Recently rapid growth in US consumption of natural gas might ease soon, according to a new report from Deloitte.
Part of the reason is limited scope for more of the price declines that have stimulated demand for electricity generation, industrial uses, transportation, and exports, say Deloitte analysts John England, US energy and resources leader, and Andrew Slaughter, executive director of the firm’s Center for Energy Solutions.
“While low prices have spurred demand growth across a number of sectors, prices are unlikely to sustainably drop much further,” England and Slaughter write. “Nor is there a new large domestic demand center entering the picture in the next 5 years. Exports will certainly drive growth. To a lesser extent, so will industry, with some smaller potential from electricity producers and alternative fuel transport.”
Power generators, which have benefited from low-cost gas, are unlikely to add much to future US demand growth, according to the report. The potential rise in gas prices is likely to reduce opportunities for further fuel-switching from coal, especially with future emission regulations uncertain and demand growth for electricity limited.
The Deloitte analysts say 28 bcfd is “likely close to the maximum sustainable annual rate” of gas demand for electricity generation, “and there may, in fact, be more downside than upside.” If the delivered gas price exceeds $4/MMbtu over the next few years, they add, gas for power generation will slip below the current 5-year average of 24 bcfd.
Economic growth will drive industrial consumption growth. Petrochemical plants will be visible consumers, but other gas-intensive US industries might contribute to demand growth.
Deloitte sees an increase in US industrial gas demand over the next 5 years to 23 bcfd from 21 bcfd under base-case assumptions.
Converting transport from liquid hydrocarbons to natural gas will likely be difficult, the analysts say. But environmental advantages of gas will be influential, possibly opening markets in marine bunkering and rail.
LNG exports might exceed 8 bcfd if capacity under development is fully utilized. But global competition has stiffened, and exports will be sensitive to cost.
