Qittle SMS Message Solutions

Qittle helps businesses create, customize and manage a mobile marketing initiative.

Why move away from Natural Gas

leave a comment »

As the world moves forward to manufacture ethanol for its energy needs, or to make its soil yield a greater harvest, the role of natural gas could increase dramatically. Subsequently, the floor for natural gas prices could begin escalating as has been found with many other commodities.

China plans to annually increase grain productive capacity by 0.65 percent within five years – and hopes to decrease planted grain acreage by 0.18 percent. The state planning commissions will be forced to improve yields. Hence, we expect an increased reliance upon nitrogen fertilizers to realistically achieve the country’s target.

But China is faced with a significant problem while maintaining an annualized 7.5-percent GDP growth rate during this time. How will China obtain sufficient natural gas to reach this target?

Earlier this month, a senior adviser to the National Development and Reform Committee [NDRC] announced, “We are seeing difficulties importing gas.” China has been stymied in meeting its annual LNG import target of 20 million tons by 2015. The country has been attempting to reduce its dependence on imported oil by increasing use of natural gas.

Fertilizer prices have more than doubled over the past 15 years, and there is no respite in the near-term. A recent Energy Information Administration outlook forecasts benchmark natural gas prices rising by 9.2 percent in 2007 and increasing another 3.7 percent in 2008. World demand for fertilizers grew by 13 percent between 2001 and 2005, according to The Fertilizer Institute. After China and India, the U.S. is the world’s third largest nitrogen producer.

Some 90 percent of the cost of manufacturing nitrogen fertilizer depends upon the price of natural gas. The more fertilizer produced, the more natural gas is utilized and the higher both eventually cost. And according to widely followed natural gas commentator Phil Flynn of Chicago-based Alaron Trading, “Ethanol plants are going to require natural gas consumption to produce electricity.”

We asked Flynn if the ethanol mania would have any impact on natural gas prices. “Absolutely,” he responded, citing that increased corn planting would require natural gas for the nitrogen-based fertilizers and to power the 130 or more ethanol plants on the books. Flynn pointed out natural gas prices would benefit from the ‘front and back end’ of the ethanol boom.

Advertisements

Written by Casey McConnell

April 10, 2008 at 12:59 pm

Posted in Bioenergy

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: