
Natural Gas Equivalent
Natural gas equivalent (NGE) refers to the amount of natural gas needed to equal the energy produced from one barrel of crude oil, as measured in British thermal units (BTUs). In the oil and gas industry, barrel of oil equivalent and natural gas equivalent are essentially the same thing — the amount of natural gas it takes to produce the same British thermal units as a barrel of oil, and vice-versa. The natural gas equivalent for a barrel of crude oil is calculated to allow for a comparison between natural gas and crude oil prices. Natural gas equivalent is used by energy market traders as well as within the oil & gas industry, although barrel of oil equivalent (BOE) is more prevalent. Natural gas equivalent is a way of standardizing the energy stored in a barrel of crude oil and other energy resources into units of natural gas.

What Is Natural Gas Equivalent?
Natural gas equivalent (NGE) refers to the amount of natural gas needed to equal the energy produced from one barrel of crude oil, as measured in British thermal units (BTUs). The natural gas equivalent for a barrel of crude oil is calculated to allow for a comparison between natural gas and crude oil prices.
Natural gas equivalent is used mainly within the oil and gas industry. In the world of finance, however, it is more common instead to speak in terms of barrel of oil equivalent (BOE).



Understanding Natural Gas Equivalent
In the oil and gas industry, barrel of oil equivalent and natural gas equivalent are essentially the same thing — the amount of natural gas it takes to produce the same British thermal units as a barrel of oil, and vice-versa. Of course, barrel of oil equivalent can be calculated and applied to other energy sources as well.
Many oil companies produce both oil and gas, among other petroleum products, but the unit of measure for each is different. Oil is measured in barrels and natural gas is measured in cubic feet. To help facilitate like-for-like comparisons, the industry standardized natural gas production into "equivalent barrels" of oil or "equivalent units of gas."
One barrel of oil is generally deemed to have the same amount of energy content as 6,000 cubic feet of natural gas. So this quantity of natural gas is "equivalent" to one barrel of oil.
Calculating Natural Gas Equivalent
The calculation for the natural gas equivalent of a barrel of oil is fairly straightforward. As both oil and gas can be measured in Btu, the first step is to convert a barrel of oil. There are standard conversions for both a barrel of oil and 100 cubic feet of natural gas. A standard barrel of oil is 42 gallons of crude and equals 5.8 million Btu, while 100 cubic feet of natural gas comes in at 103,700 Btu.
To eliminate the discrepancy in energy, natural gas is measured in 1,000s cubit feet units (Mcf) with an energy of 1.037 million Btu. So there is almost six times the energy in a barrel of oil than there is in 1000 cubic feet of natural gas. By tradition and for the sake of clean, round numbers, the natural gas equivalent of a barrel of oil simply rounds out to 6,000 cubic feet or 6 Mcf.
How Natural Gas Equivalent Is Used
Natural gas equivalent is actually meant to help investors rather than confuse them. By standardizing energy into equivalents of a barrel of oil, energy companies make comparisons of production, proven reserves, probable reserves and so on much easier for investors and industry analysts.
Of course, when it comes to energy, there is still some converting required to get a global picture, as some regional reporting across the world only provides metric units. Mcf is the standard way for reporting natural gas within the United States, but billions of cubic feet (Bcf) may also be used. In Europe, natural gas is reported by the metric ton.
And, of course, natural gas equivalent can be used in a more personal way to measure the difference between housing heating systems (heating oil vs natural gas for example) based on the market prices for their fuel.
Related terms:
Barrel of Oil Equivalent (BOE)
A barrel of oil equivalent (BOE) is a term used to summarize the amount of energy that is equivalent to the energy found in a barrel of crude oil. read more
Billions of Cubic Feet Equivalent (BCFE)
Billions of cubic feet equivalent is a natural gas term used to measure how much natural gas is either in reserves or delivered over extended periods. read more
Barrels Of Oil Equivalent Per Day (BOE/D)
Barrels of oil equivalent per day (BOE/D) is a term that is used often in conjunction with the production or distribution of crude oil and natural gas. read more
Crude Oil & Investing Examples
Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. read more
Futures Exchange
A futures exchange is a central marketplace, physical or electronic, where futures contracts and options on futures contracts are traded. read more
Hubbert's Peak Theory
Hubbert’s peak theory predicts the rise, peak, and decline of global oil production. read more
Market Price
The market price is the cost of an asset or service. In a market economy, the market price of an asset or service fluctuates based on supply and demand and future expectations of the asset or service. read more
Measuring Natural Gas in MCF
MCF is an abbreviation that refers to the way natural gas is measured in the United States, in which the imperial measuring system is used. read more
Trillion Cubic Feet (Tcf)
Trillion cubic feet is a measurement of natural gas used by the U.S. oil and gas industry, equal to about one quadrillion British thermal units. read more