Gas development: Not just for gas companies anymore

Dive Brief:

End users of natural gas, such as electric utilities, are increasingly moving to invest in gas development to hedge against fluctuations in commodity price while also ensuring supply, Argus Media reports.
NextEra Energy — the owner of Florida Power & Light (FPL) that wants to acquire Hawaiian Electric Company — will develop gas reserves with Northwest Natural Gas, and other big gas users are getting into the production market as well. Japan's Sumitomo and India's Gail both have deals in U.S. shale fields, and AGL Resources has hinted it may invest.
Holders of liquefied natural gas (LNG) export capacity have the ability to play both sides of the market, selling gas into the U.S. system when prices are high or taking the liquefied gas when prices are low.

Dive Insight:

Gas price volatility has led to an interesting phenomenon, Argus reports: End users are beginning to invest in resource development, both to hedge against higher prices and to maintain a steady fuel supply. Names not commonly associated with gas development — Duke Energy and Florida Power & Light, for instance — have been eyeing investments outside both their sectors and geographic territory.

But for some consumer advocates and activists, the potential investments from their utilities look more like risks than hedges. A bipartisan coalition in Florida is pushing FPL to decrease its reliance on gas and look to invest in more renewable generation to mitigate gas price risks rather than gas production.

Companies that hold LNG capacity, like Sumitomo and Gail, are investing as well, as the United States' export capacity gas grown.

FERC has received plans for 15 LNG export terminals, and more projects are on the drawing board. But according to the U.S. Energy Information Administration, "it is unclear how many additional natural gas liquefaction facilities will move into the construction phase, or when that might happen." Some of that will hinge on how recent low oil prices impact LNG markets, the agency said.

EIA is projecting that exports from the Lower 48 states will reach 7 Bcf/d by 2022.

Gas producers have looked to LNG exports as a way to access higher-priced markets when domestic levels fall. This month Henry Hub gas prices have traded below $3/MMBtu.