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Petrochemical, Gas-to-Liquids Growth to Spark NatGas Demand Surge, Energy Economists Say

U.S. natural gas demand could be 19-31% higher in 2020 than in 2013 because of new petrochemical and gas-to-liquids (GTL) investments, said energy economists at the University of Texas at Austin (UT).

Economists with UT's Center for Energy Economics (CEE), based in Houston, modeled a gas demand forecast to 2020 under a reference case and a high case for gas-intensive industrial projects now under construction or in the permit process.

Up to 144 projects are in the queue to be built from 2013-2020 to make ethylene, methanol, ammonia, urea, nitrogen fertilizer and GTL.

If all of the proposals make the cut, at a projected total cost of about $22 billion, U.S. gas consumption would total around 26 Bcf/d.

In the reference case, CEE economists project 103 projects are to be constructed worth a total of $83 billion. Total gas consumption would be about 23.5 Bcf/d, 3.7 Bcf/d higher than in 2012, or 19% more.

The CEE scenarios are higher than estimates issued in May by IHS Inc., as well as the Energy Information Administration's (EIA) Annual Energy Outlook 2014 (see Daily GPIMay 22May 8).

EIA's reference case sees gas demand reaching 22.2 Bcf/d in 2020 from 21 Bcf/d in 2013; it doesn't include any large-scale GTL facilities. In its high case scenario, EIA expects demand to hit 22.5 Bcf/d in 2020, with the most growth in the food, paper, bulk chemicals and glass sectors. IHS said U.S. gas demand "continues growing over the next few years and peaks at 22.8 Bcf/d in 2019-2020," CEE noted.

CEE energy economists collected industry data using a different approach. Their database "covers a subset of industries, but our bottom-up approach to gas-intensive sectors captures the expected growth as predicted in top-down macro models for EIA and IHS, and yields a much higher growth in the unlikely case of all projects going forward."

CEE's economists noted that since 2012 manufacturers of chemicals, plastics, paint, electronics and some consumer goods have increased their use of gas because of surging, low-cost unconventional supplies.

By 2020, the CEE reference case sees a total of 41 gas-intensive projects to be built including:

  • Fourteen ethylene plants that represented a total of $26 billion of investment with total incremental capacity at 9.3 million metric tons/year (mmty). Five are newbuilds, online by 2017; nine are plant expansions, online by 2015;
  • Twenty-two methanol and ammonia plants, costing a total $18 billion, would increase production by 20 mmty; and
  • Seven GTL projects are either being planned or in front-end engineering and design (FEED) or permits status, including Sasol Ltd.'s 96,000 b/d plant that captures 93% of total GTL capacity (see Daily GPIDec. 4, 2012). No project yet is under construction, CEE noted.

However, CEE is "cautious" about Sasol's Louisiana project because Royal Dutch Shell plc "abandoned plans to build a similar GTL plant in Louisiana because of high costs and gas price uncertainty among other reasons," (see Daily GPIDec. 5, 2013). EIA did not include large-scale GTL in its 2014 energy outlook.

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