NEW YORK, NY -- (Marketwire) -- 09/26/11 -- The Paragon Report examines investing opportunities in the natural gas market and provides equity research on United States Natural Gas Fund (NYSE: UNG) and Cheniere Energy, Inc. (NYSE Amex: LNG). Access to the full company reports can be found at:
Shale gas has become an important feature of US energy supply. Daily production has increased from less than 1 billion cubic feet of gas per day (bcfd) in 2003, when the first modern horizontal drilling and fracture stimulation was used, to almost 20 bcfd by mid-2011.
While North American natural gas production is skyrocketing, prices have collapsed in recent years as demand has yet to match supply. The price of natural gas in the US has been cut in half from three years ago after new drilling techniques boosted output.
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Two promising trends may be able to boost demand and shrink supply -- stabilizing prices -- in the coming years, however. Natural gas production in Canada, the world's third largest natural gas producer, is declining at a significant rate. The Conference Board of Canada recently issued a report arguing that production is expected to drop over the next five years, led by declines in Alberta output, which is expected to slide by 20%. Drilling activity is expected to be weak for a third consecutive year as explorers shift from natural gas plays to oil plays, where more favourable pricing exists.
The United States' abundant natural gas reserves could provide a new path toward achieving energy security. With clean energy still a top priority, Americans have begun heralding shale gas as a cheap and clean transitional fuel to renewable energy. President Obama himself has said natural gas has "enormous" potential as a clean energy alternative to oil.
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