01 April 2003 19:32 [Source: ICIS news]
SAN ANTONIO, Texas (CNI)--US chemicals producers can expect an average cost of $4.80/m Btu for natural gas this year and little prospect for a price reduction in 2004, the top US energy statistics official said here Tuesday.
Guy Caruso, administrator of the Energy Information Administration (EIA) within the US Department of Energy (DoE), told chemicals industry executives here today that “We continue to see pretty strong demand for natural gas throughout this year” and little near term prospect for supply improvements.
Speaking at the 28th annual International Petrochemicals Conference (IPC) here, Caruso said upward pressures on natural gas prices will be sustained by the need to restock US reserves depleted by a hard winter and an expected summer demand on US power generation that is increasingly gas-fed.
“As a consequence,” Caruso said, “the EIA is anticipating $4.80/m Btu on average for this year and perhaps an average of $4.30 for next year.”
He noted that a price of $4.80 is “almost a $2 increase in 2003 over the average cost last year.”
Caruso said EIA does expect that the increased cost of natural gas will stimulate more drilling and development of US natgas resources, but he also noted that existing US gas fields are badly depleted. “So new drilling may not bring the price down much,” he said.
“The answer,” said Caruso, “is more access to new fields and drilling in those areas. But it also means more imports from Canada.” However, he noted that existing Canadian gas fields also face depletion issues similar to those in the US. Consequently, “we need [pipeline] access to the Mackenzie Delta reserve in Canada and Alaskan reserves – but these developments will take years.”
He also suggested that the increasing use of natural gas to generate electric power could be reversed if natgas reaches a sustained price of $5/m Btu. “At that price,” he said, “natural gas would not be as attractive as a power generation source and we would begin to see renewed investment in coal-fired power and even new nuclear power projects.” But those developments also take years to come to fruition, Caruso noted, offering no near-term relief for chemical producers facing continuing high costs for natural gas.
Asked whether US policy makers in Washington, DC understand the threat posed to the broad chemicals industry by continued high natgas prices, Caruso said: “I think they are hearing the message, but they are in conflict about what to do about it.”
For example, he noted political divisions even with the Democratic and Republican parties over the substitution of ethanol for methyl tertiary butyl ether (MTBE) as a gasoline oxygenate, with “corn states” pitted against other regions of the country. He also cited tourism-dependent Florida being opposed to offshore drilling in the eastern Gulf of Mexico.
“There is a desire to do something” about the energy crisis, he said, “but whether there is the political will to reach a solution, I can’t say.”
Caruso said, however, that he expects Congress will pass a national energy policy bill this year.
Sponsored by the National Petrochemical & Refiners Association (NPRA), the IPC concludes today.
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