Study Forecasts a Larger, More Diversified Demand Scenario
In a new study forecasting gas supply and demand over the next
15 years, GRI said demand will reach 32.7 Tcf by 2015, but the
industry will have to adapt to changing consumption patterns in
order to take advantage. The results of the report, titled "GRI
Baseline Projection of U.S. Energy Supply and Demand to 2015, 2000
Edition," were released last week at the National Press Club.
Overall, the GRI predicted a 1.3% annual increase in total
energy consumption from 94 quads in 1998 to 118 quads by 2015.
"While GRI's 2000 Baseline Projection outlines a positive
outlook for the natural gas industry, it sounds a call for change
in the gas industry," said Paul Holtberg, group manager for the GRI
Baseline Center. It "will need to undertake key investments and
make significant changes in operational practices to meet the
anticipated growth resulting from a fundamental shift in
consumption patterns. The process will not be easy and will include
an element of risk."
The demand increase represents an annual growth rate of 2.6%,
which is about 60% faster than the rate of anticipated growth for
total primary energy demand. Like many demand studies published
recently, the GRI report said the driving factor will be electric
generation, which the study forecasts to grow from 3.7 quads in
1998 to 8.9 quads in 2015. The report predicts that 44% of the gas
demand growth through 2015 will be gas demand for electricity
generation. Industrial gas demand took second place, with predicted
growth from 9.8 quads in 1998 to 13 quads by 2015, representing 27%
of the overall gas demand.
The "fundamental shift in consumption patterns" that Holtberg
alluded to will occur in the electric generation sector as merchant
generation capacity is predicted to challenge central utility
generating capacity as the main driver of electric generation.
Utility generating capacity will fall from 735 GW in 1998 to 530 GW
in 2015. On the other hand, merchant generating capacity is
expected to balloon from 40 GW in 1998 to 430 GW by 2015. To reach
these levels, the GRI estimated that of the 125 GW of currently
proposed merchant generating capacity, only 80 GW will be
The GRI also said distributed generation capacity (capacity
generated by units with output of no more than 100 MW) will grow
"very rapidly" over the next 15 years, from 28,000 MW in 1998 to
75,000 MW in 2015. The vast majority of this growth will be from
microturbines and fuel cells, which will account for 28,800 MW of
the growth during the forecast period.
The report says the average size of a generating facility will
fall from around 95 MW in 1995 to about 75 MW by 2015.
"The smaller average size generating unit and the larger number
of customers will increase the gas industry's cost of serving
electric generation customers," the report said. "With a large
number of generators, service offerings by the gas industry are
likely to become broader to match the varying needs of customers."
It added that with a larger number of smaller generating units,
potential exists for greater volatility in both daily and monthly
gas loads as customers make independent decisions about plant
Along with growing demand, the GRI predicted a price increase
trend over the course of the study period. Price "peaks are
expected in 2007 and 2011, while "valleys" are forecast for 2004
and 2009. Lower-48 gas prices are projected to increase from
$1.95/MMBtu in 1998 to $3.05/MMBtu by 2015.
Will there be enough supply to accommodate the growing demand?
The report indicates needed supply will come from growing output
from the deepwater Gulf of Mexico and from Canadian imports.
While Gulf of Mexico Shelf production continues to decline
during the study period, deepwater and ultra-deepwater production
more than make up the difference. The result is an overall increase
in Gulf of Mexico output from around the current levels of 4.9 Tcf
to more than 8 Tcf in 2015. The 3.1 Tcf increase accounts for 29%
of the supply growth in the study period.
In Canada, slight declines in Alberta production will be offset
by increases in eastern Canada and British Columbia. Canadian
production is expected to increase from just over 5 Tcf in 1998 to
7.7 Tcf in 2015. GRI did not include production estimates from the
Mackenzie Delta, Fort Liard or Sable Island areas in its
The report also includes analysis of crude oil prices, nuclear
capacity, and changing production methods. For more information on
the study, call the GRI Baseline Center at (703) 526-7832.