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EIA: Gas Takes Bigger Share Long-Term

EIA: Gas Takes Bigger Share Long-Term

A higher rate of economic growth will lead to a greater expansion in natural gas use than previously forecast over the next 20 years --- to 34.7 Tcf/ year in 2020, up from 31.5 Tcf --- and a 10% increase in projected prices --- from $2.81/Mcf to $3.13, according to the Energy Information Administration's latest report.

EIA's Annual Energy Outlook 2001 (AEO2001) released last week projects U.S. economic growth at an average rate of 3% a year over the next 20 years, up from its previous estimate of 2.1% per year. The economic growth will boost overall U.S. energy demand from 96 quadrillion Btu in 1999 to 127 quads in 2020, up from the 121 energy quads projected by EIA one year ago. The increase in the projection for natural gas demand by 2020 of slightly over 3 Tcf (loosely equal to 3 quads) is responsible for about half the change in energy projections.

EIA says the 62% increase in gas demand from 21.4 Tcf in 1999 to 34.7 Tcf in 2020, will be spurred by a tripling of gas use for power generation. During the next 20 years 89% of new power generation units will be fueled by natural gas. Gas prices are expected to decline within two years from current highs. "In the longer term, technology improvements in the exploration and production of oil and natural gas are expected to moderate price increases even as demand for these fuels grows."

EIA projects world oil prices will reach $22.41/barrel (in 1999 dollars) in 2020, up just slightly from the $22.04 in last year's forecast.

The federal bean counters see a 1.8% average annual increase in power demand over the next 20 years, compared to the 1.3% they predicted last year. Prices will decline from the current 6.7 cents per kWh, but not as much as predicted last year due to the higher projected gas prices. Instead of 5.8 cents per kWh in 2020, EIA's AEO2001 sees electric rates holding at 6.0 cents per kWh.

Power to be provided by nuclear generation jumped 34% from the forecast last year "due to lower estimated costs for extending the life of current nuclear plants and higher projected natural gas prices, although total nuclear generation still declines as some existing plants retire."

Coal will still be the primary fuel for power generation, but its share will dwindle from 51% to 44% of the generating total.

Ellen Beswick

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