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EIA: Price ratio of crude oil to natural gas continues to increase

13 April 2012

The ratio between the spot prices of crude oil and natural gas has been generally increasing since January 2009, but it has climbed rapidly in recent months, according to data from the US Energy Information Administration (EIA). The crude oil-to-natural gas spot price ratio has implications for production and consumption.

OilToGasRatio
Crude oil to natural gas price ratio. Source: EIA. Click to enlarge.

The ratio increased because of both increasing crude oil prices and decreasing natural gas prices.

The spot price for Brent crude oil has increased 19% in the last six months, from $103.90 per barrel on 3 October 2011 to $123.81 per barrel on 30 March 2012. Several factors underpin the increase in global crude oil benchmarks since the start of the year. Over the same period, the spot price for natural gas at the Henry Hub has decreased 45%, dropping from $3.57 per million British thermal units (MMBtu) to $1.98/MMBtu. Natural gas spot prices have been near 10-year lows as a result of warmer-than-normal temperatures, ample natural gas in storage, and growing production.

In terms of production implications, EIA said, a higher crude oil-to-natural gas ratio encourages drilling for oil in preference to natural gas and makes natural gas liquids developments relatively more attractive than the development of dry natural gas resources.

On the consumption side, the higher ratio also encourages end users to choose natural gas over products derived from crude oil, such as distillate and residual fuel oil, wherever substitution is feasible.

April 13, 2012 in Brief | Permalink | Comments (11) | TrackBack (0)

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100,000 BTUs of natural gas (one therm) sells for about 20 cents wholesale. The same BTUs of oil sells for about $1.80 making a 9 to 1 ratio.

This is more reason to create GTL then go on to more BTL. We have the natural gas and we can develop the biomass markets. Most natural gas has to be brought up to pipeline grade, GTL can take it right from the ground.

The headline emphasis is misleading.

The ratio is driven mostly by the price for natural gas decreasing 45%, not the smaller crude increase of 19%.

The price ratio of natural gas to crude oil continues to DEcrease.

GTL is good, but bringing "natural gas . . up to pipeline grade" is easier than changing G to L.

We need both apples and oranges here.

We need both.

They refer to the ratio, 9 to 1 is greater than 8 to 1 so the ratio of oil price to natural gas price is increasing.

Of course we need both oil and natural gas, but we can make fuel from natural gas that blends right in with refined fuels.

The 20 cents per therm is for natural gas cleaned up and brought up to the one therm energy level. Imagine what a natural gas company could do with it right out of the ground, the cost per 100 cubic feet would be less because no clean up nor upgrade.

NG right out of the ground usually has considerable CO2, often H2S, and may be "wet" also.  It's a relatively clean product but hardly usable as-is.

It was a thought, not a position. If you have to process the natural gas to make it pipeline grade, why process it twice? Bring it in, process it and convert it in one step.

It does not matter much, the low price of pipeline grade at the wholesale level makes conversion to liquid fuel economically viable. I do not mean F/T when I say GTL, it is more natural gas to synthetic fuel.

There is a process that directly turns the methane in natural gas into DME and a process that turns DME into synthetic gasoline. There are companies working on smaller and less expensive units to do this.

But that is not the case for other regions. In Europe and Asia vs and oil competes neck to neck. Medvedev - russian gas giant Gazprom president told to the mass media "US gas prices are Holywood story which will not happen anywhere else". US natural gas prices has smell of financial buble. Therefore I would advocate NG-DME-gasoline chain which could maintain flexibility being modified to coal-DME-gasoline chain or biomass-DME-gasoline. DME is very similar to LPG and even LPG-DME blending is possible.

This is why I advocate GTL and then more BTL. I do not know about the CTL aspects, but perhaps that as well. It is all gasification and synthesis of fuels. F/T is an older method, the methane to DME to gasoline are newer methods.

The MTG plant operating in New Zealand in 1985 could make gasoline or diesel from natural gas with a similar process. This was done on a large enough scale that it was well proven over time. There are GTL plants in Trinidad and other places that have shown success.

I am not advocating anything that has not already been done. It seems like a very secure and relatively risk free path for a more stable energy future. I suppose those that oppose it could refuse to fill up their cars with any synthetic fuel in the future, but they may find that fuel hard to find.

The MTG plant operating in New Zealand in 1985 could make gasoline or diesel from natural gas
And now New Zealand has a natural gas shortage; the Maui field is empty or almost so.

Lower oil prices made it less economical, I don't think that will be our problem in the future. Make the plants able to take coal or biomass, have them able to produce several products.

Make them portable, like they do for ocean rigs so that if a field taps out, you can pick them up and move them. All these situations have solutions, but we can say "oh but" and then drop everything and walk away. Not a good idea.

CompactGTL makes a unit about half the size of a football field that can be deployed in a modular fashion. Last time I counted, there were more than half a dozen such companies providing products to do this.

http://compactgtl.com/wp-content/documents/RIO_GAS_FORUM_FINAL_PRES.pdf

That's just the thing for stranded gas.

Meanwhile, the international trade in LNG is serving markets at about $16/mmBTU, or about USD2.25 per gallon of diesel equivalent.  That's going to be mighty attractive when crude oil is already USD2.50/gallon before you take the trouble to crack and de-sulfurize it.

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