BASF Sees US Natural Gas Prices Rising
May 28, 2012
BASF Corp., the world's largest chemical company, believes the price of natural gas in the U.S. is poised to rise to the $5/MMBtu to $7/MMBtu range.
Speaking May 21 at the 2012 Deloitte Energy Conference near Washington, D.C., BASF CEO Hans-Ulrich Engel said the $2 to $4 range for natural gas is not sustainable. While he did not put a specific time frame on his forecast, Engel said $6/MMBtu is about where BASF projects natural gas prices will be in the longer term.
"We are confident the supply is there. We have no doubt with respect to the reserves and the resources, and we have no doubt of the amount of natural gas being produced," he said.
Engel admitted that BASF was a bit behind the shale gale. The company did not have shale gas on the radar screen in a significant way until 2009. But now, the transformative power of shale gas is on display for the entire world, and the chemical industry is in a prime position to capitalize.
As long as chemical companies are situated near a supply basin in North America, Engel said, they will have a competitive price advantage in the range of $4/MMBtu to $5/MMBtu compared to chemical companies in Europe. That advantage helped the U.S. once again become a net exporter of chemicals in 2010, something it had not done since 2000, according to BASF.
Although Engel said $2 gas cannot last, companies across the chemical industry are betting on sustained, relatively low prices. Tens of billions of dollars in investments are planned by the chemical industry, he said. Highlights include plans for two new ethane crackers, one proposed by Dow Chemical Co. in the Gulf and another by Shell Chemical LP in Pennsylvania.
"I'm very sure we won't see all of the projects really materialize," Engel said. "But I'm also sure we will see the majority of these projects being realized."
BASF is making two relatively modest near-term investments in the U.S., one in the $50 million to $70 million range and another at about $100 million, he noted.
BASF believes that U.S. natural gas producers will be subject to increased regulations, but responsible parties will handle those requirements and still thrive, Engel said.
Source: SNL Daily Gas Report
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