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Permalink Reply by cocodrie man on May 25, 2012 at 11:08

An article yesterday suggested somewhere between $2.50 and $2.75.  The writer also suggested that tougher emission standards would be a great help to natural gas in the price war with coal.

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Permalink Reply by Parkdota on May 25, 2012 at 13:03

Yikes....$2.50 to $2.75 isn't too good. 

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Permalink Reply by Les Bamburg on May 25, 2012 at 17:48

Parkdota, there are a range of breakeven prices based on location, type of coal, coal prices, emissions limits, coal contracts, etc.  The range of prices could be something like $2.00 to $5.00/MMBtu.  Generally speaking at current natural gas prices essentially all coal that could be displaced, has been displaced.  As natural gas prices increase, it will lose some portion of the power market back to coal in the dispatch order depending on time of year.   

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Permalink Reply by Henry on May 25, 2012 at 23:36

I don't know the answer to your question, but it is apparent that NG is displacing coal.  Have you looked at the price of coal stocks lately?  It's amazing to see how they have plummeted.  Their prices have fallen even more than those of the natural gas companies (even more than CHK's price has fallen!).  Yes, lack of demand for met coal (coal used in steel-making) in China has something to do with it.  But the lack of demand for thermal coal (coal used to generate electricity) in the US, due to the switch to NG, has been a huge factor.  Check out the prices of Arch Coal (ACI), Alpha Natural Resources (ANR), Peabody (BTU) or Patriot Coal (PCX).  Someone lost a ton of money in those stocks.

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Permalink Reply by ken hatcher on May 26, 2012 at 1:55

 Very true, and someone will make a ton of money if they rebound.

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Permalink Reply by Les Bamburg on May 26, 2012 at 2:03

Henry, another factor is the planned shutdown of ~ 60 GW of coal fired power plants over the next few years related to new air emission regulations.  Some of the coal companies have cut back on their production until additional port capacity can be developed for coal exports.  Of course some were also impacted by flooding in Australia last year. 

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Permalink Reply by GoshDarn on May 26, 2012 at 4:05

If analysts are seeking well-defined specifics as to how dirty coal can effectively manage its future per the undercutting price margins being presently generated by NG -- then they probably won't be surprised by the intricate complexity of the many variables which are needed to properly manage a safe hedge vis-a-vis factoring in any sort of future pricing predictions as to NG futures and/or coal demand.

Note:  To ramp up the export of LNG (per various port locations) will take numerous years, as will the ramping up needed to export ever-increasing quantities of coal from the West Coast (i.e., since railroading the coal to the West Coast is the real issue, along with the port facilities needed for coal-ship moorage).  So both scenarios require considerable regulatory and infrastructure lead times.  Nevertheless, when the specifics are analyzed, the exporting of LNG will proceed fairly easily per the engineering/favorable-political do-able-ness of so-called "clean" NG being a good fit for most involved (along with the petrochemical transparencgy of the buildout).

Whereas some analysts could be shocked to learn what is in the cards for the needed rail-line upgrades, port-terminal approvals, environmental hoops, and legal issues which are associated with the transport of massive amounts of mercury-dust coal railcars from the Powder River to the Pacific.  In other words, certain coal-shipping issues are going to seriously delay China's import of coal from the U.S., whereas Canada, along with other-coal exporting countries, will be able to nimbly step up and grab a dominate market share of coal export.  Within the U.S., the financial return that will come from investing in coal (in the ground) should be viewed as a very long play, with a 5-year fruition, if that. 

         

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Permalink Reply by Max on May 26, 2012 at 4:16

From google search:

http://seekingalpha.com/article/294527-electric-utilities-good-bye-...

Coal-fired generation has historically been utilized for “base-load” requirements – consistent electrical production 24 hr a day, 7 days a week, 52 weeks a year. With the pending reduction of total base-load electric generating capacity, the slack will be made up through a fuel source that also has base-load characteristics. The dilemma with current solar and wind generation is the variables of power output make them not as reliable for base-load needs. Natural gas, however, fits the bill.

Last spring, Mr. Bill Powers, Editor of Powers Energy Investor, offered an in-depth comparison between the economics of coal versus natural gas for electric power generation, citing a report from last fall authored by Credit Suisse. In that report, CS calculated that at a current price of $74 per ton for Central Appalachian coal, the price of natural gas would have to rise to $6.30 per mcf for the two fuels to reach parity for electric power generation.

 

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Permalink Reply by Parkdota on May 26, 2012 at 6:33

Max, $6.30/mmcf sounds a lot better!!  Thanks for the article.

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