Natural gas supply and demand will exceed 30 Tcf by 2020 if policy makers swiftly enact measures that are favorable to liquefied natural gas (LNG) imports, construction of an Alaskan gas pipeline and open up U.S. lands that currently are off limits to producers, according to a new report released by the American Gas Foundation (AGF) Monday.

The report, “The Natural Gas Outlook to 2020,” takes a hard look at three alternative public policy scenarios — expected, expanded and existing — and the potential impact that these choices could have on the domestic gas market over the next 15 years.

It concluded that consumption under the two most favorable scenarios (expected and expanded) would see a boost in gas consumption past 30.4 Tcf by 2020 from 22.1 Tcf in 2003, driven largely by the demand for gas by the power generation sector. In contrast, it found that the less favorable “existing,” or status quo scenario would result in a lower demand of 26.8 Tcf.

Both the expected and expanded scenarios assume that an Alaskan gas pipeline will be built by 2014 and tremendous growth in LNG imports will take place. But while the expanded scenario sees restrictions against drilling onshore and offshore being lifted, the expected scenario assumes that the restrictions will largely remain in place between now and 2020. The existing scenario assumes a bleak outlook for gas — restricted access to onshore and offshore gas, no Alaska gas pipeline by 2020, and no new LNG terminals are built (but expansions occur).

The AGF report projected that nominal prices for natural gas would range from a low of $5.47/Mcf under the “expanded” scenario to as high as $13.76/Mcf by 2020 under the “existing” scenario.

The report said supply would be sufficient to meet demand under all three scenarios. It expects LNG to contribute anywhere from 1.9 Tcf to 8.56 Tcf to the U.S. supply mix in 2020, and Alaska to provide potentially up to 2.7 Tcf by then. In the meantime, production from the Lower 48 states will stabilize at around 18-19 Tcf, according to the report.

Under the expected scenario, “electricity generation will account for two-thirds of the natural gas demand growth over the forecast period. Gas consumption for electricity generation is projected to increase from 4.2 [quadrillion Btus or Tcf] to 6.8 quads in 2010 and to 10.2 quads in 2020,” AGF said. “Sales of electricity are projected to increased by over 38% over the forecast period and gas is expected to account for 26% of the electricity generated in 2020 versus 15% today.”

Industrial natural gas demand under the expected scenario “will rebound and grow, but growth will be sluggish — at about one-third the rate experienced in the 1990s,” the report said. Gas consumption by the industrial sector was roughly equivalent to 7.4 Tcf in 2003, about 15% below the 2000 consumption level. “A further decline is projected in the gas feedstock industries, but this decline is expected to be offset by increases in boiler and ‘other’ applications as the economy expands.” A growth rate of 0.3% annually is foreseen for the industrial sector in total, with an overall consumption of 7.7 Tcf in 2020, it noted.

The expected scenario sees modest growth for the residential and commercial sectors, with continued efficiency improvements partially offsetting new customer hookups, according to the AGF report. Residential gas consumption is projected to increase to roughly 6.3 Tcf in 2020 from 5.2 Tcf in 2003. An annual growth rate in residential demand of 1.2% nationally is expected, but rates near or greater than 2% are likely for parts of the West and Northwest.

Lower-48 production will remain the largest component of U.S. gas supply, but producers will struggle to keep production between 18 and 19 Tcf per year, AGF said. The percentage of the total U.S. supply mix accounted for by the Lower 48 will decline to 61% in 2020 from 83% in 2003 under the expected scenario.

Canadian gas imports are likely to fall from 3.3 Tcf annually to 2.3 Tcf in 2020, according to the report. Canadian imports, which accounted for 15% of the total U.S. supply in 2003, are expected to account for only 8% of the total by 2020.

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