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US gas demand expected to grow steadily over next decade


By Rodney White in Washington


October 3, 2013 - US gas demand is expected to grow steadily in every sector over the next ten years. Power generators will continue to be the largest users of gas because coal use is expected to decline in the face of current and future regulations. (See related table: Sample of US demand forecasts).


The US Information Energy Administration said gas demand grew 23 Tcf in 2002 to 25.5 Tcf in 2012 and expects it to climb to 26.5 Tcf in 2022.


But industrial use of gas will likely expand as long as the cost of the gas remains well below the world price of gas, with the caveat that soon-to-be-proposed federal rules regarding ozone and greenhouse gases will likely affect the use of any kind of fuel.


The EIA said September 10 that year-over-year gas price rises will speed up the decline in gas used for electric power generation from 25 Bcf/day in 2012 to 22.1 Bcf/day in 2013 and 21.6 Bcf/day in 2014.


Analysis continues below...


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Gas use could decline by 11.5% between 2012 and 2013 and 2.4% from 2013 to 2014, the agency said.


Gas demand peaked in 2012 but power generation was up 20% over the previous year and the price of natural gas relative to coal was lower.


Circumstances changed in 2013, with gas costing $0.75/Mcf more than a year ago and the demand for electricity slowing down, from a growth rate of 1 or 2%/year to just a 0.5%. And there is more renewable electricity in the mix.


Exports of natural gas by tanker or pipeline will likely start in the coming years, but even if they reach 5 or 6 Bcf/day, advocates say the supply of readily available gas is too large to impact on prices.


"The demand curve has been going up but it hasn't been going up anywhere nearly as quickly as the supply component," said the American Gas Association. "That's the definition of relative market stability that we see going forward for the next decade."


A senior analyst at ConocoPhillips, Jim Duncan, said the gas story will change over the next five years: from abundant supply to one of rising demand.


He predicted that gas demand could rise by between 7 and 20 Bcf/d through 2017, driven by power-generation regulations, liquefied natural gas exports, new ethylene plants and the growth of gas as a transportation fuel.


Duncan said a growing number of industrial users – such as steelmakers and automobile manufacturers – were seeking to move operations to the US, and site them near trunklines. Some of these are packing up in Europe, unable to compete with US production fuelled by gas that is almost free relative to the Dutch TTF for example.


New emissions regulations – specifically, the mercury and air toxics standards – are poised to go into effect next year and could reduce the number of coal-fired plants and boost the amount of gas-fired generation.


Another key feature to watch in 2014 is whether the housing market recovers and pushes power load growth back to more normal levels, he said.


Infrastructure build-out will be another major event over the next few years, Duncan said, pointing to the Utica Shale as one area in need of additional infrastructure to move gas from the region.


Rising wind-power notwithstanding, the EIA expects 8.24 Tcf/year to generate electricity by 2022. In 2012, 9.27 Tcf were used by power generators, who were expected to use only 8.21 Tcf in 2013. (See related chart: US Gas Demand: 2002-2022).


In its recently released study, "America’s New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy," IHS expects power sector gas demand "to continue to grow steadily as existing coal-fired generators are projected to retire, electricity demand increases, and gas-fired generation retains its cost advantage over competing technologies."


The Natural Gas Supply Association expects overall demand for gas to go up from 74 Bcf/day in 2012 to 86 Bcf/day by 2022. But association spokeswoman Daphne Magnuson said the current size of the natural gas supply pie "will change very little."


"We think the power sector will account for 34% of demand, the industrial sector will account for another 34%, and efficiencies in the residential/commercial sector may shrink their demand a single percentage point to 26%, leaving vehicles and LNG exports to account for the remaining 6%," she said.


Next page: US gas use could decline by 11.5% between 2012 and 2013





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