American Gas - November 2012 - (Page 15)

inDustry insights demAnd Pull The market today reflects the Demand Drivers Based on an internal review of the drivers of natural gas consumption, the following summarizes AGA’s high-level views of plausible demand going forward. ResidenTiAl And commeRciAl demand has been level since 1970 as demand from new customers has been counterbalanced by consumer conservation and improvements in energy efficiency. While many factors indicate this flat-line trajectory may be likely to continue, growth in residential and commercial consumption is possible if certain market drivers take hold, including the adoption of new technologies, an accelerated economic recovery, greater conversions from alternative energy sources including distillate fuel oil, continued price advantages for natural gas, and the recognition of environmental benefits. elecTRiciTy geneRATion from natural gas is likely to be the largest driver of new natural gas consumption during the decade ahead. Short-term price advantages for natural gas relative to coal have driven large increases in consumption already. Long-term migration from coal to natural gas may be driven by sustained coal to natural gas price differentials, new environmental regulations on coal-fired power generation, and economic growth. indusTRiAl use of natural gas for heat, power, and chemical feedstock will likely be shaped by the fortunes of the U.S. economy and the strength of global GDP growth. Underlying trends toward greater industrial energy efficiency will be compounded by a general shift toward less energyintensive, high-value products. New demand is expected from new manufacturing capacity, driven in part by lower natural gas prices as well as an expanding economy. vehiculAR use of natural gas faces challenges over the next decade to improve fueling infrastructure. However, the idea and tangible results of alternative vehicle strategies are gaining momentum. Sizable advances may be made within specific vehicle markets including fleets and long-haul trucks. lng exPoRTs are likely to materialize as North American natural gas prices enable arbitrage value to European and Asian markets compared with other exporting countries. The range of new demand will be constrained, at least somewhat, based on regulatory hurdles and capital requirements for new plants. dynamics of demand constraint, not supply limitations, given recent strong natural gas production along with less-than-commensurate increases in levels of demand. There is significant potential to expand natural gas use for homes and businesses, electricity generation, industrial plants, liquefaction facilities, and vehicles. mARkeT And PRice sTAbiliTy Natural gas Henry Hub prices of under $3 per million British thermal units (MMBtu) may be a short-term phenomenon and a market response to excess supply. With that said, there is room to grow demand at reasonable and stable prices. Even significant increases in demand may be supported by this large, dynamic, robust, and diverse North American natural gas resource base, coupled with expanding infrastructure and appropriate regulatory constructs, at acquisition prices averaging slightly higher than $5.50 per MMBtu during the next 10 years and possibly beyond. That is still well below the peak market prices of the preceding decade. RegulAToRy And legislATive It is not only incumbent on the natural gas industry to recognize the critical potential for natural gas in our energy mix, but also necessary for regulators and policy makers to acknowledge this potential and make critical decisions based on the best available science and information. Natural gas is an affordable, relatively stable energy resource that can help our country achieve its environmental objectives; is a catalyst for job growth and an improved trade balance; and provides critical contributions to increased national security. Capitalizing on the opportunities that natural gas affords requires a realistic view of the critical elements shaped by science and facts. Foreseeable supply and demand fundamentals are a large part of this puzzle. But just as important are the regulatory frameworks under which natural gas is produced and consumed, and recognition of natural gas as a component of a larger, all-of-the-above approach to energy policy and environmental concerns going into the next decade and beyond. Get vital first-of-the-month gas market prices for more than 40 pipeline locations and key market centers in Platts Gas Market Report. Learn more at www.platts.com/Products/gasmarketreport november 2012 AmericAn GAs 15 http://www.platts.com/Products/gasmarketreport http://www.platts.com/Products/gasmarketreport

Table of Contents for the Digital Edition of American Gas - November 2012

American Gas - November 2012
Table of Contents
President’s Message
Industry News
Ask AGA
Search Engine
In the Know
Part One: Pipelines
Company Profiles
Places to Be
Jobline
Advertisers Index
Noteworthies
Marketplace
Facts on Gas

American Gas - November 2012