ArrowHead Solutions – Natural Gas

ArrowHead Solutions Help Clients Understand Future Natural Gas Markets to Aid Their Decisions

ArrowHead Natural Gas Solutions Help Clients Understand How Potential Market Events Impact Their Business

Natural gas supply and demand have grown rapidly regionally and worldwide in the past fifteen years, and growth does not promise to abate. ArrowHead natural gas solutions include helping clients to understand specific natural gas industry issues and how these issues impact our client’s business based on assumptions about the market drivers.

Many of these issues are around commodity price, such as:

  • What will natural gas prices be at key locations worldwide over the next year, 5 years, 10 years, 25 years? How are these prices affected by potential market events?
  • What if Qatar, Russia, and/or Australia slow output relative to recently announced or anticipated levels?
  • What if Nabucco, expanded Greenstream, and other megaprojects open new competitive routes into Europe? Will LNG be displaced? If so, to where will that LNG be displaced? Will Russian prices be softened?
  • What if gas price decouples from oil price? How low could gas price get? What if it doesn’t decouple? Should one be confident that gas price is going to decouple from oil price or not? Why?
  • Is the access and supply of low cost gas in North America so astronomical that gas price will never climb significantly above $3/MMBtu? Alternatively, will the production cost of gas in North America rise as the cost of shale gas rises when sweet spots deplete or when access might begin to experience limits?
  • If Marcellus supply continues to increase, how low will the basis to Henry Hub go? Negative? Still positive? What will that do to long haul pipelines? Are there going to be profitable gas exports from North America? How about profitable LNG imports?
  • If gas burn in the United States increases by 1, 2, 5, or 10 Bcfd, how much will that drive up North American gas prices region by region? If 10 Bcfd of gas were to be burned for electric power generation, would American gas consumers pay higher gas prices? Would that eliminate the profitability or benefits of LNG or gas pipeline exports?
  • Does Russia have market power in Europe? If Russia reduces output to Europe, does the price go up faster than the cutback volume drops, leading to an increase in revenue? Or does a cut in output to Europe leave the price more or less the same and simply sacrifice volume (and therefore revenue) to Russia? If the revenue doesn’t go up faster than the production decrease, then Russia does not have market power.
  • Can Chinese shale gas thwart large volumes of LNG into Asia? What if there are a couple of Marcellus size deposits in China with Marcellus-class costs? Will that displace LNG out of China? To what degree? Will it depress price in China? To what degree? Will it obviate the need for oil indexed contracts?

Natural gas companies also need help with specific types of issues or decisions, such as:

How ArrowHead Natural Gas Solutions Help:

ArrowHead consultants use the Arrowhead Global Gas Model and other related ArrowHead Models to calculate probability distributions over prices and quantities across the decision time frame our clients need. Clients can have us use our assumptions and probabilities, or their own. It is easy to adjust models to reflect any of the conditions or events reflected in the types of issues presented above. Then in a single model run using probabilities for each of the market assumptions or issues that must be explored, the models calculate the probability distributions over prices and quantities needed to answer the questions and issues. Not only does the model provide an accurate representation of market behavior under the various assumptions, but it also accurately applies the calculations for the various probabilities in an integrated fashion in a single run. Our natural gas market specialists can also help clients analyze the model results and apply the model results to helping make a specific decision or to understand how certain events would impact the natural gas market and as a result their businesses.