The industry scramble to find new gas supply sources should begin paying significant dividends as early as 2006, according to consultants at Arlington, VA-based Energy Ventures Analysis (EVA). By 2025, EVA sees the potential for 23.8-33.2 Bcf/d of additional gas supply coming from a wide variety of new sources.

Nearly all of that incremental supply growth is likely to be needed given projections that annual gas demand could increase to as much as 32 Tcf by 2020. Gas supply would have to increase by 26.6 Bcf/d from current levels to meet that projected demand growth, EVA said in its most recent Fuelcast long-term outlook.

“It is fairly apparent that traditional supply areas will not be able to achieve this level of increase in deliverability, but instead the U.S. market will have to rely on a series of evolving gas supply sources to fill the projected gap between supply and demand,” EVA said.

Although the timing of incremental supply additions is uncertain, the evolving sources include the following:

Liquefied natural gas stands out as having both the greatest intermediate-term impact and the greatest long-term potential supply, according to EVA. Each segment of the LNG chain already is undergoing a period of rapid expansion for a variety of reasons in addition to higher U.S. gas prices: increasing worldwide demand, declining costs in every segment, stranded gas supplies around the world, environmental pressure to eliminate flared gas (estimated at 8 Bcf/d worldwide) and the desire by many foreign countries to obtain hard currency.

EVA projects that LNG imports by the United States will rise from 0.6 Bcf/d in 2002 to more than 11 Bcf/d by 2010 with further increases after that.

However, in the meantime the industry will suffer through a period in which short-term supply increases will not be able to match short-term increases in demand. This has been created because of “the 3.5 Bcf/d decline in domestic gas production over the six consecutive quarters ending with the fourth quarter of 2002,” according to EVA.

“This along with the anticipated near record storage injections for 2003 has resulted in a significant supply and demand imbalance for the year,” EVA noted. “The latter is the net result of record storage withdrawals last winter, which caused end-of-the-season storage levels to reach record lows. The industry’s response to this situation has been a 2.8 Bcf/d, or 13%, reduction in industrial sector demand with additional declines likely as the year proceeds.”

EVA sees the tight supply-demand situation persisting until about 2006. “At that time supply relief from a series of evolving resources, but in particular LNG, should bring supply and demand back in balance which will help moderate prices.”

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