Growing US demand for natural gas will cause supply shortages and high prices, but it may finally focus public and political attention on producers' problems in finding and developing those resources, industry leaders said at the annual meeting of the Independent Petroleum Association of America in San Antonio late last month.
Energy debate intensifies
Regardless of who won the upcoming presidential election last week, the political debate over energy will soon intensify, said J. Larry Nichols, chairman and CEO of Devon Energy Corp.
"The Clinton administration was able to have its political cake and eat it, too, by restricting industry access to public lands and not having to answer for it," he said.
But those days of too-cheap energy are fading in the face of rapidly growing market demands, said Nichols and other industry leaders at the 3-day meeting.
Natural gas prices will remain strong "for several years to come," said Charles L. Watson, chairman and CEO of Dynegy Inc. "I think this is the most optimistic you can be in an industry, because the demand that is creating that [market price] is real," he said.
"Gas is going to lead the future for the independent producer. I think it's going to lead the energy segment in discussion and politics for the next 10 years," he said. "While it's important to have continued growth in the demand for energy, it's also important when and where that demand comes and what kind it is."
"The growth for natural gas will be in peaking demand, and it's going to be in the summer months, rather than the winter months. That's pretty exciting, because it allows us to use the existing infrastructure that we already have," Watson said.
Gas-power convergence
Convergence of the natural gas and electric power sectors will drive the US gross national product much more than any single other element over the next 5 years, Watson said.
US peak demand for electricity-fueled primarily by clean-burning natural gas-is expected to grow an average 2.5%/year through 2007. That will require new generation capacity additions of 25,000-35,000 Mw/year just to keep up with demand growth, said Watson.
"There haven't been 35,000 Mw added in any single year for 15 years," he said. Moreover, he said, the US market already is short 45,000 Mw of peaking capacity, which also must be made up.
"This is a significant issue," Watson said. "When eastern cities with large populations start browning out and blacking out, people are going to start understanding this is a real problem."
He said, "The demand is real, and it's going to be real important politically."
Internet demand
But rapidly expanding use of the internet, which is driving up demand for energy, could also evolve into a major source of conservation to dampen the energy market, said Greg Armstrong, CEO of Plains Resources Inc. and Plains All-American Inc.
To illustrate, he asked for a show of hands of how many attendees at the IPAA meeting have personal computers at work or home, and how many turn those machines off when they are not in use. "Maybe 10% turn them off," said Armstrong. "Next to your refrigerator, a computer consumes more electricity than any other appliance in your house. The average computer is on 75% of the time that it's not being used. Tomorrow, if Al Gore or George W. Bush said, 'Turn it off when you're done with it,' there would be a tremendous reduction in the amount of energy consumed in this nation."