natural gas - an integrated analysis special report by

Natural Gas

Natural Gas – An Integrated Analysis

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An Integrated Analysis



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CONTENTS

Introduction

Uses of Natural Gas

Natural Gas Demand

Factors Affecting Short Term Demand

Factors Affecting Long Term Demand

Natural Gas Supply

Meeting Natural Gas Demand

Factors Affecting Supply of Natural Gas

U.S. Natural Gas price forecast

Technical View


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Introduction

Natural Gas is one of the principle sources of energy for many of our day-to-day needs

and activities. For hundreds of years, natural gas has been known as a very useful

substance. The Chinese discovered a very long time ago that the energy in natural gas

could be harnessed, and used to heat water.

In the early days of the natural gas industry, the gas was mainly used to light

streetlamps, and the occasional house. However, with much improved distribution

channels and technological advancements, natural gas is being used in ways never

thought possible.

There are so many different applications for this fossil fuel that it is hard to provide an

exhaustive list of everything it is used for. And no doubt, new uses are being discovered

all the time.

Uses of Natural Gas

Power Generation: Natural gas is a major source of electricity generation through

the use of gas turbines and steam turbines. Most grid peaking power plants and some

off grid engine generators use natural gas. Natural gas burns more cleanly than

other Hydrocarbon fuels, such as oil and coal, and produces less carbon dioxide per

unit of energy released.

Domestic use: Natural gas dispensed from a simple stovetop can generate heat in

excess of 2000°F (1093°C) making it powerful domestic cooking and heating fuel. In

much of the developed world it is supplied to homes via pipes where it is used for many

purposes. In the rural areas it is also used as CNG & LPG.

Transportation: CNG is

gasoline (petrol) and diesel. The energy efficiency is generally equal to that of gasoline

engines, but lower compared with modern d

Fertilizers: Natural gas is a major feedstock for the production of ammonia, via the

Haber process, for use in fertilizer production.

Hydrogen: Natural gas can be used to produce

being the hydrogen reformer.

for the chemical industry, a hydrogenating agent, an important commodity for oil

refineries, and a fuel source in

Other: Natural gas is also used in the manufacture of fabrics, gl

paint, and other products.

Natural gas uses by sector

a cleaner alternative to other automobile fuels such as


engines, but lower compared with modern diesel engines.

Natural gas is a major feedstock for the production of ammonia, via the

Haber process, for use in fertilizer production.

Natural gas can be used to produce hydrogen, with one common method

hydrogen reformer. Hydrogen has many applications: it is a primary feedstock


refineries, and a fuel source in hydrogen vehicles.

Natural gas is also used in the manufacture of fabrics, glass, steel, plastics,

Industrial

32%

Electric generation

24%

Residential

22%

Commercial

14%

Other

8%

Natural gas uses by sector


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automobile fuels such as


Natural gas is a major feedstock for the production of ammonia, via the

hydrogen, with one common method

Hydrogen has many applications: it is a primary feedstock


ass, steel, plastics,


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Natural Gas Demand

Natural gas is believed by many to be the most important energy source for the future.

The abundance of natural gas, worldwide as well as domestically, coupled with its

environmental soundness and multiple applications across all sectors, means that

natural gas will continue to play an increasingly important role in meeting demand for

energy. There are many reasons for the long term expected increase in natural gas

demand. As can be seen, demand for all types of energy, save nuclear and hydro

power, is expected to increase over the next 20 years. This general upswing can be

attributed to the expected general growth of the U.S. economy and population in the

future.

Factors Affecting Short Term Demand

Demand for natural gas has traditionally been highly cyclical. It depends highly on the

time of year, and changes from season to season:-

Weather: Natural gas demand typically peaks during the coldest months and tapers

off during the warmest months, with a slight increase during the summer to meet the

demands of electric generators.

Fuel Switching: Supply and demand in the marketplace determines the short term

price for natural gas. However, this can work in reverse as well. The price of natural gas

can, for certain consumers, affect its demand. For instance, during a period of extremely

high natural gas prices, many electric generators may switch from using natural gas to

using cheaper coal, thus decreasing the demand for natural gas.


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U.S. Economy: The state of the U.S. economy in general can have a considerable

effect on the demand for natural gas in the short term, particularly for industrial

consumers. When the economy is expanding, output from industrial sectors is generally

increasing at a similar rate. When the economy is in recession, output from industrial

sectors drops. These fluctuations in industrial output accompanying economic upswings

and downturns affects the amount of natural gas needed by these industrial users.

Factors Affecting Long Term Demand

The long term demand factors reflect the basic trends for natural gas use into the future.

In order to analyze those factors that affect the long term demand for natural gas, it is

most beneficial to examine natural gas demand by sector.

Residential and Commercial Demand:


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Industrial Demand:

Electric Generation Demand:


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Natural Gas Supply

Maintaining an adequate supply of this critical resource is essential to preserving and

improving our quality of life. Inadequate supply at any one time leads to price increases,

which signal to production companies the need to increase the supply of natural gas to

the market. Supplying natural gas in order to meet this demand, however, is dependent

on a number of factors.

These factors may be broken down into two segments: general barriers to increasing

supply, and those factors that affect the short term supply scenario.

Short Term Supply Barriers

In a perfect world, price signals would be recognized and acted upon immediately, and

there would be little lag time between increased demand for natural gas, and an

increase in supplies reaching the market. However, in reality, this lag time does exist.

There are several factors that affect this lag time and the short term availability of

natural gas supply. They include:

Availability of Skilled Workers

Availability of Equipment

Permitting and Well Development

Weather and Delivery Disruptions


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General Barriers to Increasing Supply

In addition to the short-term impediments to increasing natural gas supply, there exist

other more general barriers to the increased supply of natural gas. These include:

Onshore and Offshore Access: An estimated 59 percent of the U.S. undiscovered

natural gas resources is located on federal lands and offshore waters, however much of

these resources are off-limits to exploration and production. Access to coastal

resources remains an ongoing issue for natural gas: in the wake of the tragic Deepwater

Horizon accident and oil spill in spring 2010, the administration instituted a six- month

moratorium on deepwater drilling leases in the Gulf of Mexico.

Pipeline Infrastructure: The ability to transport natural gas from producing regions

to consumption regions also affects the availability of supplies to the marketplace. The

interstate and intrastate pipeline infrastructure can only transport so much natural gas at

any one time, and in essence provides a 'ceiling' for the amount of natural gas that can

reach the market.

The Financial Environment: Exploring for and producing natural gas is a very

capital intensive endeavor. In fact, the National Petroleum Council estimated in 2007

that production companies will have to invest $4.3 trillion in capital between 2005 and

2030 in order to keep pace with demand growth. While efficient and transparent

financial markets in the U.S. do offer options for raising capital effectively, the rate at

which production companies may do so can serve as a limiting factor in the increasing

availability of supplies reaching the market.


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TECHNICAL VIEW

Natural Gas CMP - $4.531 Target Price –$6.090

Moving averages

Moving Averages 20 Day 50 Day 100 Day 200 Day

Daily $4.293 $4..403 $4.356 $4.283

Weekly $4.312 $4.163 $4.387 $5.784

Fibonacci retracement levels

SCRIPT 0.0% 23.6% 38.2% 50.0% 61.8% 100.0% 138.2 161.2

Natural gas $6.086 $5.216 $4.650 $4.215 $3.780 $2.323 $0.8936 $0.0104

Expansion levels

SCRIPT 23.6% 38.2% 50% 61.8% 76.4% 100% 138.2% 161.8%

Natural Gas $4.542 $4.890 $5.542 $5.977 $6.543 $7.435 $8.870 $9.740

Weekly Pivot

SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4

Natural Gas $5.526 $5.155 $4.784 $4.657 $4.413 $4.286 $4.042 $3.671 $3.300

Monthly Pivot

SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4

Natural Gas $5.819 $5.338 $4.857 $4.694 $4.376 $4.213 $3.895 $3.414 $2.933


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TECHNICAL SUMMARY

Support/Resistance Levels Price Key Turning Points

8.197 Price Crosses 18-40 Day Moving Average

14 Day RSI at 80% 5.496 5.031 Price Crosses 9-40 Day Moving

Average 52 Week High 4.925

13 Week High 4.915 14 Day RSI at 70% 4.898 4.747 3-10 Day MACD Oscillator Stalls 4.586 38.2% Retracement from 13 Week

High Current Price 4.585 Current Price

4.506 14-3 Day Raw Stochastic at 80% 4.489 14 Day %k Stochastic Stalls 4.485 50% Retracement from 13 Week

High/Low 4.484 Price Crosses 40 Day Moving

Average 4.467 14-3 Day Raw Stochastic at 70% 4.434 38.2% Retracement from 4 Week

High 4.431 Price Crosses 9 Day Moving

Average 4.421 14 Day RSI at 50% 4.397 14 Day %d Stochastic Stalls 4.387 50% Retracement from 4 Week

High/Low 14-3 Day Raw Stochastic at 50%

4.384 38.2% Retracement from 13 Week Low

4.364 Price Crosses 18 Day Moving Average

4.341 38.2% Retracement from 4 Week Low

4.320 Price Crosses 40 Day Moving Average Stalls

4.309 14-3 Day Raw Stochastic at 30% 4.286 Price Crosses 9 Day Moving


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Average Stalls 4.269 14-3 Day Raw Stochastic at 20% 4.255 38.2% Retracement from 52 Week

High 4.218 3-10-16 Day MACD Moving

Average Stalls 4 Week Low 4.190 Price Crosses 18 Day Moving

Average Stalls 13 Week Low 4.055 4.048 50% Retracement from 52 Week

High/Low 3.840 38.2% Retracement from 52 Week

Low 14 Day RSI at 30% 3.724 3.290 Price Crosses 9-18 Day Moving

Average 52 Week Low 3.170 14 Day RSI at 20% 2.852

Daily Quotes Period Moving Average Price Change Percent Change Avg Volume 5-Day 4.498 +0.217 +4.97% -

20-Day 4.363 +0.235 +5.40% - 50-Day 4.414 +0.335 +7.88% -

100-Day 4.270 +0.755 +19.71% - 200-Day 4.133 +0.920 +25.10% -

Year to Date 4.283 +0.360 +8.52% -

Period Raw Stochastic Stochastic %K Stochastic %D ATR

9-Day 100.00% 93.90% 84.33% 0.066 14-Day 100.00% 91.90% 78.74% 0.068 20-Day 100.00% 84.21% 64.46% 0.068

Period RSI Percent R Historic Vol. MACD Oscillator

9-Day 65.09% 0.00% 32.98% +0.151

14-Day 59.33% 0.00% 29.71% +0.173

20-Day 56.67% 0.00% 29.44% +0.192

50-Day 53.76% 38.37% 32.09% +0.141

100-Day 52.21% 27.97% 30.69% +0.285


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Weekly Quotes Period Moving Average Price Change Percent Change Average Volume

6-Week 4.372 -0.330 -6.71% - 6-Month 4.234 -0.145 -3.07% - 1-Year 4.107 -0.110 -2.34% - 3-Year 4.545 -4.735 -50.80% - 5-Year 5.817 -2.620 -36.36% -

Period Raw Stochastic Stochastic %K Stochastic %D Average True Range

9-Week 54.48% 45.40% 45.72% 0.232 14-Week 61.63% 49.75% 49.62% 0.241 20-Week 71.55% 61.27% 58.97% 0.252

Period Relative Strength Percent R Historic Volatility MACD Oscillator

9-Week 57.31% 45.52% 42.35% -0.043 14-Week 55.61% 38.37% 38.16% +0.036 20-Week 54.21% 28.45% 35.91% +0.135 50-Week 50.57% 18.91% 41.57% +0.350

100-Week 49.39% 41.56% 82.35% +0.209

Monthly Quotes

Period Moving Average Price Change %Change Avg Volume

6-Month 4.373 +0.150 +3.38% -

2-Year 4.236 +1.215 +36.05% -

5-Year 5.799 -4.665 -50.43% -

10-Year 5.823 +1.275 +38.52% -

20-Year 4.151 +3.245 +242.16% -

Period Raw Stochastic Stochastic %K Stochastic %D ATR

9-Month 79.90% 72.10% 63.96% 0.718

14-Month 70.57% 60.73% 53.47% 0.850

20-Month 42.75% 47.27% 48.72% 0.978

Period Relative Strength Percent R Historic Volatility MACD Oscillator

9-Month 53.35% 20.10% 97.09% +0.162

14-Month 49.87% 29.43% 37.71% +0.260

20-Month 48.47% 57.25% 44.01% +0.136

50-Month 48.92% 76.53% 50.29% -1.101

100-Month 49.84% 80.24% 62.25% -1.733

Weekly Chart Analysis

Above is the weekly chart of Natural gas. We have applied retracement of its fall from

high of $13.752 (July 2008) to its low of $2.334 (August 2009). Natural gas over the

past one and a half years has retraced back to its 23.6% retracement

been in uptrend since then making higher top and higher bottoms. The overall weekly

chart of natural gas is making a symmetrical triangle pattern and we expect an

aggressive break out in the near term. Also, considering its correlation with U

oil, Crude has retraced more than 61.8% of its fall back in 2008 and is in uptrend

making higher tops and higher bottoms.

averagely bullish and in overall uptrend

to the level of 38.2%($6.670) which is way above our conservative target of $6.090

hart Analysis



past one and a half years has retraced back to its 23.6% retracement



aggressive break out in the near term. Also, considering its correlation with U


making higher tops and higher bottoms. If we look at 14 Days RSI, it is at 53.86 which is

in overall uptrend as well and supporting our expect

to the level of 38.2%($6.670) which is way above our conservative target of $6.090


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past one and a half years has retraced back to its 23.6% retracement level and has



aggressive break out in the near term. Also, considering its correlation with U.S crude


it is at 53.86 which is

as well and supporting our expected break out

to the level of 38.2%($6.670) which is way above our conservative target of $6.090.

Monthly Chart - Fibonacci retracement

In the monthly chart of Natural gas above,

uptrend starting from September 2

level of 23.6 % ($5.216) and then the level of 61.8% ($3.780) acted as

the past one and a half years. N

has taken crucial support of retracement level 50

Given its overall trend, it has been in uptrend making higher tops and higher bottoms and is in a

symmetrical trading range and we expect an aggressive break out from here that will unfold

prices to 23.6% ($5.220) and if breaks that

Fibonacci retracement

Natural gas above, we have applied Fibonacci

uptrend starting from September 2009 to January 2010. It has taken support of

level of 23.6 % ($5.216) and then the level of 61.8% ($3.780) acted as a crucial support

. Now, it is trading in the range of 38.2 & 50% and this week

cial support of retracement level 50%.

been in uptrend making higher tops and higher bottoms and is in a

range and we expect an aggressive break out from here that will unfold

nd if breaks that resistance then can further rally to $6.


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retracement of

009 to January 2010. It has taken support of retracement

crucial support for

it is trading in the range of 38.2 & 50% and this week

been in uptrend making higher tops and higher bottoms and is in a

range and we expect an aggressive break out from here that will unfold

can further rally to $6.090.

Fibonacci Expansion

In the monthly chart of Natural gas above,

uptrend starting from September 2009 to January 2010

Natural gas is moving in the range of 4.890

can have a potential upside break

pattern, it may now unfold to 61.8% level

Natural gas above, we have applied Fibonacci

uptrend starting from September 2009 to January 2010 to project our next levels

ral gas is moving in the range of 4.890-3.671(0 - 38.2%) from 2010 and now

have a potential upside break-out, given its trend and symmetrical triangle

61.8% level, near our target price $6.090.


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Fibonacci expansion of

to project our next levels.

) from 2010 and now

, given its trend and symmetrical triangle


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natural gas - an integrated analysis special report by

Documents

natural gas industry

supply of natural gas

introduction natural

natural gas power generation

use of gas turbines

domestic use

hydrogen vehicles

gasoline engines