Why is natural gas so valuable?
Natural gas’ formation started millions of years ago. It is made from organic matter, formed by the remains of dead animals and plants, located between the rock deposits deep inside the earth’s surface. Under the influence of heat and pressure this organic matter transformed into the fossil fuel we use today. The main component of natural gas is methane, a chemical compound of one carbon atom and 4 hydrogen atoms.
Natural gas is widely used for commercial and industrial purposes. It serves as an effective and inexpensive source of energy and electricity all over the world. Every year the world’s largest countries extract billions cubic metres of natural gas.
How did the natural gas market begin?
Though natural gas has been known since the ancient times, its commercialisation as the source of fuel started only during the Industrial Revolution.
In 1785, in Britain, natural gas was first used to light houses and streets. The first natural gas well was developed by William Hart in Fredonia, NY, in 1821. The Fredonia Gas Light Company became the first company in the USA that distributed natural gas.
In the 20thcentury, the development of pipelines opened new opportunities for natural gas usage. The commodity was actively used for home heating and cooking and to power various appliances, including boilers, water heaters, etc. Today the United States, the world’s largest producer of natural gas, operates over 900 public gas systems.
Natural gas exploration. What does it look like?
Rocks containing vast deposits of natural gas can be found both in oceans and on the mainland. When geologists find a promising site, the exploration process begins. If the initial exploratory well confirms that the rock contains natural gas, the drilling of production, otherwise called the development wells starts.
Wells that are used for oil drilling can also produce natural gas. More than a half of modern wells are used for both, natural gas and crude oil exploration and production.
Liquefied gas is 600 times smaller than natural gas in its gaseous state. It helps to transport natural gas to places where no pipelines are available.
Top 5 Natural Gas Producers:
- The USA (766 billions of m3)
- Russia (598 billions of m3)
- Iran (185 billlions of m3)
- Qatar (164 billions of m3)
- Canada (150) billions of m3)
Top 5 Natural Gas Deposits
- Russia (47,800 billions of m3)
- Iran (33,500 billions of m3)
- Qatar (24,300 billions of m3)
- United States (8,714 billions of m3)
- Saudi Arabia (8,602 billions of m3)
5 Major Natural Gas Applications
Electric power. A great deal of the world’s electricity generation takes place with the help of natural gas.
Industrial sector. Natural gas is widely used for power and heat systems. As a raw material, it is used to produce hydrogen, fertilisers and chemicals.
Residential sector. A significant part of the world’s households use natural gas to cook, heat water and dry clothes.
Commercial sector. Besides heating buildings and water, natural gas is used to power cooling and refrigeration equipment, and provide outdoor lighting.
Transportation. Natural gas is used as a fuel for compressors that transfer it through gas pipelines.
What drives natural gas prices?
Even small changes in the demand or supply of natural gas can cause significant price fluctuations. The price highly depends on the production process, weather conditions, economic growth, storage supplies and substitutes.
Natural gas can be substituted by other competing power sources, including coal, hydroelectric, wind and solar power.
How to trade natural gas?
Natural gas futures are traded on the Chicago Mercantile Exchange (CME Globex) under the ticker symbol NG. The contract size is 10,000 million British thermal units (mmBtu). Natural gas can be volatile and traders should expect significant price swings. Join Capital.com to learn and trade CFDs on the Natural Gas pricefluctuations and follow the NG chartin real-time.