Washington (Platts)--28Aug2012/336 pm EDT/1936 GMT

Continuing his campaign to back natural gas as the fuel of choice for his city, New York Mayor Michael Bloomberg released a study late Monday that showed New York needs natural gas to make complete its conversion away from heavy heating oil use in the city.

The study by ICF International notes that by 2030 New York City's two local distribution companies -- ConEd and National Grid -- will have to reserve more capacity on interstate pipelines as well as make full use of 1.13 Bcf/d worth of new pipe coming to the city-gates to keep the city supplied.

In April 2011, the city passed a set of regulations that phases out the use of No. 4 and No. 6 heating oils in building boilers by 2030, to be replaced by biofuels, No.2 fuel oil and natural gas. ICF estimates the full conversion will increase the average daily gas send-out by the two LDCs by 16%, or 160,000 Mcf/d on a normal day, jumping 30% to 560,000 Mcf/d by 2030.

In 2009, New York City burned 1.3 Bcf/d on an average day, climbing to 2.5 Bcf/d on peak days in summer and winter, ICF said.

New York City's difficulty, even with the completion of Houston-based Spectra Energy's 800,000 Mcf/d New Jersey-New York pipeline from Jersey City to Manhattan, and two Williams pipeline improvements accounting for 350,000 Mcf/d of natural gas, is that demand for gas will increase 1.1%/year through 2030 while available supply capacity will increase less than 1%/year, ICF said.

Although the boilers burning heavy heating oils only account for 1% of the city's building stock, they produce more soot than all the cars and trucks in the metro area, Bloomberg said.

"Natural gas is a low-cost, low-emissions fuel that makes good economic and environmental sense," Bloomberg, an independent, said in a statement. "This study confirms its importance to New York City's reliable, clean energy future."

Fairfax, Virginia-based ICF estimated that by 2030, 80% of the city's gas supply would be coming from the Marcellus and Utica shales, up from the current 25%.

At the same time that New York's Democratic Governor Andrew Cuomo is debating whether to end the state's ban on hydraulic fracturing and open up Southern Tier counties to drilling in New York's share of the Marcellus, Bloomberg has spent the last several days calling for a focus on natural gas development and regulation.

Friday, the billionaire mayor used $6 million of his personal fortune to create a charity with the Environmental Defense Fund to push for ways to increase the regulation of hydraulic fracturing to reassure a leery public and reduce the environmental impacts of the practice.

The day before, Bloomberg co-authored an editorial piece in the Washington Post with the father of modern slick water fracking, George Mitchell, calling on industry and government to get fracking right -- disclose chemicals, improve well casing guidelines, minimize water use and capture fugitive methane.

Both writers noted that shale gas extraction has brought lower natural gas prices and increased employment, calling for continued exploitation of the nation's shale reserves.

ICF predicted the city's two LDCs will find new upstream supplies through new pipelines, larger capacity reservation on the interstate pipelines connected to the city gates, and increased peak shaving storage units inside their service territories.

ICF estimated that from drill tip to burner tip, natural gas' greenhouse gas emission were 20% lower than the heavy fuel oils per unit of energy delivered to customers.

ICF also predicted that New Yorkers won't be shouldering a huge price risk by converting away from cheaper fuel oils to gas as prices will remain moderate through 2030 with gas selling for $6/MMBtu (2010 dollars) in 2030, up from the current average of $3/MMBtu.

--Bill Holland, bill_holland@platts.com --Edited by Jason Lindquist, jason_lindquist@platts.com