Natural-gas price spikes, but San Juan Basin waits

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SHAUN STANLEY/Durango Herald photo illustration

Natural-gas prices have surged in January as historically cold weather in the Northeast led to increased demand and reduced supply.

However, the price spike may mean little for the San Juan Basin. Natural-gas production has dropped each year since 2009 in La Plata County in reaction to low prices and a surge of drilling in other states.

“The price is still what’s preventing drilling wells,” said Christi Zeller, executive director of the La Plata County Energy Council, an industry group. “Even though we have a spike this month, it doesn’t change where money is being allocated for drilling programs.”

Also, the price could retreat after the supply-and-demand effects of the cold spell work themselves out.

Natural gas was trading last week at $4.50 per million British thermal units on the Henry Hub, a widely watched market indicator. It was the highest price seen for natural gas since summer 2011, according to the federal Energy Information Administration.

San Juan Basin operators don’t necessarily get the Henry Hub price, but other hubs broadly track the indicator.

The cold weather in much of the eastern United States also contributed to a decline in supply. The amount of natural gas in storage last week was 15 percent below the same point a year ago, according to the EIA.