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Supply Could Outpace Demand, Bentek Warns

May 20, 2011
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Limited demand for natural gas could keep 9 Bcf/d of production off the market over the next four years, a Bentek Energy LLC executive told an audience in Pittsburgh on Tuesday.

At current rig counts and production rates, Bentek believes total domestic production could grow 14 Bcf/d through 2015, largely on the back of seven major unconventional plays, Jack Weixel, manager of energy market fundamentals for Bentek, said at the Northeast Shale Gas Symposium. In Pennsylvania alone -- one state in one basin -- Bentek expects 4 Bcf/d of growth through 2015.

Under the constraint of existing demand, though, Bentek sees growth of 5.4 Bcf/d by 2015. "There's not enough demand to support that other 9 Bcf/d of growth" and without increases, "you're basically going to blow up storage and you're going to drive the price of gas to 25 cents," Weixel said.

That demand growth is possible, though, he said.

With 54 Bcf/d of potential demand through natural gas vehicles (NGV), converting 75% of all buses, 20% of all long-haul trucks and 1% of all passenger vehicles would add 2.5 Bcf/d by 2020.

Proposed liquefied natural gas (LNG) export operations could add 4.7 Bcf/d of demand, but Weixel noted that any plan to export domestic resources faced significant political hurdles.

"The idea of exporting clean, domestic, affordable energy is not the most palatable in the world, but if the demand can't come from a domestic source, then you've got to go somewhere else and that's the argument a lot of these facilities are making," Weixel said (see Daily GPI, May 16).

The biggest area for growth, though, is the domestic market, Weixel said. Bentek estimates that replacing 35 gigawatts (GW) of coal-fired electricity generation, converting fuel-oil power plants and increasing residential, commercial and industrial use of natural gas could add another 8.7 Bcf/d of demand by 2020.

Even if all those markets open, though, they won't open at once, Weixel said. While power generation and residential, commercial and industrial applications could make headway in the next five years, NGVs and LNG exports would likely take longer to come online, Bentek believes.

"This paces your ability to produce," Weixel said, estimating 10 Bcf/d of incremental growth by 2020.

That constrained pace means that the debate over Marcellus Shale drilling in New York State is irrelevant, at least from a market standpoint, Weixel said, because "there's so much potential just here in Pennsylvania. Every rig that can't go to New York will find a home here" (see Daily GPI, May 18).

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