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ConocoPhillips market expert: Sub-$4/MMBtu gas prices could last for 30 years

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ConocoPhillips market expert: Sub-$4/MMBtu gas prices could last for 30 years

Even though demand for natural gas is booming, producers' ability to match that growth could keep prices under $4/MMBtu for the next three decades, the head of research for energy giant ConocoPhillips said.

"The supply is continuing to grow, regardless," Jim Duncan, ConocoPhillips director of market research, told the LDC Gas Forums Rockies and West conference. "But from a gas demand perspective … the general thought is $4 [per MMBtu] and below, 30-plus years out."

Industrial demand for gas is surging with about $198 billion in related projects coming on stream in 2018, Duncan said Oct. 9 at the Los Angeles conference. "That's money on the ground," he said. "That doesn't mean they're planned, that means they're going to happen."

Gas producers' ability to increase production, which is now frequently referred to as "manufacturing" gas, will keep a cap on prices. Duncan pointed to the Marcellus Shale as an area that has been able to continue to grow despite wild price swings. "Even during the slow times, the low-price times, Marcellus was able to maintain [growth]. That microsphere has seen the most volatility in price, and will going forward," he said. "It is the number one. It can jump in a heartbeat."

Duncan acknowledged that regional conditions could and have pushed local prices higher than $4/MMBtu, including in the west, where most of the gas marketers and buyers at the conference work. Prices in that and other "microspheres" will continue to be impacted by factors such as pipeline and storage constraints.

While increased gas use in the power sector and exports of LNG will continue to lift demand, NGL production is also increasing in the U.S. "Ethane is the most recent impacter to our market," Duncan said. "We've got five new ethane crackers coming online, roughly 490,000 barrels per day of ethane that's going to come out of the natural gas lines and go into those crackers, which will have impact directly before the end of this year or shortly thereafter."

Production of ethane and other gas liquids used in the chemical and plastics industries has been growing steadily. The 490,000 bbl/d of ethane processing will equate to roughly 8 Bcf/d of produced natural gas, Duncan said. In 2019, gas processors will add 46 NGL recovery trains with a capacity of 7.8 Bcf/d "to meet the ability to condition the gas so that it's fungible, but also separate the liquids to go into these markets,"

Weather will also continue to be a factor in gas demand and pricing, although it will likely be "neutral" in the next few years as most of the U.S. is feeling the first effects of winter later and a so-called quiet sun period, which will see less solar flaring and other activity, creates less volatility. "Winter has shifted forward for the last 10 years," and the onset of winter will continue to move closer to Christmas than Thanksgiving in much of the country, Duncan said.