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NW Gas Market in 'Good Health,' Report Says

January 4, 2010
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With demand and corresponding infrastructure projected to grow steadily, the outlook for natural gas in the Pacific Northwest is fit and looking at a potentially bright future, according to the latest annual report from the Northwest Gas Association (NWGA). The "2010 Outlook" offers an assessment of demand, supply and capacity in the region through October 2019.

The proportional share of gas use in the Northwest will continue to expand in the electric generation and residential end-use areas, the report noted, projecting average growth of 1% annually during the next 10 years. "The need for gas to fuel the generation of electricity and continued growth in the number of residential consumers will pace increased regional demand," the report noted.

Calling supplies sufficient and infrastructure generally adequate, the outlook concluded that the regional gas market "faces the future in good health." The report also identifies various "opportunities" to more fully maximize what it called "the benefits in natural gas use" for a part of the nation that was dominated by hydroelectric supplies until the last 20 or 30 years.

"The last decade has been punctuated by events that have significantly changed the Pacific Northwest energy market," said NWGA's report, citing the 2000-01 wholesale energy market meltdown throughout the West as profoundly altering the region's economy by eliminating much of the major industrial gas load (Industrial use made up nearly half of the region's gas use in 1999, and now it accounts for only one-third).

"More recently, the national credit crisis, collapse of the housing market and high unemployment have plagued North America and the Northwest -- again, dampening energy demand."

The report cites a "rising tide" of gas supplies from unconventional sources, such as the shale boom, and the corresponding slackening of demand for gas. The outlook assumes the biggest developments in 2010 will be in efforts to curb carbon emissions, push conservation and efficiency, and harness more renewable energy resources for power generation, saying these moves collectively will help "significantly shape" the region's energy market.

"But policymakers recognize that these alone will not cover our growing energy needs," and therefore the outlook calls for a "truly comprehensive plan." And that plan must include "a significant role" for natural gas, said the NWGA.

In the fundamentals of demand, supply and capacity, the regional outlook remains rosy and bullish because it assumes:

And the expected rejoinder from regulators and consumers is: At what price? In an anticipated response, the outlook notes that in the region high gas prices from 2008 plummeted to what the report called "seven-year lows," reflecting the fluctuating balance between demand and supply.

The demand-supply balance shifted significantly during the past year, the report said. The 2008 summer price highs in the $13/Dth area contrast to prices as low as $2/Dth at some points in the summer and fall this year.

"Policymakers can and will influence natural gas prices depending on whether and how they address critical issues affecting the supply/demand balance, including access to new sources of supply, infrastructure development and efficient use of natural gas."

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