Northwest Power and Conservation Council expects stable, low gas prices

Portland, Maine (Platts)--10 Oct 2017 514 pm EDT/2114 GMT

The Northwest Power and Conservation Council expects natural gas prices to remain relatively low and stable in the next three to five years, driven by abundant and diverse supplies.

NPCC, responsible for power planning for parts of Idaho, Montana, Oregon and Washington, anticipates that natural gas prices will be lower compared with a forecast prepared two years ago for the organization's power plan, which is developed every five years and examines the region's long-range resource needs.

NPCC, for example, expects prices at the Sumas hub in Washington to stay below $4/MMBtu through 2025 under a medium annual forecast, according to a presentation Steve Simmons, NPCC senior economic analyst, gave to the council Tuesday. In its previous forecast, NPCC expected Sumas prices to exceed $4/MMBtu in 2019.

Under its medium forecast, NPCC expects prices this year of $2.76/MMBtu at Sumas, compared with $3.06/MMBtu at Henry Hub, with prices inching up next year to $3.17/MMBtu and $3.34/MMBtu, respectively, and then down to $3.01/MMBtu and $3.19/MMBtu in 2019.

Article continues below...

Request a free trial of: Gas DailyGas Daily
Gas Daily

Whether you’re a risk manager, research analyst, trader or broker, Platts Gas Daily brings you crucial competitive intelligence across the entire gas marketplace. To request a free trial of Platts Gas Daily, fill out the form below and someone from our team will be in contact with you to setup your trial. Start making decision with confidence in the natural gas market today.

Request a free trialMore Information

NPCC expects natural gas prices to rise and fall in waves over the next 20 years as higher prices spur more production, which leads to a temporary softening in prices.

NPCC developed its natural gas forecast with input from its Natural Gas Advisory Committee, which includes representatives from utilities, marketers, pipelines, consultants, public interest groups and others.

Several factors are leading to a near-term outlook of low and stable pricing for the next five years, including abundant natural gas supplies, Simmons said. Improvements in drilling have boosted well productivity by 300% in the last four years, according to Simmons.

At the same time, residential and commercial natural gas consumption has been essentially flat for about two decades, although industrial demand has picked up since 2009, Simmons said.

However, natural gas use by the power sector has jumped from about 4 Tcf in 1997 to 10 Tcf in 2015, according to Simmons. So far this year, natural gas-fired power plants have made up 46% of all new generation, followed by wind at 37% and solar at 16%, he said.

"Growth in the consumption of natural gas for power generation is expected to continue as a result of low prices undercutting coal as a fuel," Simmons said in a memo to NPCC members.

Several Northwest coal-fired power plants are facing expected shutdowns. The units include the 254-MW North Valmy 1 in 2019, the 600-MW Boardman plant and the 730-MW Centralia unit in 2020, followed by Colstrip 1 and 2, 358-MW units, in 2022, and the 267-MW North Valmy 2 in 2025.

Meanwhile, liquefied natural gas exports are expected to climb to about 9.6 Bcf/d in 2019, representing about 10% of production, according to Simmons, who noted that the Northwest is expected to remain an importer from Canada.

Several factors expected to affect natural gas price volatility include extreme weather, inadequate infrastructure and improvements in production technology, Simmons said. Hurricanes hitting Gulf coast states are expected to have less of a price impact nationally than they have in the past, he said.

Some of the drivers of natural gas price uncertainty include carbon dioxide, challenges getting pipelines built and the potential development of undersea methane hydrates, according to Simmons. If methane hydrates are proved, it would undercut North American LNG exports, he said.

--Ethan Howland,

--Edited by Annie Siebert,

Related News & Analysis

Video archives Commodities Spotlight podcast archive News features The Barrel blog

Related Products and Events

Gas Daily Platts Conferences and Events

Copyright © 2018 S&P Global Platts, a division of S&P Global. All rights reserved.