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Industrial Demand for NatGas Quickly Escalating, Says Barclays

U.S. industrial demand growth for natural gas accelerated faster in 2013 than expected, analysts with Barclays Capital said Tuesday.

According to Biliana Pehlivanova and Shiyang Wang, consumption rose by 713 MMcf/d from 2012. The analysts had projected industrial demand growth of 300 MMcf/d.

"So far, this dynamic has been largely the result of restarting previously mothballed facilities and expanding capacity at existing operational ones," they said.

In early 2013 Pehlivanova and Wang tallied upcoming industrial facilities and expected demand.

"Since then, some projects have moved forward, while others have been suspended due to cost overruns or lack of clarity on financing and other issues such as environmental concerns."

Based on a "fresh look" at the upcoming projects tracked, "the pace of industrial demand growth is likely to accelerate further in the second half of this decade," said the analysts. "Natural gas demand should receive a boost from the construction of new industrial manufacturing plants spanning across a number of industries.”

Between 2015 and 2017, Barclay's project list indicates that gas use may rise by nearly 3.2 Bcf/d if all projects starting up over the two-year period "are fully ramped up."

Gas use from projects that begin operating in 2015 should add up to 0.7 Bcf/d. Demand could increase another 1.1 Bcf/d in 2016, rising by 1.4 Bcf/d more in 2017.

There is, said the analysts, some uncertainty that many of the projects will ramp up within their proposed timeframes, and some could be delayed or canceled.

According to Barclays data, the biggest industrial startups this year include Methanex's methanol relocation to Geismar, LA, with capacity of up to 1 million metric tons/year (mmty) (see Daily GPIOct. 31, 2012). Chesapeake Energy Corp. in early 2013 agreed to supply all of the natural gas over a 10-year period for the facility, set to begin operations later this year (see Daily GPIJan. 25, 2013).

The next biggest project scheduled for startup this year is LyondellBasell's methanol plant restart in Channelview, TX, with capacity of up to 780,000 metric tons per year (see Daily GPIJan. 3). TPC Group also is planning a 303,000 metric tons/year isobutane facility ramp-up this year in Harris County, TX (see Shale DailySept. 17, 2012).

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