A trio of challenges over the next three years — low demand, new coal-fired power plants and a surge in liquefied natural gas (LNG) imports — will put downward pressure on U.S. natural gas prices until 2012, energy researchers with Wood Mackenzie said this week.

The global economic contraction that began in the last half of 2008 stunted power demand at the same time gas supplies began to surge domestically, said Jen Snyder, who analyzes North American gas and power markets for the UK-based researcher. More coal-fired power plants globally are scheduled to come online in the next two years, which also will reduce gas demand for the power sector, she said. It won’t be until 2012 that coal capacity additions will “grind to a halt,” she said.

“As quickly as it started, our Renaissance in U.S. gas supply slipped into the Dark Ages,” Snyder said.

The U.S. gas rig count has dropped by half since September 2008, but even with less gas coming out of the ground, gas prices won’t recover when gas demand recovers, she said. Wood Mackenzie is forecasting a “modest” uptick in 2010 for gross domestic product, but overall, gas demand likely won’t recover until 2012.

Also hindering gas demand will be the arrival of more LNG. Around 12 Bcf/d of global liquefaction capacity is scheduled to ramp up to 2012, said Snyder. Some LNG capacity is scheduled to begin this year, but most is planned for 2011 and 2012. Even with an expected increase in European and Asian demand for LNG by 2011, there will be a “tsunami” of LNG hitting domestic markets, she said.

George Given, who tracks global power markets for Wood Mackenzie, also said the global recession may last for several more quarters.

Global industrial power load was down sharply in the first three months of 2009, and residential power demand has dropped more quickly than expected, Given noted. The drop in demand increases the likelihood that electric plants may be mothballed to balance supply and demand, he added.

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