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Power Industry Told to Watch Gas Market Carefully

A Wood Mackenzie natural gas analyst told the electric generation sector to keep a close eye on developments in the wholesale gas market, particularly noting how fast demand picks up for North American supplies.

Gas resources and the upstream sector can handle big swings upward in demand, but not at today's paltry forward curve prices for natural gas, Wood Mackenzie's Jen Snyder said in a Q&A titled "What's Ahead for Natural Gas?" in the spring issue of the Electric Power Research Institute's (EPRI) quarterly EPRI Journal.

Among the highlights that Snyder provided the power industry were:

Wood Mackenzie's North American gas research team is "extremely bullish" on shale gas; it doesn't argue with forecasters who say there is now a 100-year supply of gas in North America, Snyder said. "However, the pace at which this market grows is extremely important, including not just incremental power generation capacity additions, but also retiring older capacity.

"It is not just the size of the overall demand coming into the market -- it's how quickly that demand materializes."

Wood Mackenzie also is charting the impact of global coal prices on gas markets in the next few years, Snyder said. Just like liquefied natural gas, the consulting firm's researchers are watching what happens to trends in investments for expanding North American coal export capacity. "Any mid- to long-term increase in coal prices feeds right back into our gas price expectations," she said.

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