Natural gas is one of the cleanest and most efficient of all energy sources. It provides 25 percent of U.S. energy consumption -- including heating 60 percent of homes, providing a feedstock and fuel for the country's chemical and manufacturing industries, and powering 15 percent of U.S. power plants. More importantly, nearly all of the new power plants built in the last 15 years have been powered by natural gas.

Natural Gas Use:

In 2004, the United States consumed 22.4 trillion cubic feet (tcf) of natural gas (this converts to $150 - $200 billion per annum depending on average gas price) – virtually all of which came from one of three sources: domestic production – 82 percent; imports from Canada – 15 percent; and imported liquefied natural gas (LNG) – 3 percent. Further, the Energy Information Administration (EIA) has projected steady demand increase with consumption rising to 25.4 tcf in 2010 and 30.7 tcf by 2025.  According to the Annual Energy Outlook 2007 (AEO 2007) the amount of natural gas needed to meet the United States demand will grow at approximately 16 percent by 2015.  

This significant growth in consumption will be difficult to accommodate given that record drilling in the United States and Canada has resulted in annual production declines of one to two percent over the past four years and depletion rates at many gas fields of 15 percent/yr.  These declines coupled with growing demand mean that the U.S. gas market needs to add 3.5 trillion cubic feet/year just to maintain the status quo.

Production of natural gas in the U.S. peaked in 1971, and Canadian reserves, which subsequently made up the difference between supply and demand, have been in decline since 2001. With demand expanding and production declining, prices have risen sharply. As shown in the chart below, between 1999 and 2005, average natural gas prices have grown almost 500 percent from $1.94 to $8.85/MMBtu (million British thermal units). 

Major oil and gas companies have already announced plans to invest billions of dollars in infrastructure to increase imports of liquefied natural gas (LNG). However, downward price pressure from LNG imports has not materialized due to legal roadblocks around the permitting of new liquefaction terminals, which are prolonging the prospect of increased supplies. At the same time, LNG well-head prices are rising dramatically as demand for LNG imports grows on a global basis especially from the alternative resource constrained buyers in Asia and Europe.  

With these market dynamics as a backdrop GreatPoint Energy expects to produce bluegas™ for under $4.00/MMBtu versus ~$4.20+/MMBtu for conventional drilled natural gas (Source: Wood Mackenzie) making it the United States’ marginal gas producer. Not only is this a significant cost reduction, but it can be delivered to customers under long term stable supply agreements without price volatility.

Lowest Cost of Natural Gas