Natural Gas

Natural gas is a fossil fuel that is colorless, shapeless, and odorless in its pure form. It is a mixture of hydrocarbon gases formed primarily of methane, but it can also include ethane, propane, butane, and pentane. Natural gas is combustible, clean burning, and gives off a great deal of energy. Around 500 BC, the Chinese discovered that the energy in natural gas could be harnessed. They passed it through crude bamboo-shoot pipes and then burned it to boil sea water to create potable fresh water.

Around 1785, Britain became the first country to commercially use natural gas produced from coal for streetlights and indoor lights. In 1821, William Hart dug the first well specifically intended to obtain natural gas and he is generally regarded as the "father of natural gas" in America. There is a vast amount of natural gas estimated to still be in the ground in the U.S. Natural gas as a source of energy is significantly less expensive than electricity per Btu.

Natural gas futures and options are traded on the New York Mercantile Exchange (NYMEX). The NYMEX natural gas futures contract calls for the delivery of natural gas representing 10,000 million British thermal units (mmBtu) at the Henry Hub in Louisiana, which is the nexus of 16 intra-state and inter-state pipelines. The contract is priced in terms of dollars per mmBtu. NYMEX also has basic swap futures contracts available for 30 different natural gas pricing locations versus the benchmark Henry Hub location. Natural gas futures are also listed in London on the ICE Futures Europe (ICE) exchange.

Prices - NYMEX natural gas futures on the nearest-futures chart in early 2009 extended the sharp sell-off seen in the latter half of 2008, posting a new 8-year low of $2.408 in September 2009. Natural gas futures then rebounded mildly higher in late 2009 to close the year virtually unchanged on the year at $5.572.

Supply - U.S. recovery of natural gas in 2009 rose +2.2% to a record high of 26,320 billion cubic feet. The top U.S. producing states for natural gas in 2009 were Texas with 31% of U.S. production, Wyoming with 11% and Oklahoma with 8%, Louisiana with 7%, and New Mexico with 6%. In 2009 the world's largest natural gas producers were the U.S. with 1,907,653 terajoules of monthly average marketed production and Russia with 1,593,279 terajoules. The next closest producer was Canada with 473,442 terajoules.

Demand - U.S. - delivered consumption of natural gas in 2009 fell -1.66% yr/yr to 22,841 billion cubic feet, of which about 30% was delivered to electrical utility plants, 27% to industrial establishments, 21% to residences, and 14% to commercial establishments.

Trade - U.S. imports of natural gas (consumed) in 2009 fell -6.82% yr/yr to 3,713 billion cubic feet, further down from the 2007 record high of 4,608 billion cubic feet. U.S. exports of natural gas in 2009 rose +4.23% yr/yr to a record high of 1,048 billion cubic feet.

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