Friday, August 06, 2010

o-gas switching and new gas-fired generation unlikely to keep pace with natural gas production growth

EVERGREEN, CO (August 5, 2010) – A new five-year forecast of natural gas demand in the electric power industry just released from BENTEK Energy, LLC, reports that last year’s unique confluence of market conditions that drove 1 trillion cubic feet (Tcf) in coal-to-gas fuel switching in the power sector was a “head fake” – a false market signal that appeared to promise that increased power burn demand would help offset ongoing supply growth in the shales. While gas continues to make gains in the power sector, that rate of increase is expected to decline.

     According to BENTEK, over the next five years gas demand growth in the power sector will remain moderate at best and will not be enough to offset the potential downward price impact of currently rapid U.S. shale growth.

     “The higher gas burn in 2009 was interpreted by some as evidence of a possible ongoing upswing in the demand curve to help offset the growth in shale gas production,” noted E. Russell (Rusty) Braziel, BENTEK Energy Managing Director. “But the dynamics of coal-to-gas switching in 2010 have turned out much different. And when we look forward to the 2011-2015 timeframe, the most likely scenario is for moderate levels of coal-to-gas switching and increases in gas-fired power generation demand.”

     BENTEK projects that demand from the power sector will grow only 13% over the next five years. On the supply side, U.S. gas production is projected to remain on its current growth trajectory due to efficiency gains from technology improvements associated with unlocking unconventional resources. Gas storage levels are expected to be near or surpass the high levels established in 2009. As a result, BENTEK forecasts that gas prices will remain relatively weak compared to historic averages and the NYMEX forward curve.

     A new Market Alert from BENTEK, Power Burn Head Fake Catches Market Off Guard, examines the U.S. power sector with a focus on increasing demand for natural-gas-fueled capacity and the prospects for coal-to-gas switching through 2015. This new report is the first in a series of five reports BENTEK will issue over the next six months as a complement to its new Forward Curve Quarterly™. As part of the Forward Curve Suite report series, these Market Alerts provide comprehensive details behind the five-year forecast and market analysis presented in the Forward Curve Quarterly™. Each of these Market Alerts covers the impact of a key market sector on long-term supply/demand dynamics, including background, assumptions, pipeline flow and capacity consequences, constraints, risks and price implications. Other future Market Alerts will include:

For more information call BENTEK at 888-251-1264.