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Midwest Gas Demand, Supply Options Projected to Increase

Aging power plants, competitive natural gas prices and increasingly strict environmental regulations will drive continued growth in demand for gas-fired power generation in the Midcontinent Independent System Operator (MISO) region, according to a MISO-commissioned study released Friday. The region's gas supply outlook is poised to benefit from new sources of production, provided appropriate infrastructure development occurs.

"Over the past two years, growth in shale gas production has dramatically altered the natural gas supply landscape," said John Lawhorn, MISO senior director of policy and economic studies.

The third phase of MISO'sstudy of natural gas infrastructure highlights the impacts of the shale gas supply revolution, including the transition of the Midwest from being a by-way to a destination for gas sourced from an increasingly diverse supply portfolio. The analysis, which made use of data provided by Bentek Energy LLC, also forecasts continued access to numerous gas supply sources for end-users in MISO South due to "an exceptionally well-connected pipeline network" there.

"Canadian gas will play less of a role in meeting Midwest fuel needs over time as the Bakken [Shale] and basins in the northeastern U.S. ramp up production," the study found. "The Midwest is is projected to turn into a net importer of gas from the northeastern U.S. but needs approximately 2.0 Bcf/d worth of new or converted infrastructure to do so. Without this buildout, the Midwest will have to source this supply from another region, which would significantly alter the balance of [gas] flows."

Average daily Midwest gas demand from all sectors is forecast to grow to 13.4 Bcf/d in 2032 from 11.1 Bcf/d in 2013. Residential and commercial applications will still account for the greatest portion of demand, the report said. "Gas production growth and the proximity to agricultural customers have drawn interest to the Midwest region, with planned in-service dates over the next few years for a handful of agrochemical projects."

The study projects that as demand for gas grows in the southeastern United States, more local supply will stay in the MISO South region and inflows of gas to the Midwest from the Southeast will become increasingly seasonal. "Forecasted demand growth in the southeastern U.S. is led primarily by liquefied natural gas (LNG) exports, gas-to-liquids production, petrochemical and fertilizer manufacture, and power generation," the study found.

The Midwest is poised to benefit from continuing and emerging trends in gas supply and flow dynamics, both outside and inside the region the study found.

"Increased retention of supply passing through the Midwest region, greater diversity of supply options and growth in Bakken production will provide end-users with opportunities to reassess their [supply] portfolios. Strong supply basins in the northeastern U.S. will continue to impact Midwestern flow patterns and increasingly help serve Midwestern demand; however, infrastructure expansion is still needed to move gas into the region and to address area-specific constraints."

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