The Value of Natural Gas in the Pacific Northwest: Prices

In today’s blog, we’ll discuss natural gas pricing.

The commodity cost of natural gas has plummeted with the surge in supply over the last decade (see Figure 1 below), saving Northwest consumers across all economic sectors hundreds of millions of dollars. Commodity prices are expected to remain below $4/Dth through 2050 (see Figure 2). High demand, coupled with infrastructure constraints, may periodically cause short-lived regional price volatility.

Figure 1. Historical Natural Gas Prices

Source: U.S. EIA Natural Gas Wellhead Prices at Henry Hub. (Henry Hub is a trading point in Louisiana that serves as a benchmark for North American natural gas pricing.)

 

Figure 2. Natural Gas Price Forecast Comparisons

NOTES: Price forecasts reflect the existence of and an ongoing expectation for robust natural gas supplies throughout the forecast period (2029) and beyond.

The Northwest Power and Conservation Council (NPCC) forecasts natural gas prices at trading hubs where the Pacific Northwest sources its gas: AECO and Sumas for natural gas originating in Alberta and British Columbia, and Opal for gas produced in the U.S. Rocky Mountain states of Colorado, Utah, and Wyoming.

The price of natural gas coming from the supply areas upon which the Pacific Northwest relies is typically lower than the North American benchmark at Henry Hub in Lousiana.

One of the primary reasons the Pacific Northwest has such an advantage in natural gas pricing relative to other parts of the U.S. is the region’s direct access to multiple production basins. In particular, the Pacific Northwest is the nearest market to the vast supply resources located in western Canada. When combined with an already well-developed and interconnected pipeline grid, gas shippers and utilities can quickly secure gas from the area with the lowest daily price and react quickly to re-route supplies when there have been disruptions.

Figure 3. Location of Natural Gas Trading Hubs in the Pacific Northwest

 

Check back on September 8 for The Value of Natural Gas in the Pacific Northwest: Emissions blog.

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