NORTH AMERICAN GAS: PRICE RELIEF ON THE WAY, BUT NOT SOON

Participants in the North American natural gas market have had to recalibrate their expectations about prices over the past few years, owing to a chronic inability to increase indigenous supply and to surprisingly price-insensitive demand. Prices have been further exacerbated by recent hurricane activity. Looking ahead, CERA sees gas prices taking a true roller coaster ride over the next ten years.

- CERA expects the market to remain very delicately balanced between now and 2008, as continued demand resiliency will clash with stagnant supply.
- Spurred by the ongoing period of gas price strength and the belief that continental supply will not keep pace with demand, a large wave of liquefied natural gas (LNG) is heading to North America, with a big surge of growth expected in 2008. This will be critical to meeting the continent's rising gas demand for power generation.
- LNG deliveries are projected to outstrip demand growth between 2008 and 2010. Thereafter, CERA foresees new LNG projects arriving at a slower pace.
- CERA expects gas prices to reflect definite before-LNG and after-LNG levels. Nominal prices at Henry Hub are projected to average $8.05 per million British thermal units (MMBtu) from 2005 through 2007 and $5.34 per MMBtu from 2008 through 2015. Over the same two periods, prices at AECO are expected to average C$7.83 per gigajoule (GJ) ($6.87 per MMBtu) and C$5.36 per GJ ($4.63 per MMBtu), respectively.

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CERA Reports Online, a wholly owned subsidiary of IHS Energy, is a leading advisor to international energy companies, governments, financial institutions, and technology providers. CERA delivers critical knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA's expertise covers all major energy sectors--oil and refined products, natural gas, and electric power--on a global and regional basis.