Gas use for power seen rising as much as 10 Bcf/d due to switching from coal

Monday, April 09, 2012

With natural gas prices remaining at historically low levels, its use for power generation could increase by up to 10 Bcf/d in 2012, in large part due to generators' switching away from coal, according to analysts. They also observed that summer weather and production volumes will be the most meaningful variables to determine the total amount of fuel switching.

Analysts with Bentek Energy, a unit of Platts, said that with a Henry Hub spot price of $2.33/MMBtu, some 3 Bcf/d of gas could hypothetically replace Powder River Basin coal as a generation fuel.

Gas demand for power burn between April and October is forecast to rise by 2.1 Bcf/d as compared with the same period in 2011, to 25.2 Bcf/d on average from 23.1 Bcf/d, they said. Bentek analysis suggests Central Appalachian-sourced coal will be competitively displaced first due to its relatively high price.

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