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FERC: Economic Downturn, Lower Prices Not Slowing Demand

Despite the economic downturn and a drop in natural gas prices there has not been much of a decline in demand, according to Steven Reich, deputy director of the Division of Market Oversight in FERC's Office of Enforcement.

"While industrial demand has fallen over the past several months relative to last year, demand for gas to fuel electric power plants has been increasing as gas prices have...become increasingly competitive, not only with oil but also, on a regional basis, with coal. Yet natural gas supplies are abundant heading into the summer months," Reich said.

The Energy Information Administration released inventory data Thursday morning showing continued growth in stored gas well above industry expectations, with additions to working gas inventories totaling a whopping 103 Bcf. The data proved that despite drastic rig reductions (see related story), gas is still being stored at a rate that is well above industry expectations.

Liquefied natural gas (LNG) imports are expected to reemerge, Reich said during a presentation Thursday of the Federal Energy Regulatory Commission's (FERC) 2009 Summer Energy Market Reliability Assessment in Washington, DC.

"LNG imports are already twice as high as last year; the global LNG market has excess supply available due to lower worldwide demand, full overseas inventories, and the addition of new LNG liquefaction capacity; and due to its size, maturity, and flexibility, the U.S. is one of the few places able to absorb excess LNG."

Whether or not excess global LNG will flood the U.S. market remains a hot debate point. End users and market experts discussed their varying views on the topic last week at GasMart 2009 in Chicago (see related stories).

With the economic downturn expected to continue for some time, FERC forecast the 2009 summer electricity load to be lower than projections it made in 2007 and 2008, and the average on-peak capacity to be 15.2% of nameplate capacity, an on-peak increase of 21.5% (805 MW) from the 2008 summer assessment.

Prices will be lower this summer because of the weak demand brought on by the slowing economy, Reich said.

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