|From Encana Corp|
The price for natural gas on continental North America is most often set at Henry, Louisiana - the Henry Hub. Many pipelines meet here, and many contracts for gas are settled here, either by taking delivery of the gas or rolling the contract over for another month. The price of gas has been settling lately between $2.50 and $3 per thousand cubic feet. Natural gas is considered fungible - one bit of gas is as good as another - so the gas that a producer puts into the pipeline system may not be the same molecules that the customer takes out at the other end. Of course, standards are maintained - the gas must be free of contaminants and must have a Btu content within a specified range.
Gas in North America is most often sold in quantities of 1,000 cu. ft. (Mcf), which contains approximately 1 million Btu's (MMBtu's) Another useful approximation is that 6,000 cu.ft. of gas has the same theoretical energy content as a barrel of crude oil. So, when natural gas is selling for $3 per Mcf it means that the gas is about equal to crude oil selling for $18. Crude oil has been selling in the $60 to $70 range this spring.