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A Burning Question:
Why is North Dakota’s Natural Gas
Going Up in Flames?
By Merit Webster
The Bakken story is a remarkable one that continues to evolve; it tells of a minor
oil producing region that has skyrocketed to become one of the nation’s leaders in
only a few years. There are certainly some unique factors that have coalesced in the
Williston Basin to create this exceptional growth. But in many ways, the dynamics at
play represent a microcosm of the opportunities and challenges impacting the entire
North American energy sector.
We ran a feature article discussing crude oil production in the Bakken in Q2 2013.
In this issue of the CMU, we explore the other side of that story: natural gas.
4 COMMODITY MARKETS UPDATE
WILLISTON BASIN, NORTH DAKOTA – There are hundreds of
fires burning across the western half of North Dakota, lighting up
the night sky. They are not caused by wildfires or other natural
disasters; the region is only sparsely inhabited. Observable from
satellite data, the clusters of light emanating from the Bakken oil
fields result from the flaring of natural gas – a visual consequence of
a rapidly growing energy industry and the region’s insufficient infrastructure to move that gas to the end markets where it is needed.
This is all changing, however, and very quickly. It is no secret that
North Dakota is currently undergoing an unprecedented crude
oil boom. At 875,000 barrels/day (a 40-fold increase from the
18,000 bbls/day produced in May 2007), the state is now the
second largest producer in the United States, behind only Texas.1
New horizontal drilling techniques and high oil prices have facilitated a rapid growth in crude oil production extracted from the
Bakken, the shale formation that lies below a 15,000-square
mile portion of the Williston Basin.
A View of the Bakken
A quick flight in a propeller plane over the Williston Basin, which
spans some 150,000 square miles into the northeast corner of
Montana, and it is easy to tell that this is not Texas oil country.
The basin is peppered with rock formations (“The Badlands”),
rolling hills, and valleys, which today, during our trip in the rainsoaked month of June, are alive with several shades of green.
Roads consisting of scoria, a thick burnt-red clay dirt, snake
through the grasslands and up the slopes of the hills. Pumps
sit atop red “pads,” where freshly-drilled oil wells churn out the
light, sweet crude which has made the region famous as of late.
The primary hindrance to further drilling has been the absence
of pipelines to transport the crude to end markets. Even that
constraint has begun to ease, as marketers have adapted by
increasingly using rail, truck and barge to transport product to
refineries in the Gulf Coast and along the eastern seaboard.
(For more information on this topic, refer to Q2’s CMU – “The
New Logistics of Oil Transportation.”) Crude oil production in
the basin is projected to top two million bbls/d by 2025.2 In comparison, the country of Saudi Arabia produces 10 million bbls/d,
according to the International Energy Agency.
The landscape is breathtaking. But the very attributes that make
the basin so beautiful have also historically made it among the
most arduous terrain for oil and gas exploration and production.
The harsh climate and severe cold weather create unfavorable
working conditions throughout much of the year. The remote,
rugged landscape has traditionally not been conducive to conventional drilling techniques; the dearth of pipeline and gathering
infrastructure has long made the prairie a wildcatter’s game.
An Abundance of Natural Gas
What is less discussed, however, is the abundance of rich natural gas that is being produced in conjunction with these oil wells.
More than three-quarters of all gas in North Dakota is “associated” gas, which is gas that bubbles up as a byproduct of
horizontal oil drilling and is not the primary revenue generator for
the well operator. As unconventional oil production in the Bakken
has experienced tremendous growth, soaring 40% in the past
year alone, production of associated natural gas has kept pace.3
According to an analysis by Bentek, an energy analytics company, the gas-to-oil ratio of a Bakken well will double over its
lifetime, meaning that wherever oil is drilled, gas will not only
just follow, but will significantly outpace oil production as the
well matures. In the company’s “base case” scenario, gas production in the Bakken will rise to 3.1 Bcf/day by 2025, a threefold
increase over current production levels of 0.93 Bcf/d.4 Based
on these projections, the basin is on track to become a leading source of North American natural gas in the next few years.
Flaring from Bakken oil fields is now visible by space, with light emitting from the region
comparable to urban centers like Minneapolis and Chicago. Image Source: NASA
1
Lynn Helms, NDIC Department of Mineral Resources, “Director’s Cut,” 09/13/13.
2
Bentek Energy, “The Williston Basin: Greasing the Gears for Growth in North Dakota,” 2012.
3
NDIC Department of Mineral Resources.
4
Bentek Williston Basin report.
Fourth Quarter 2013 5
... unlike crude oil, natural gas cannot be trucked
or moved by rail. Individual wells must be connected to pipelines, which capture gas at the
wellhead and send to processing facilities…
In the Bakken, with its mountainous terrain,
long winters, and large distances between
wells and processing plants, installing this infrastructure is particularly challenging.”
The problem is that, unlike crude oil, natural gas cannot be
trucked or moved by rail. Individual wells must be connected to
pipelines, which capture gas at the wellhead and send it to gas
processing facilities. These “fractionation” facilities separate the
“wet gas” (i.e. natural gas liquids such as propane, ethane, and
butane) from the “dry gas” (i.e. methane) and ready the product
for shipping on interstate pipelines. Comparable oil-rich shale
plays, such as the Eagle Ford and Permian Basin (both in Texas),
benefit from existing transportation infrastructure, making it less
laborious for well operators to invest in pipelines to gather the
associated natural gas and route it to processing plants.
45%
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
-
Even for wells that are connected to a pipeline, there
can sometimes be additional hindrances to fully
capturing gas production. After hydraulic fracturing
techniques have cracked open the shale rock, Bakken
wells typically have an initial “flush” of rapid oil and gas
outflow for the first three to four months of operation. When one of
these new, high-pressure wells comes online, it can sometimes kick
older, low-pressure nearby wells off the gathering grid for an interim
period, because there is not sufficient compression in the Bakken
infrastructure to handle both the new and the old gas.
A Reason for Flaring
In any situation without the ability for adequate collection, the natural gas that is generated alongside oil production is burned at the
wellhead – “flaring,” in industry parlance. Roughly 30% of all gas
produced in the Bakken is flared. This translates to 300 million cubic
feet of natural gas squandered daily at current production levels,
enough energy to heat 3,000 American homes for an entire year
and foregone revenues to the tune of $35 million every month.6 (In
contrast, only 0.4% of all gas produced in Texas is flared.)7
40%
35%
30%
25%
20%
15%
10%
5%
As with most other energy-producing states, North Dakota regulations allow flaring to occur during the first 12 months of operation
without penalty. After that timeframe, producers must apply for
an exemption that requires them to justify the “economic feasibility” of needing to flare, or pay royalties to the state.8
Natural Gas marketed
Natural Gas NOT marketed
May-13
Jan-12
% natural gas flared
Source: NDIC Department of Mineral Resources, BBH Analysis
6 COMMODITY MARKETS UPDATE
Sep-12
May-11
Jan-10
Sep-10
May-09
Jan-08
Sep-08
May-07
Jan-06
Sep-06
May-05
Jan-04
Sep-04
May-03
Jan-02
Sep-02
May-01
Jan-00
0%
Sep-00
BCF/day
Natural Gas Flaring
Installing pipeline gathering systems in the Bakken,
by contrast, with its mountainous terrain, long winters that shorten the working season, and large
distances between wells and processing plants,
is particularly challenging. As of July, there were
9,322 active wells dispersed across North Dakota,
and the number keeps growing. Although drilling
companies are connecting wells to gas infrastructure at an increasing rate, production – with an
average of 130 new wells coming online each
month – has far outpaced the installation of gathering and treatment facilities.5
5
Lynn Helms, NDIC Department of Mineral Resources, “Director’s Cut,” 07/15/13.
6
American Gas Association.
7
Railroad Commission of Texas.
8
ND Pipeline Authority, “Natural Gas Facts,” accessed July 2013.
The state allows flaring for two reasons. The first is environmental: in any situation where excess natural gas (methane) could
otherwise leak into the atmosphere, the alternative byproduct
of burnt gas, CO2, is generally considered preferable. There are
some who have environmental concerns: a recent report published by Ceres, a non-profit environmental group, argued that
flaring has “increased the carbon footprint of Bakken oil,” by emitting 4.5 million metric tons of carbon dioxide over the course of
2012, equivalent to the annual emissions of approximately one
million cars.9 Thus far, however, North Dakota health officials say
that flaring has not produced any serious air pollution problems.10
natural gas in the Bakken trades at an even steeper discount to
the Henry Hub benchmark because of the lack of pipeline infrastructure. For example, in September 2013, average price for
delivery at the Northern Border hub in North Dakota was at $3.02/
mmbtu, compared to an average $3.64/mmbtu for the Henry Hub
benchmark.14 With the oil-to-gas price ratio (on an energy-equivalent basis) for the region at 30 to 1 and producers scrambling to
overcome the logistical challenges in getting their ~$90/bbl crude
to end markets, natural gas has thus far been little more than an
afterthought for Bakken producers.
That does not mean, however, that capturing natural gas is
entirely uneconomical. The costs vary substantially depending
on how easy it is to get to the well and how close the well is to
a processing plant. While the price of gas is clearly a key driver
of a well’s economics, once the initial gathering pipeline infrastructure investment is made, a company will reap the additional
income over the life of the well (25-30 years in some cases),
with minimal additional maintenance expenses. With the vast
amount of gas now expected as a byproduct of oil drilling, producers today have more incentive to connect their wells at an
earlier stage in the drilling process.
The second is economic: investing in the additional infrastructure required for natural gas collection can be an expensive
alternative for independent drillers who could otherwise invest
that capital into additional wells. In order to justify the upfront
costs to connect its wells to gathering systems and to get an
estimation of the size of pipeline needed, an operator must have
a strong idea of how much associated gas is going to be generated from its well. As gas production is difficult to predict until oil
production gets underway, some amount of flaring will therefore
be necessary to bridge the gap between a well’s completion
and the time it takes to install gathering pipelines.
Natural Gas Price Differential
A Driller’s Economics
Natural Gas
Price Differential
($/mmbtu)
As with many other unconventional shale plays, oil production
drives the economic incentive for companies to drill in the Williston
Basin. Precisely because of the region’s topography, a well in the
Bakken is a huge upfront investment that can cost upwards of
$10 million to complete (much higher than the average of roughly
$6 million for shale drilling in other U.S. production regions).11
Despite the costs, wells in the region produce some of the most
attractive rates of return of any shale play across the country
because of their high-quality oil production. Bentek’s Internal Rate
of Return (IRR) model (which compares expected returns over a
well’s lifetime factoring in natural gas liquids, crude, and natural
gas production), rated the Bakken’s IRR at 58%, in contrast to an
average return of 36% across the 18 U.S. shale plays it analyzed.12
Accordingly, the $2.1 billion in monthly revenue that producers
generated in July from crude oil production dwarfs the $100 million earned from natural gas production in the same month.13 As
a glut of supply across the country continues to depress prices,
($/mmbtu)
$5.00
$4.00
$3.00
$2.00
$1.00
Price Received by Bakken Producers
Henry Hub Benchmark
Source: NDIC Department of Mineral Resources, Bloomberg
9
Ceres, “Flaring Up: North Dakota Nautral Gas Flaring More Than Doubles in Two Years,” 07/29/13.
10
NDIC Department of Mineral Resources.
11
According to Bentek, based on key 18 shale plays surveyed in report.
12
Bentek Williston Basin report.
13
NDIC Department of Mineral Resources.
14
Lynn Helms, NDIC Department of Mineral Resources, “Director’s Cut,” 09/13/13.
Fourth Quarter 2013 7
Processing Rich Natural Gas
NGL Applications:
Methane: power generation, residential and commercial heating
Raw
Natural
Gas
Ethane:
Propane:
Butane:
Natural
Gasoline:
Consumer
Quality Dry
Natural
Gas
Ethane
42%
Methane
Propane
28%
petrochemical feedstock, synthetic rubber for tires, lighter fuel
solvent, gasoline, polystyrene
Iso-Butane: petrochemical feedstock, refrigerant, aerosols
NGLs
Fractioned
Processing
Plant
petrochemical feedstock,
plastic manufacturing
residential and commercial
heating, cooking fuel
Butane
7%
Natural
Gasoline
14%
Iso-Butane
10%
NGL spot
price ($/gal)
Conversion Factor
(GAL/MMBTU)
NGL spot price
($/MMBTU)
% Processing
Composition
NGL $ Gross Margin
per MMBTU
Propane
$1.03
11.010427
$11.34
28%
$3.21
Iso-Butane
$1.47
10.109895
$14.82
10%
$1.42
Normal Butane
$1.34
9.717323
$13.05
7%
$0.91
Natural Gasoline
$2.00
9.195064
$18.39
14%
$2.48
Product
* Prices - spot Conway, KS 09/30/13
**Estimated conversion factors and model provided by Bloomberg. % Product Breakdown by
Bentek for Williston Basin region.
****Note that ethane, the fifth liquid processed from gas has been omitted for the purposes
of this analysis. Typically it comprises ~42% of processing, but ethane is being rejected at the
plant in the Bakken due to prices averaging under 30c/gal for much of the year, well below the
cost of transportation. Therefore, we do not factor in the additional uplift a plant could theoretically earn from ethane production.
8 COMMODITY MARKETS UPDATE
Total - value of NGL “basket” in MMBTUs
$8.02
Less: spot natural gas
$3.56
Income "uplift" per MMBTU
$4.47
A Source of Profit in Liquid Form
The table to the left shows a rough indication of the value differential among various NGLs and pure methane gas, based on
September 30th prices at the Conway, KS hub and the percentage output of a barrel of NGLs in the Bakken.
The current pricing premiums of NGLs over methane translate
into a material uplift for an oil producer facing the discounted
wellhead prices for gas that have persisted in the Bakken due to
its logistical constraints. As such, producers are not choosing to
flare off these NGLs because of a lack of value. Rather, the primary factor holding back further NGL production in the region
has been, unsurprisingly, an infrastructure shortage to process
the raw natural gas into liquids and transport them to market.
A Changing Infrastructure Landscape
Several midstream energy companies are now taking note of
this need and are investing heavily. Roughly $4 billion has gone
into natural gas infrastructure developments since 2009 in the
Williston Basin, according to the ND Pipeline Authority. Bakken
NGL processing capacity is currently 50,000 bbls/day, up from
20,000 bbls/day just two years ago. With new processing capacity coming on stream in 2013, the EIA predicts NGL production
will double in the Williston Basin by the end of the year.
The investments of two companies in particular will provide a significant outlet for the region’s gas production. Hess
Corporation expects to complete a major expansion of its Tioga
Gas Plant later this year, which produces propane, butane, and
natural gasoline.15 ONEOK has completed two projects in 2013,
$25
$20
$15
$10
$5
NGL Basket
Natural Gas (Henry Hub)
Aug-13
Feb-13
May-13
Aug-12
Nov-12
Feb-12
May-12
Aug-11
Nov-11
Feb-11
May-11
Aug-10
Nov-10
Feb-10
May-10
Aug-09
Nov-09
Feb-09
May-09
Aug-08
Nov-08
Feb-08
May-08
$0
Aug-07
For years, energy companies favored “dry” gas (pure methane) for
its pipeline-ready purity; many of the originally-discovered unconventional shale plays produce mainly dry gas. However, as dry gas
prices have plummeted due to the supply glut, drillers have become
increasingly willing to shoulder the additional cost of “wet gas” processing, in order to capture the higher value of the NGLs.
$30
Nov-07
There is another, potentially more lucrative incentive for producers
in the Bakken to capture natural gas, which lies in the embedded
natural gas liquids (“NGLs”, which include products like ethane
and butane). Associated gas is rich in these liquids, which currently command higher prices on the market and are valuable
resources that producers would prefer to sell rather than flare.
Crude Oil, Dry Gas, and NGL prices,
Crude Oil, Dry Gas, and NGL Prices,
inin$/mmbtu
$/mmbtu equivalent
equivalent
Crude Oil (WTI)
Source: Bloomberg
As the EIA points out, “for production implications, a higher crude oil-to-natural gas
ratio incentivizes drilling for oil in preference to natural gas, and makes NGLs relatively more attractive than the development of dry gas resources”.
as well: an NGL pipeline that transports unfractionated NGLs
to the Conway, KS hub and a Stateline II processing facility.16
According to Justin Kringstad, director of the North Dakota
Pipeline Authority, the improvements will increase processing
capacity to 1.2 bcf/d by the end of this year and 1.4 bcf/d by
the end of 2015. Based on baseline projections, North Dakota
could have enough processing capacity for all of the gas it produces by the end of the year.17 (Current production as of June
was 0.93 Bcf/d; June 2011 production was 0.39 Bcf/d).
Furthermore, once drilling companies do connect their wells to a
gathering grid, there is considerable dry gas takeaway capacity
on pipelines that flow through the region (Alliance, WBI Energy,
NBPL) and provide delivery access to Midwest markets such as
the Chicago hub. Though the space has historically been allocated primarily to Canadian producers, Bakken producers have
an opportunity to gain market share as the firm pipeline transportation contracts roll off in the next few years, according to
Bentek. As gas is not their primary revenue generator, Bakken
operators have a competitive advantage in the region over traditional Canadian producers: they can accept lower prices for their
gas without negatively impacting well returns.
These developments could challenge the conventional wisdom
that flaring is inevitable. Yet keeping pace with the growing
Michael Lutz, “Hess: A Bakken Producer’s Regional View on Gas & NGL
Markets,” Platts Rockies Oil & Gas Conference, April 15-16, 2013.
15 16
ONEOK Annual Report, 2013.
17
Justin Kringstad, North Dakota Pipeline Authority, “Bakken Investor Conference,” 04/25/13.
Fourth Quarter 2013 9
The fires scattered throughout the North
Dakota prairie illustrate the enormous challenges facing energy companies as they
work to reduce wastefulness and instead
harness this valuable energy source into pro-
solution to the flaring problem will necessarily be a
mixture of several initiatives, and it is not an issue that
can be resolved overnight.
In a way, however, flaring also offers a visual representation of the opportunities that the region has
been given. The Bakken is a story of exceptional
growth, propelling the North Dakota economy into
one of the nation’s leaders: the state has the lowest unemployment rate in the country at 3.0%,
and it reported the highest annual increase in GDP
per capita of any state in both 2011 and 2012.19 A
revitalized energy industry is now engaging with
other sectors, spurring further investment in the
region. For example, two new fertilizer plants are
in the process of being constructed to utilize natural gas in the manufacture of nitrogen fertilizer,
which will boost productivity in the state’s legacy
agriculture industry. The North Dakota regulatory
body continues to see a wave of enthusiasm from
companies interested in finding alternative uses for natural gas
and has already commissioned several studies, including an evaluation of its use in motor vehicles.
ductive (and revenue-generating) end uses...
In a way, however, flaring also offers a visual
representation of the opportunities that the
region has been given.”
production is going to be a continual struggle: projections by
Continental Resources, a major operator in the region, have the
number of Bakken wells approaching 52,000 by 2025 (+400%
increase over today). The rural, rugged terrain and the severe
winter weather that shortens the drilling season will only further complicate the process of well connection.
A Future of Challenges and Opportunities
With such exceptionally high flaring levels, the situation has
raised the attention of the Environmental Protection Agency,
and the state could increasingly come under scrutiny from environmental groups if flaring does not decrease. North Dakota’s
legislature is targeting a 10% flaring rate, though it has not yet
published a specific timeline for that goal to be met. It also
recently passed legislation to provide tax incentives for companies that find an alternative source for otherwise flared gas.
Major players in the Bakken, such as Continental Resources and
Whiting Petroleum Corp, have vocally expressed a more ambitious goal of reducing flaring to “as close to zero as possible.”18
The fires scattered throughout the North Dakota prairie illustrate
the enormous challenges facing energy companies as they work
to reduce wastefulness and instead harness this valuable energy
source into productive (and revenue-generating) end uses. The
10 C O M M O D I T Y M A R K E T S U P D A T E
Much about how the energy industry will tackle these unprecedented hurdles, and how it will capitalize on these unprecedented
opportunities, remains up in the air. For natural gas, a relatively
clean-burning fuel that is currently being wasted in excess, the
hope is that with the right balance of encouragement from the
North Dakota state legislature and the economic incentives to
develop adequate gathering and processing infrastructure, this
valuable energy source will no longer be going up in flames.
Much of the data for this article was sourced from Bentek Energy’s July
2012 report, “The Williston Basin: Greasing the Gears for Growth in North
Dakota.” The study was commissioned by the North Dakota Pipeline
Authority and the North Dakota Industrial Commission to forecast natural
gas production growth through 2025 and to determine if adequate natural
gas pipeline infrastructure exists.
As per 10-K company presentations. Also sourced from: Saqib Rahim, EnergyWire,
“Bakken’s top producer wants to snuff out natural gas flaring,” 03/04/2013.
18
EIA.gov, “North Dakota sees increases in real GDP per capita following Bakken
production,” 07/12/13.
19
Fourth Quarter 2013 11
Natural Gas Overview
dominate rig activity, allowing producers to earn favorable
In many ways, the unprecedented challenges and opportunities
Changing Supply Dynamics: Less efficient, more expensive pro-
confronting producers and marketers in the Williston Basin reflect
ducing areas, such as the Southeast, are being priced out of the
what is happening on the national scale.
markets they once served. There has been a massive infrastruc-
returns despite low dry gas prices.
ture development of pipelines and gas gathering systems across the
The North American natural gas sector has undergone, and contin-
continent; some pipelines have even begun shipping gas in the oppo-
ues to undergo, several dramatic changes that have caused a rapid
site direction of traditional flows, as discoveries like the Marcellus in
increase in gas production and disrupted traditional forms of supply.
Pennsylvania can now more easily send product to northeast end
Total U.S. production has climbed 45% since 2005, from an aver-
markets. Imports from Canada have declined 40% and will continue
age 47.5 Bcf/d to 70.6 Bcf/d as of July 2013, according to the EIA.
to be negatively affected by increased U.S. production, particularly in
North Dakota’s Williston Basin, which shares similar pipeline routes.
Key Themes
Oversupply Leading to Low Prices: Horizontal drilling technolo-
Transition from Regional to National Pricing: Once a regionally
gies (known as “unconventional” vs. traditional vertical drilling) have
based-market, the flood of natural gas in unconventional areas of the
unlocked a prolific new source of natural gas. Demand has stayed rel-
country has caused geographic price spreads to collapse. Now that
atively constant over the past few years; the glut of production has
the U.S. market is much more interconnected through a developed
depressed prices, causing several ramifications. Ironically, many of
natural gas pipeline system, traditional trading strategies that profited
the unconventional shale play discoveries that initially created such
from geographic basis arbitrage are no longer lucrative.
vast supplies of gas (Haynesville, Barnett) are facing reduced production in favor of wells that have more lucrative liquid streams.
Increased Gas Production: The surge in oil and NGLs drilling
nationwide is, in turn, helping to foster continued natural gas pro-
Drilling in Oil and Wet-Gas Rich Shale Plays: Producers
duction growth. Dry gas drilling has fallen to ten year lows, but
are now incentivized to shift drilling rigs to oil and liquids-rich
national production has held steady because wet gas is recovered
(“wet” gas) plays, because oil and NGL prices remain high rel-
alongside crude production in the shale regions (“associated”
ative to dry gas on an mmbtu basis. Wet gas plays currently
gas). While 54% of 2014 natural gas is predicted to come from
12 C O M M O D I T Y M A R K E T S U P D A T E
these wet gas wells, U.S. natural gas production is still expected
Top U.S. Unconventional Shale Gas Plays
to grow 22% between 2011 and 2017.
Location
Bcf/d
AK, LA
6.99
Barnett
TX
5.85
Marcellus
PA
4.96
Fayetteville
OK
2.81
ply has reinvigorated the U.S. manufacturing industry. Companies
Eagle Ford
TX
2.14
have also begun to export propane and butane to Latin America and
Woodford
OK
1.13
OK/TX
0.95
Surging NGL Production: As drillers continue to reallocate capital to
drilling in “wet” shale plays with greater rates of return, and as midstream companies race to build more liquids processing infrastructure,
NGL production is growing considerably. The new abundant supply
of liquids has driven down their prices to some extent, but this has
also created a global cost advantage. For example, since NGLs are
key feedstocks in petrochemical production, the readily available sup-
East Asia, with exports expected to exceed one million bbl/d by 2018.
Haynesville
Granite Wash
Gas-Fired Power Generation Projected to Increase: Low gas
Source: EIA 6/1/13
Historical
Gas
Price
Historical Natural
Natural Gas
Price
prices, and a continued focus on environmental regulations, are causing a shift from coal-burning to natural gas-burning power plants.
Bentek, an energy consulting agency, estimates 14% gas demand
growth from the power sector between 2011 and 2017. The company
also projects a 43% increase in gas demand from Mexico during that
same time period, as the country is currently investing in a gas distribution network to take advantage of cheap supply from the U.S. In
the long-run, approval to export LNG (liquefied natural gas) to Europe
and Asia, where average netback prices (gas price at import desti-
HenryHub
HubBenchmark
Benchmark
Henry
$16
$14
$12
$10
$8
$6
$4
$2
$-
nation less shipping costs) average $8.60 and $13.68, respectively,
could also expand distribution channels for domestic natural gas.1
1
Bloomberg
Source: Bloomberg
Fourth Quarter 2013 13
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