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Page added on December 30, 2009

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Natural-Gas Producers Seek Long-Term Contracts

In a sign that low natural-gas prices are probably here to stay, big U.S. energy companies are pushing to sign long-term contracts with electric utilities and other customers.

Major producers such as Chesapeake Energy Corp. and Devon Energy Corp. are trying to reach multiyear deals — likely five or 10 years long–that would guarantee them buyers for their gas but would deny them the benefits from any sudden price increases.

For a decade, energy companies have shunned such agreements because they wanted to profit when gas prices soared, as they often did, especially in advance of rising winter demand for gas heat.

But huge new gas fields in Texas, Louisiana, Pennsylvania and elsewhere have led to a surge in U.S. natural-gas production, glutting the market even as the recession has sapped demand for all forms of energy. Prices have plummeted to less than $6 per million British thermal units, less than half their price in July 2008.

“The days of double-digit gas prices in the U.S. are over,” said Chesapeake Chairman and Chief Executive Aubrey McClendon.

Wall St. Journal



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