The industry got some good-and some not so good-news on U.S. gas demand trends last week.
The Energy Information Administration said gas consumption could increase as much as 5.5% next year if normal weather patterns occur.
It said 1992 gas consumption may climb 3.5% to 20.1 tcf, the highest level since 1979, due to higher demand in the industrial and electric utility sectors.
EIA observed that despite mild winters and poor economic conditions the last 2 years, gas demand has remained relatively strong.
Wellhead prices are rising and for first quarter 1993 should be 30cts/Mcf, or 24%, higher than the same period this year. Assuming normal weather, no significant price increases are expected after the first quarter.
GRI'S OUTLOOK
Meanwhile, Gas Research Institute was less optimistic about the medium and long term.
In its latest baseline projections, it estimated the world oil price will be only $21/bbl in current dollars in 2000, coal prices will drop, and more conservation and energy efficiency will occur than previously thought.
That combination will keep a strong lid on gas prices. GRI estimated the average gas acquisition price at $2.29/MMBTU in 1992 dollars in 2000.
GRI said short term, deliverability seems adequate to support consumption at gradual rates of increase for some time with moderate producer activity.
But long term, it predicts strong gas reserves, reduced drilling costs, higher success rates for finding and recovering gas, and improved technologies and practices.
"The combined impacts of these changes reduce the rate of investment necessary to provide the required supply and defer introduction of high cost supplies, such as Alaskan gas."
GRI said demand will be the main constraint on the role gas can play in the energy mix.
"This conclusion is not counter-intuitive. Gas prices have been low for several years, and existing market opportunities are probably pretty much saturated.
"Any significant increase in the use of gas will have to be associated with investment in new gas using equipment: turbines, methane vehicles, appliances, space conditioning devices, or industrial facilities. The only important exception might be substitution of gas, at discount prices, for coal in existing power plants."
TECHNOLOGICAL PROGRESS
GRI also said, "Continued technological progress will be necessary to support gas demand growth, no matter how optimistic the other assumptions of the future might be.
"Nobody but the gas industry has the incentive and the capability to underwrite the technological progress that will be required. Only gas industry support for R&D and deployment of new technologies will make the optimistic assumptions realities."
That's a not so subtle plug for GRI's own R&D program. Gas pipelines recently have been balking at underwriting the GRI research effort.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
