COMMODITIES

Utility Forecaster's Roger Conrad discusses what he sees is the future for natural gas, as it becomes increasingly important to our economy.

Will natural gas save the world or something like that? We're here with Roger Conrad who is going to explain the natural gas hype and the natural gas reality.

Well, thanks Gregg. I think the reality for natural gas is we're going to use a lot more of it. We already are using a lot more of it...particularly the power generating industry has really ramped its use of gas. In fact, for the first time, electric generating companies are using more gas in the United States than they are using coal.

Really?

Which is really fascinating, because coal has really been the mainstay fuel for years and years and years-historically well over 50%. But because of the fact that a lot of the coal plants are older, they're not as efficient. You can put up a new gas plant with a much better heat rate; in other words generating a lot more electricity, a lot more efficiently and lot cheaper than you could ever in the past.

Also, natural gas has been cheaper than coal which is sold on world markets. All our gas here, all that gas that's been unlocked from shale is trapped here in North America, for the time being anyway.

So we're going to use a lot more gas going forward. We're using it for bus fleets, vehicles. The real question though is, is that step up of usage offsetting the massive supplies that we have here?

I think the answer is no at this point. I think that's one reason why gas usage-type stocks are very attractive now, because supplies look like they're going to be very cheap. So therefore we're going to build a lot more pipelines to utilities. We're going to see a lot more storage for utilities. We're going to see a lot more other usage like clean fuels, that Pickens company, things like that. Those are things that are going to really proliferate.

The flip side of that is the reason they're going to proliferate is because the price of gas very likely is going to remain very low. I mean, a lot of gas has been shut in this year because prices really crashed in the first part of the year. We had a mild winter. In some parts of Canada, it was pretty close to a $1 per million British thermal units.

Wow.

And it went below that on the benchmark index in the US.

Almost any company can make big money selling gas at $10. Somewhat fewer can make it at $5 to $6; fewer than that can sell it at $3 to $4, an elite few at $1 gas. You may be talking about one or two companies that can earn dollar one.

Are they looking for demand to increase-say exports from the US to Europe and Asia? Is that what they're hoping is going to bring the price back to a decent level across the globe, and can offset some of the supply?

I mean that's really the game-changer, is when we start exporting natural-gas liquids. We are exporting natural gas...liquefied natural gas, or LNG. The problem that the country has right now is that all the facilities for trading LNG are geared for imports. That may sound crazy, but most of them built. They take longer, huge projects, they have long lead times, and they need a lot of permitting.