Hefner on the Topic of the Future Decline of Global Natural Gas Prices

(While most others are concerned about the continuation of steep global natural gas prices, Hefner believes those prices will decline.)

Hefner’s global natural gas price predictions

  • 2012, October 3, The Asahi Shimbun (Japan’s leading newspaper) Interview by Naoatsu Aoyama: In response to the interviewer’s comment “We [Japan] have to think much more highly of natural gas and we have to do our best to get LNG at more affordable prices. There is the so-called problem of the Asian that we have to buy a lot of LNG from Qatar at extremely high prices and that causes drainage of our national wealth” Hefner responded “I think some way or another, the enormous supplies that North America have will arbitrage the price around the world. But it will take time…If you make commitments for North American gas soon, I would think you’d be able to get it to Japan for $8 or $9 per mcf for a long-term contract, versus what you are paying today – in the $15 or $17 range.”
  • 2012, October 23, Video comments, meeting of Singapore’s International Advisory Panel (IAP) on Energy: In response to the question “How and when would North American LNG have an impact on gas prices in Asia?”, Hefner responded “I think it’s already begun to because we’ve taken the United States out of the marketplace for LNG imports and that’s bound to have had an effect. It probably kept them from going higher than it otherwise would have, particularly during the Japanese crisis – the shutdown of nuclear and the rush to purchase new supplies of LNG to displace that nuclear energy.”
  • 2012, October 31, Article for Energy Focus journal: “Partly because natural gas generation facilities can be built for one-fourth the cost in half the time [than a nuclear plant] and also because of the fact that the global abundance of shale gas and its development will continue to bring down global natural gas prices including imported natural gas (LNG) for several decades, in the coming decades natural gas will be the least expensive, environmentally friendly source of energy and its global abundance is now assured.”
  • 2012, November 7, Speech, “Shale & Unconventional Gas” conference, London: “Shale gas is global, and much of its development will come over the next three decades, bringing global natural gas prices down for the foreseeable future. For those who have been forecasting increased natural gas prices, you need to switch your models, because the development of shale gas, particularly its continued development in the United States and its export, as well as its development in China, will certainly have a significant, long-term impact on prices, bringing them down over the coming decades.”
  • From “Shale & Unconventional Gas” conference: “In it my opinion that a responsible UK energy policy is one that will embrace the new understanding of natural gas and would be based principally on diversified sources of natural gas and multiple, worldwide suppliers. It would include the development of the UK’s shale gas, which I believe will surprise on the upside, as well as gas purchased around the world and imported to the UK within an increasingly dynamic global LNG market with declining prices over the coming decades.”

Hefner’s earlier U.S. natural gas price predictions

At major turning points in the natural gas industry, Hefner has a record of accurately predicting the long-term direction of natural gas prices largely based upon his understanding of the vastness of natural gas resources. For instance, in the first half of the 1980’s, when U.S. natural gas prices were at then record highs and nearly all prognosticators were predicting continued high prices, Hefner both wrote and spoke – on several occasions – that natural gas prices were falling. Hefner was proven correct on the direction of U.S. natural gas prices, as, at the time he made the predictions (see below), natural gas wellhead prices averaged $2.59 per Mcf and were predicted to rise for the coming decade by U.S. government agencies, most industry sources and energy experts. By 1986 natural gas wellhead prices had fallen below $2.00 per Mcf and not only did the annual average natural gas wellhead price stay below $2.00 per Mcf for 9 of the next 10 years, it was not until the year 2000 that the annual average wellhead price rose higher than it had been in 1983!

  • 1982, August 4, Speech, New York Society of Securities Analysts: “There is some preliminary evidence that [natural gas] prices are already beginning to moderate.”
  • 1983, February 4, Letter to U.S. Senator Nancy Kassebaum: “It is my firm belief that oil prices will continue on a course of significant decline and, therefore, all energy costs (including gas!) will continue on both a real and nominal decline over the next 18 months to two years.”
  • 1983, February 4, Letter to Preston Martin, Vice Chairman, Federal Reserve Board: “There is absolutely no question in my mind that oil prices will continue to fall in both real and nominal terms to near $20/barrel and with it the cost of all energy.”
  • 1983, February 14, Letter to Craig Fuller, Deputy Assistant to President Ronald Reagan: “[Natural gas] prices are beginning to decline
  • 1983, February 14, Letter to Robert Roosa, General Partner, Brown Brothers Harriman Co. and former U.S. Under Secretary of the Treasury: “Things continue to move in the direction [of] lower energy prices.”
  • 1983, February 17, Letter to U.S. Senator David Boren: “…declining energy costs, which I think we can safely forecast for at least the next several years led by oil and domestic natural gas.”
  • 1983, March 2, Letter to U.S. Senator John Heinz: “…falling energy prices for oil and also natural gas.”
  • 1983, March 11 and March 24 and April 14, Testimony before Congress: “Natural gas prices are falling.”