Natural Gas

About Natural Gas Futures and Where Gas Comes From

While natural gas is usually associated with oil deposits, it is found in separate locations. Natural gas production companies identify reservoirs and drill wells in the earth where it is likely to be found. Once discovered, natural gas is refined and separated from impurities. Hydrocarbons such as propane, butane, and carbon dioxide are separated from natural gas. Hydrocarbons such as hydrogen sulphide are refined into sulphur.

The delivery of natural gas begins with a gathering system. These are small systems of mostly low-pressure pipe that connect dozens of wells to a larger transmission system. From there, the gas moves through narrow pipes, called distribution pipelines, until it reaches its destination. The delivery system resembles a tree with a thick trunk and numerous branches. This is the process that allows natural gas to travel across the country.

Depending on the geological conditions, natural gas can be extracted in two ways. Conventional gas extraction involves drilling holes in rocks and pushing the gas to a processing facility. It is then separated from the other chemical components, including methane. In addition to conventional gas extraction, unconventional gas deposits can be extracted, including shale gas and tight gas sandstone.

Natural gas is used in countless industries and homes. In normal times it is significantly less expensive than electricity. Natural gas is used in cooking and heating, as well as to power home appliances like clothes dryers, outdoor lights, and garage heaters. It is also used in commercial settings, such as restaurants, hotels, and malls. Natural gas is a highly efficient source of power, in normal times it can see prices as much as 68 percent less than the cost of electricity.

Natural gas is sold as a futures contract on the New York Mercantile Exchange (NYMEX), where it is sold by the gigajoule (GJ) or cubic meter. Both quantities are equal to 10 billion BTU or 10,551 GJ. These two measurements are often confused with one another.