After a decade of recuperation, the North American gas industryfaces the challenge of growing end-use consumption to 25 or even 30Tcf in the U.S. alone over the next decade, according to the 1998North American Natural Gas Trends report released yesterday byArthur Andersen and Cambridge Energy Research Associates (CERA).
“The gas industry now faces an unprecedented window ofopportunity to rapidly increase end-use consumption,” said TomRobinson, CERA senior director. “But with this opportunity comesthe challenge of developing adequate gas supply resources andinfrastructure to meet what could grow to be a 25 or even 30trillion cubic foot market in the United States over the nextdecade.
Five features of the demand growth challenge pointed out by thereport are: 1) The industry’s success in convincing the market gasis a safe, reliable and plentiful fuel. “Customers have gotten themessage: natural gas use is rising in industrial applications andgas is winning the battle as the fuel of choice for new homehookups,” the report reads.
2) The fact that gas reserves have not risen with productionalthough over the past decade North American gas production hasrisen from 20.2 Tcf to 26.2 Tcf per year, implying a 30% increasein the requirement to find and develop new supplies just to replacereserves. The industry’s reserve-to-production ratio has declinedto less than 12-to-1. “But the combination of higher production anda lower reserves-to-production ratio means a growing requirement todevelop new supplies each year.”
3) The fact that new infrastructure will be needed to connectnew supplies with growing markets. “This need will be mostpronounced in regions where gas has had a lower market penetration,such as the U.S. Northeast and Southeast. It will also require newinfrastructure to connect new supply areas – such as the deep-waterGulf of Mexico, Atlantic Canada, and possibly even Arctic gas.”
4) Unbundling and retail choice. “The industry also faces thechallenge of a radical restructuring of its interface withcustomers, as unbundling pushes further downstream to reach retaildistribution for small customers.”
5) Gas and power convergence. “Although convergence has not goneso far as to subsume the gas industry within the power industry,the necessary connection between gas and power is growing evercloser.” Factors causing this are growing use of gas in powergeneration, integration of gas and power in the distribution sectorwith a growing connection likely in billing, metering and customerinformation systems, and the bundling of multi-commodity productsby energy service companies in attempts to serve a wider array ofcustomers.
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