EIA: Price ratio of crude oil to natural gas continues to increase

The ratio between the spot prices of crude oil and natural gas has been generally increasing since January 2009, but it has climbed rapidly in recent months, according to data from the US Energy Information Administration (EIA). The crude oil-to-natural gas spot price ratio has implications for production and consumption.

Crude oil to natural gas price ratio. Source: EIA. Click to enlarge.

The ratio increased because of both increasing crude oil prices and decreasing natural gas prices.

The spot price for Brent crude oil has increased 19% in the last six months, from $103.90 per barrel on 3 October 2011 to $123.81 per barrel on 30 March 2012. Several factors underpin the increase in global crude oil benchmarks since the start of the year. Over the same period, the spot price for natural gas at the Henry Hub has decreased 45%, dropping from $3.57 per million British thermal units (MMBtu) to $1.98/MMBtu. Natural gas spot prices have been near 10-year lows as a result of warmer-than-normal temperatures, ample natural gas in storage, and growing production.

In terms of production implications, EIA said, a higher crude oil-to-natural gas ratio encourages drilling for oil in preference to natural gas and makes natural gas liquids developments relatively more attractive than the development of dry natural gas resources.

On the consumption side, the higher ratio also encourages end users to choose natural gas over products derived from crude oil, such as distillate and residual fuel oil, wherever substitution is feasible.

Source: Green Car Congress

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Omnitek Engineering completes $5M placement; financing to facilitate diesel to natural gas truck engine conversion sales

Omnitek Engineering Corporation, a developer of natural gas engines and diesel-to-natural gas conversion systems, has entered into a definitive agreement with investors for a private placement of common stock and warrants to raise approximately $5.0 million in gross proceeds.

Under the terms of the financing, the company will issue shares of common stock at a price of $2.12 and warrants to a group of investors at an exercise price of $3.88, with a five-year term. Merriman Capital, Inc. acted as the sole placement agent in connection with the transaction.

The completion of this financing will greatly accelerate the build out of our national network of diesel-to-natural-gas conversion facilities. There is enormous pent-up demand for truck engine conversions in the US market, as well as other substantial opportunities, including power generators, irrigation pumps, and other diesel powered equipment.

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Funk noted that diesel engines have a service life of up to 20 years, and that routine overhauls are required and service budgets established in advance. By converting these diesel engines to operate on natural gas during a routine service overhaul, Omnitek can offer truck operators a compelling return on investment with much lower fuel costs and cleaner combustion, he said.

Source: Green Car Congress

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