A ten-year snapshot of California’s natural gas future could re-touched or rendered out of focus in the months ahead, depending on more current residential/commercial demand data and whether or not the state’s sagging economy rebounds, according to one of the principal authors of the California Energy Commission’s (CEC’s) last staff gas assessment.

A big unknown is how much of a lasting impact, if any, the state’s energy crisis of 2000-2001 will have on long-term gas supply/price issues.

Some of the assessment’s most interesting aspects are in what the report does not include, such as any liquefied natural gas (LNG) imports or new interstate pipelines aside from the expansion plans of current ones. LNG may not make it into the energy commission’s next so-called “base case,” and it could be an issue when the CEC holds a workshop Jan. 23 or 28. The CEC forecaster has his views on the subject, but preferred not to make these public at this ttime.

“The electricity gas-demand forecast was done last spring and that is in the process of being revamped now,” said Bill Wood, the CEC’s chief natural gas forecaster, during an interview Tuesday with Natural Gas Intelligence.”I’m not really certain whether the newer gas demand data is higher or lower (than what was used in Dec. 12 ‘Natural Gas Supply and Infrastructure Assessment’.”

Wood said the state energy agency is trying to assess the longer term impact of the big drops in electricity and gas demand as a result of the state’s recently passed crisis. “We’re trying to determine if things are going to spring back to where we were before. Is conservation going to slowly erode?”

Essentially, the overall assessment projected that growth in California’s natural gas demand, prices and infrastructure are expected to be steady over the next 10 years through 2012. Demand is expected to average 2% growth annually over the next 10 years, with prices varying between $4 and $6/mcf.

Growth will be driven primarily by electricity demand rather than the number of new gas-fired electric generation plants that get built, Wood said. “Supplies will be sufficient but more costly,” his staff assessment stated, noting that gas prices in the Lower 48 states increased about 50% above the wellhead prices forecast for 2002, as published in the state energy agency’s 1998 Natural Gas Market Outlook.

For supply, the assessment predicts that more reliance on Canadian and imported LNG sources will be necessary. California’s two largest gas utilities — Pacific Gas and Electric Co. and Southern California Gas Co. — will have “similar California border prices after 2007,” although PG&E’s prices are still overall expected to be a little less expensive. In terms of infrastructure, PG&E will probably need additional receiving capacity in its in-state back-bone transmission pipeline system between 2007 and 2012; SoCalGas’ infrastructure upgrade this year should suffice throughout the 10-year period.

However, Wood noted that even more interesting is what may not be readily accounted for in the assessment. For example, there is no consideration for a new interstate pipeline serving the northern half of the state, although Wood thinks of that as a realistic possibility over the next 10 years. Similarly, there is a liquefied natural gas (LNG) receiving terminal proposed for Mare Island in the San Francisco Bay, but that is not considered in the assessment either.

“A key is where is electricity demand going?” Wood said.”That sets the upper bounds on how much natural gas demand is going to be met. The the question is does natural gas have the incremental supplies to meet that incremental demand for electricity?” He acknowledges that both the economy and the weather could have a bigger impact.

Similarly, Wood said the state energy analysts are looking at the renewable sector’s and distributed generation’s impact, if any, on the planning time frame. “For the 10 years we are looking at here (2002-2012), I believe there are renewables embedded in it, but I don’t know how much. It definitely is not at the legislatively 20 percent level because it wasn’t in place when this was put together last spring,” he said.

Coming out of the state’s recent energy crisis, the energy commission is now required to regularly forecast and assess natural gas from the standpoint of: (a) statewide/regional demand, (b) supply adequacy, (c) infrastructure adequacy, and (d) gas markets nationally and regionally. CEC staff used the North American Regional Gas (NARG) model as its principal assessment tool in putting together its latest gas report. It has been using the model since 1989, Wood said.

“It is an old model we leased from the Gas Research Institute, enhanced it to meet our requirements and now a number of entities throughout the U.S. and Canada are using this model.,” Wood said. “It is in the process of being converted from DOS to Windows-based driver model. We’re very comfortable using the model; it is flexible and allows you to make quick changes in your assumptions.

“It has been a pretty good forecasting tool for us.”

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