Expanding US natgas output to keep pace with growing demand

10 May 2011 17:29  [Source: ICIS news]

PITTSBURGH, Pennsylvania (ICIS)--US demand for natural gas will increase substantially over the next 20 years, but it poses little risk of major price gains because domestic production, especially in fast-growing shale gas, will keep pace, a leading gas industry official said on Tuesday.

Kevin West, managing director of external affairs at EQT, told a chemicals industry conference that even as demand for natural gas was expected to grow in industrial, utility and transportation sectors, expanding shale gas production and technical advances will provide sufficient supply to avoid a price crunch.

Speaking at the annual Pittsburgh Chemical Day conference, West said his company expects that US demand for natural gas will increase by nearly 50% by 2030, chiefly for industrial consumption.

The US petrochemicals sector and downstream chemical makers are heavily dependent on natural gas as both a feedstock and energy fuel, and natural gas also is widely used for power throughout the broader US manufacturing sector.

Newly abundant supplies of domestic gas from shale plays also will help fuel expanding use of gas for electric power generation, he said. 

He noted that existing gas-fired electric utility plants are operating at only 42% of capacity, and that as the economy improves those operating rates will increase.

In addition, he said that nearly half of all new electric power generating capacity is being designed for gas as fuel.

Gas will play an increasingly larger role as a US transportation fuel, he said, a development that worries the gas-dependent chemical sector. The natural gas equivalent of a gallon of gasoline is only about half the current cost of gasoline, and it is cheaper still than diesel fuel.

Based on energy equivalence, with diesel fuel at around $4.49/gal (€0.83/litre) and gasoline at $3.88/gal, the natural gas price is $2.00/gal, he said.

West conceded that the US lacks sufficient infrastructure at present to allow widespread consumer use of natural gas as a motor fuel.

But he noted that if Congress continues to advance now-pending legislation to facilitate installation of retail gas fuelling pumps, the necessary infrastructure development could occur.

In the near term, West said that major fleet vehicle operators such as FedEx are looking seriously at shifting to natural gas for their delivery trucks. 

Gas has more immediate interest for fleet operators because relatively little investment is needed to establish natural gas fuelling facilities among fleet operators whose vehicles typically return to base at the end of their runs.

Asked if the combined growth of increasing natural gas demand among industry, utility and transportation sectors might force runaway price increases in years ahead, West discounted the possibility.

“This technology is not stagnant,” West said, referring to the expanding development of shale gas supplies across the country.

“Five years ago, no one would have thought that we would have the gas reserves that we have today, and I think the technology that has given us those new resources will continue to expand,” he said.

He said that the reach of horizontal drilling - crucial to production of shale reserves - has more than doubled in recent years.

“We will go deeper, we will become more efficient, and I think the sky is the limit for this country’s gas supply,” he said.

“For the next century, we will have enough natural gas in this country,” he added.

EQT is a Pittsburgh-based natural gas production, pipeline and supplier company.

($1 = €0.70)

By: Joe Kamalick
+1 713 525 2653

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