Here's something that can instruct us in the UK as to what happens when no shale gas resources are available. This recent document from the US Energy Information Administration on New England natural gas points out the key problem for New England:

Since November, New England has had the highest average spot natural gas prices in the nation. Average prices at the Algonquin Citygate trading point, a widely used index for New England natural gas buyers, have been $3 per million British thermal units (MMBtu) higher than natural gas prices at the Henry Hub, and more than $2 per MMBtu higher than average spot price at Transco Zone 6 NY, which serves New York City and has historically traded at prices similar to those in New England (see Figure 1).

Full pipelines from the west and south limit further deliveries from most of North America, while high international prices and declining production in eastern Canada pose challenges in making up the difference from the north and east, except at higher prices.

As a result of these market conditions, New England natural gas and electric power prices this winter could be volatile at times. During November and December, spot natural prices in the northeastern United States seesawed in relation to weather-driven pipeline constraints. This price volatility has continued into January 2013 to date. 

New England's basic problem is lack of pipeline capacity to import the riches of the Marcelllus into the area. This isn't only a case of Sean and Yoko wanting to stop pipeline construction to New York City, but a basic Not In My Backyard narrative in places like Fairfield County Connecticut. The real estate there is owned by very rich people who like  the sylvan atmosphere and a low carbon commute  to detract them from thinking of the havoc their hedge fund indusry based in Stamford CT causes. Building a pipeline there is a no go situation from the start. Years of environmental impact discussions, opposition from the richest in the country and needing to buy right of way under some of the world's most expensive real estate combine to make the direct route problematic. Other routes are geographically difficult leaving only a possible pipeline expansion along the Mass Turnpike the only option. That puts the pipeline straight through Berkshire County in Western Mass. I was a frequent visitor when I lived in New York City and the problem  is the area is both rural yet very chi-chi. Think Hamptons with mountains. Sean and Yoko's "farm" in upstate New York is the cheap seats in comparison and Josh Fox's stamping ground of Milanville PA is almost the Bronx by Berkshire County standards.

The only alternative is LNG, which explains why this is the only part of North America still importing any at all, via the Boston area or the Canaport terminal in New Brunswick. The situation could be cured if New Brunwsick shale gas ever came to pass, but both the geology and the public opposition to shale there, (piggy backing on Quebec opposition, NB being a third Francophone) doesn't lead to any optimism on that front.

Rural New England in Maine, New Hampshire and Vermont can be very poor, a situation aggravated by the lack of a gas network due to the aforementioned constraints and long distances and small markets. Thus, New England rural poverty is aggravated by the very high cost of fuel oil, the only alternative short of deforestation. Fuel oil, in one of those little twists of fate, is provided to the poor at subsidised levels by none other than Hugo Chavez of Venezuela via a foundattion fronted by members of the Kennedy family who via Robert Kennedy of the Riverkeeper organisation of New York are also a big opponent of shale gas. Confused?  We haven't even mentioned the impact yet of how LNG traded on world prices dominated by the oil link pushes up New England prices much the same as in Europe. In fact as this chart shows, there is a relationship between lack of access to shale gas and having to pay higher gas prices. The EIA makes the direct connection betweeen UK NBP prices and New Engand:

new england

One of the more uneducated assertions about shale gas in the UK is that it won't cut down gas prices. Bang goes that theory.

An interesting aside is how US LNG from Cove Point Maryland may not necessarily mean international exports. The  assumption that Marcellus gas as LNG could compete against UK NBP linked LNG on the European side of the Atlantic Basin  may need to be revisited.  I won't go into the jhead spinning complexities of LNG markets too much, but there could actually be some reductions of European prices via US shale gas without any physical transfer of molecules outside of the US.

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  • Jim South London<br /><br />Bit off topic .Check out the date on this article.No Fracking in Lancashire at the moment.

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  • jay

    Of course, the introduction of another source of wholesale supply should provide competition, lowering prices.<br />But then, we were told that deregulation of the utility companies would do this too, by the same people who are cheer-leading for the fracking. <br />Call me cynical, but I do not expect, that the introduction of fracking will reduce our bills. Any saving, will be quickly gobbled by the regressive taxation aka "green and social initiatives". <br />Meantime, we will have to read about what we hope are only scare stories about safety issues.<br />Remember how, the nuclear industry was going to give us all free energy. Until we discovered, this was a lie. Factoring in decommissioning of plant and waste disposal, it was only economic if you dropped bombs on the Japanese or fired the waste from cannons at various brown peoples...<br />But, I hear you saying, France is mostly all nuclear generation and their leccy is the cheapest in the world. Well, that's a dodge. The French government is picking up the tab for decom on the old never never. Watch France going bust and making Fukushima look like a pussy fart.<br />Fool me once and all that...<br /><br />I came across your blog, researching for an article in my blog:<br />Many Thanks Jay

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