. is projected to increase from 22.0 tcf in 2005 to 26.1 tcf in 2030. Technological progress affects the future production of natural gas by decreasing production costs and expanding economically recoverable resource base.

Industry Players
Integrated Oil & Gas industry shows a growth rate of + 15.60 %. The major activities in this sector are to explore, refine, market and transport crude oil, natural gas and natural gas liquids. Most industry players are engaged in exploration and production activities including oil and natural gas exploration and field development and production, together with pipeline transportation and natural gas processing. Exxon Mobil Corporation is the front runner in integrated oil and gas industry with net sales of 335 billion. Its major dealings are exploration, production, transportation and sale of crude oil and natural gas. It also has the highest market capitalization at $491.8 billion.

Natural gas Industry Market Share based on net sales in 2006 :

Natural gas Industry Market Capitalization :

Recent Trends and Developments

Technology developments in terms of plastic piping, underground facility monitoring, and excavation damage prevention are facilitating the natural gas industry to increase production efficiency. Exploration of conventional and non-conventional natural gas and expansion of drilling fleets is expected to meet growing demand for natural gas. Cooling natural gas to about -260F at normal pressure results in condensation of gas into liquid form which is called as LNG (liquefied natural gas). LNG can be very useful for transportation of natural gas since it occupies very small volume. It is expected that LNG will provide a steady, dependable source of natural gas for consumption. Natural gas fuel cells result in very low emissions of pollutants and generation of high quality electricity. They are being contemplated as energy source of future.

Sources
U.S. Department of Commerce The Energy Information Administration U.S. Department of Energy BP