Forbes: Shale gas means flat prices until 2020
by MBJ Staff
Published: September 26,2010
That’s bad news for Mississippi Power Company, which bet $2.4B of its ratepayers’ money that natural gas prices would not remain flat
Forbes blogger Daniel Fisher reports that natural gas from shale will likely keep gas prices flat at around $5 per million Btu through 2020.
If Forbes’ numbers come to fruition, Mississippi Power Company customers paying for the $2.4-billion Kemper County clean coal plant will be on the losing end.
The alternative to Kemper was to build a natural gas-fired power plant, which would have been significantly cheaper to construct. But plant advocates argue that historically volatile and high gas prices would pass on too much fuel cost to consumers.
Because Kemper can use on-site lignite coal, its fuel prices will be stable and can be locked in for a number of years.
For MPC customers to financially benefit from Kemper, gas prices must reach the $12 to $14 per million Btu range by 2020, according to information from the Mississippi Public Service Commission.
If gas prices do not rise to this level or higher, MPC ratepayers will have lost out on Kemper, paying more than they should for electricity bills.
The MBJ recently obtained Kemper’s break-even natural gas prices from the Commission via public records request. The prices were filed confidentially by MPC.
Fears of dwindling natural gas reserves have been significantly tempered in recent years by the discovery of huge new shale-gas deposits. Advanced drilling technology and fracturing have made it possible to access new reserves from this very hard rock called shale.
The Marcellus Shale formation alone, spreading from New York to West Virginia, is believed to contain at least 700 trillion cubic feet of economically accessible gas, a 30-year supply at U.S. rates of consumption, according to Forbes.
“You can’t in that time frame come up with enough demand to soak this up,” said Robert Ineson, a gas expert with IHS CERA, speaking at the IHS Global Pacesetters energy conference in Greenwich, Conn.
The U.S. Energy Information Administration predicted in its December 2009 forecast that gas won’t pass the $7 mark until 2026.
— Mississippi Business Journal
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