Power burn leads natural gas demand growth and production follows as coal seeks new markets

Thursday, December 06, 2012

Bentek’s new Market Alert, Power Jump-Starts New Gas Market Cycle, reports that U.S. natural gas demand will grow 9.9 Bcf/d by 2017, with 40% of the demand increase being driven by power burn. Since 2008, domestic gas production growth has outpaced gas demand growth, squeezing out LNG and Canadian imports from the U.S. supply stack. However, with little in imports left to squeeze out, recent increases in power burn demand will mark a turning point in which demand will increasingly set the pace for production growth.

Significant displacement of coal by natural gas in the U.S. power generation stack in 2012 helped absorb the natural gas supply shock resulting from last year’s warm winter and record-high storage inventories. Bentek expects coal displacement by natural gas to continue over the long-term. With other sources of natural gas demand staying flat over the next five years, power burn will continue to represent the biggest area of new demand growth for natural gas.

Access the overview:

Key takeaways from Bentek’s new Market Alert:

• Natural gas demand growth over the next five years will allow production to grow another 12.8 Bcf/d by 2017.
• The tighter balance between production and U.S. demand is expected to keep prices range bound on an average annual basis, with resistance at $5.00/MMBtu.
• Coal-to-gas switching related gas demand more than doubled in 2012 to date year-over-year to 6.0 Bcf/d, from just above 3.0 Bcf/d in 2011.
• The majority of the changes in demand and production will occur in the Northeast and Southeast regions, leading to big changes and increased volatility in flow dynamics and pricing relationships between regions.

For more information on Power Jump-Starts New Gas Market Cycle please contact Bentek Sales at (303) 988-1320.