Industrial natural gas demand is likely to grow steadily in the next five to 10 years, according to a report released Monday by engineering consulting firm Black & Veatch (BV).
Methanol and fertilizer industries, among the most gas-intensive industrial end-users around the globe, are expected to be the primary drivers of the demand uptick, according to BV consultants Michael Dickson and Denny Yeung. They take the U.S. Energy Information Administration's (EIA) prediction of 0.5% annual growth in industrial gas demand and turn another page.
BV's analysis sees continued low and stable prices for gas and natural gas liquids as the basis for future industrial growth with the U.S. Gulf Coast being the center of this expansion.
Liquefied natural gas (LNG) export terminal and electric generation plant developers should pay attention, Dickson and Yeung wrote in their profile trying to answer the question, "Is Industrial Demand Growth the Next Big Thing for Natural Gas?" In addition, midstream developer/operators also should take note, they said.
They expect that the additional industrial gas loads "will require new infrastructure and will compete with other consumers such as power generators or LNG exporters for pipeline capacity." And the LNG and power plant developers "would be remiss to ignore the demand signal from industrial customers," Dickson and Yeung wrote. In Oregon, the proposed Jordan Cove LNG project has long included an adjacent gas-fired generation plant as an adjunct to the export facility (see Daily GPI, Sept. 9, 2011; Nov. 30, 2010).
BV projects future gas prices to stay under $5/MMBtu out to 2025, and this will encourage industrial demand to grow steadily throughout North America. "The ease of pipeline and processing construction and abundance of supply makes the U.S. Gulf Coast attractive to industrial consumers." They cite two primary reasons:
The reversal of the traditional south-to-north gas pipeline flow; and
Gulf Coast interstate and intrastate pipeline networks offer numerous options for gas supply and transportation.
Dickson and Yeung underscore the growing acknowledgement that Marcellus and Utica shale output has created more incentives for producers to find a long-term market for their output, so the industrial sector is a natural place to absorb a lot of the added supplies. In the Gulf states the potential added industrial load will increase competition among the pipelines, producers and marketers, the authors said.
Under the circumstance, the report concluded that "a thorough review of proposed industrial facilities and their effect on natural gas supply near proposed development would be a prudent risk management procedure to follow."