GRI sees U.S. gas demand growing 2%/year

U.S. Gas Demand [75,606 bytes] The Gas Research Institute's 1999 baseline projection of U.S. supply and demand predicts a highly competitive, low-price energy future with natural gas expanding its share of the total U.S. energy market. The baseline, an independently prepared analysis of energy supply and demand, shows total primary U.S. energy consumption growing 1.8%/ year, from 94 quadrillion BTUs (quads) in 1997 to more than 115 quads in 2015. The outlook for gas is more robust, with

Sept. 28, 1998

4 min read

U.S. Gas Demand [75,606 bytes]

The Gas Research Institute's 1999 baseline projection of U.S. supply and demand predicts a highly competitive, low-price energy future with natural gas expanding its share of the total U.S. energy market.

The baseline, an independently prepared analysis of energy supply and demand, shows total primary U.S. energy consumption growing 1.8%/ year, from 94 quadrillion BTUs (quads) in 1997 to more than 115 quads in 2015.

The outlook for gas is more robust, with demand growing 2%/year to about 32 quads in 2015 (1 quad equals about 1 tcf of gas) from 22.5 quads in 1997.

GRI said, "As a result, the natural gas share of total U.S. energy consumption will increase from 24% in 1997 to 28% in 2015.

"Nearly 75% of the projected demand increase will come from electricity generation and industrial applications, with the balance from growth in the residential and commercial markets."

It said that the greatest potential for growth in the U.S. natural gas market is for electric power generation, which will jump from 3.3 quads in 1997 to 7.3 quads in 2015. It added that all of this power demand growth will come from independent power generators (see chart).

Two challenges

GRI said that two major challenges will shape future energy consumption patterns:

The U.S. must ensure that the required gas supplies are available to meet the anticipated 9 tcf growth in gas demand-from 22 tcf in 1997 to nearly 32 tcf in 2015.
Energy markets also could be affected by the potential implementation of the proposed 1997 Kyoto Protocols mandating reductions in emissions of carbon dioxide and other greenhouse gases.

GRI said, "The first of these challenges is projected to be met and is embedded within the 1999 baseline results. The second represents potential incremental gas demand above the 32 tcf level projected in the baseline."

Paul Holtberg, GRI group manager, said, "GRI's 1999 baseline outlines a 'positive' future scenario for the natural gas industry. However, the baseline does not imply that the process will be easy, only that it is achievable with definable and less than heroic steps, including continued investments, significant increases in drilling activity, and continuous improvements in gas supply technology."

GRI cites historic precedent in assuming that the projected growth in demand can be met.

"Between now and 2015, the gas industry is facing a demand growth of approximately 9 tcf over a 17 year period. This equates to a growth rate of about 0.5 tcf/year.

"The last time the gas industry faced a similar challenge was from the mid-1950s to the early 1970s. During that period, the industry successfully addressed a 13 tcf demand growth challenge. Meeting that challenge required supply growth of 0.8 tcf/year, 60% greater than the annual supply additions that would be required to meet today's growth challenge."

Technology's role

GRI said technology will play a pivotal role in helping gas producers meet the projected higher demand.

"The technologies available to producers today are much improved over those available in the late 1950s and early 1970s. Because of advances in technology, fewer gas wells are required to support a given level of production.

"In addition, today's technology opens up previously uneconomical fields and enables drilling in previously unreachable areas. In the low-price, moderate-growth environment projected in GRI's baseline, technology acts as a substitute for price."

The study did not speculate on the incremental gas demand that would be created by CO₂ emission-reduction mandates in the Kyoto Protocols.

But it said if the 32 tcf hurdle were moved ahead 5 years to 2010, gas producers would face increased pressure to perform, since it would require a growth rate of 0.8 tcf/year, roughly equal to the performance the gas industry demonstrated decades earlier.

The report predicted that the projected growth in U.S. gas demand, when combined with slack U.S. oil production and low prices, will trigger a pivotal change in the oil and gas industry.

"Between 2000 and 2005, natural gas will become the domestic producers' dominant revenue source," it said.

GRI said many of the potential actions that would result in cutting CO₂ emissions are being fostered by changes that are taking place in the market today, or are expected to take place, as a result of increased competition.

"For example, in the electric generation sector, efficiency improvements are being made through the retrofit or replacement of existing generating units, the increased use of high-efficiency, combined-cycle gas generating units, and increased interest in distributed generation.

"The trends in the electric generation sector and others in the transportation and industrial sectors raise the question of whether market forces are themselves creating the changes needed to address global warming."

GRI manages cooperative R&D programs for its 335 members and the gas industry.