Natural Gas Supply FAQ
Answers to common questions about natural gas supply — how it works, pricing, pipeline vs LNG alternatives, supply reliability, and infrastructure requirements.
Frequently Asked Questions About Natural Gas Supply
Natural gas supply involves a complex chain of infrastructure and market mechanisms. These questions address the fundamentals for industrial operators, facility managers, and investors seeking to understand how gas supply works in practice.
For a comprehensive overview, see: Natural Gas Supply Fundamentals.
What is the Henry Hub and how does it affect natural gas prices?
Henry Hub is a natural gas pipeline interchange in Erath, Louisiana that serves as the primary pricing benchmark for North American natural gas. NYMEX natural gas futures contracts are priced for delivery at Henry Hub. Prices at other delivery points are quoted as basis differentials to Henry Hub, reflecting transportation costs and local supply/demand conditions.
What is the difference between pipeline gas and LNG for industrial users?
Pipeline gas is delivered continuously through a fixed pipeline connection at low marginal cost per unit. LNG is natural gas liquefied for transport by truck, providing gas supply to locations without pipeline access. LNG has higher delivered cost than pipeline gas (reflecting liquefaction and logistics), but enables gas supply where pipelines don't exist.
What is a firm gas supply contract?
A firm gas supply contract guarantees delivery at specified volumes and pressures at a fixed price or index-linked price. The supplier cannot interrupt delivery except in defined force majeure circumstances. Firm contracts are typically required for industrial processes where gas supply interruption would cause significant harm.
What is interruptible gas service?
Interruptible gas service allows the pipeline or distribution company to curtail delivery during periods of high demand — typically cold winter peak periods. Interruptible rates are lower than firm rates to compensate customers for accepting curtailment risk. Industrial users with critical processes should not rely on interruptible service for supply continuity.
How do I get natural gas to a location without a pipeline?
Locations without pipeline access can receive natural gas as LNG delivered by cryogenic truck. LNG is produced at a liquefaction facility, transported by specialized tanker truck, stored in on-site cryogenic tanks, and regasified for use in natural gas equipment. This supply model is the foundation of United Energy's Energy Fulfillment™ platform.
What causes natural gas prices to spike?
Natural gas price spikes are most commonly driven by extreme weather events (cold winters causing demand surges), supply disruptions (pipeline failures, production outages), storage drawdowns below normal levels, and LNG export demand competing with domestic supply. Price spikes are typically regional, reflecting local supply/demand imbalances.
How much natural gas does the US produce?
The US is the world's largest natural gas producer, currently producing approximately 100–105 billion cubic feet per day (Bcf/d). This is approximately 25% of total global natural gas production. The shale revolution (Marcellus, Permian, Haynesville, Eagle Ford) transformed the US from a gas importer to a major LNG exporter.
What is a natural gas liquids (NGL) and how is it different from LNG?
Natural gas liquids (NGLs) are heavier hydrocarbons — ethane, propane, butane, and pentane — that are separated from the natural gas stream at processing plants. They are stored as liquids at moderate pressure and temperature. LNG is methane (the primary component of natural gas) liquefied by cooling to -260°F. NGLs and LNG are fundamentally different products with different markets and applications.
Can natural gas be used for power generation?
Yes. Natural gas is the largest single fuel source for US electricity generation (approximately 40% of total generation). Natural gas turbines and combined cycle plants are highly efficient and can be quickly ramped up and down to follow demand. LNG-fueled distributed generators apply these same principles at the facility scale for off-grid and backup power.
How long does it take to establish a new natural gas connection?
New pipeline service connections for industrial facilities can take months to years depending on local distribution capacity, required main extensions, and permitting. In constrained markets, new connections may face multi-year queues. LNG delivered by truck can be established in weeks, making it an attractive alternative for new facilities that cannot wait for pipeline service.
Natural Gas Supply Without Pipeline Constraints
United Energy delivers natural gas in LNG form to industrial facilities anywhere a truck can go. Contact us to discuss your supply requirements.