POWER August 2018 - 36

NATURAL GAS
Natural Gas: Clear Skies, Some
Clouds on the Horizon
Horizontal drilling technology and fracking techniques have created a natural
gas revolution in the U.S. The future looks bright for gas-fired power generation
but there are three potential storm clouds that require tracking:
gas deliverability, cybersecurity, and Donald Trump.
Kennedy Maize
B
U.S.
y all accounts, the supply and deliverability
of natural gas to electric
generators in the months ahead
(and perhaps years) face sunny prospects.
The Federal Energy Regulatory Commission's
(FERC's) " Summer 2018 Energy and
Market Reliability Assessment, " published
in May, says, " Nationwide, this may be a
record summer for natural gas demand for
electric generation. "
The FERC assessment cites work by the
Information
Energy
Administration
(EIA) forecasting that natural gas production
would reach near record highs. EIA's Natural
Gas Monthly report-released at the end
of May, based on March data-notes, " In
March 2018, for the tenth consecutive month,
dry natural gas production increased year-toyear
from the same month a year ago. The
preliminary level for dry natural gas production
in March 2018 was 2,467 billion cubic
feet (Bcf), or 79.6 Bcf/day. This level was 8.0
Bcf/day (11.2%) higher than the March 2017
level of 71.6 Bcf/day. The average daily rate
of dry natural gas production for March was
the highest for any month since EIA began
tracking monthly dry production in 1973. "
The EIA added, " Electric power deliveries
were 743 Bcf, or 24.0 Bcf/day, up 9.4% from
21.9 Bcf/day in March 2017. Electric power
deliveries were the second highest for March
since 2001, when EIA began using the current
definitions for consuming sectors. "
Looking longer term, EIA's Annual Energy
Outlook 2018, released in February, says,
" Production of U.S. liquids and natural gas
continues to grow through 2042 and 2050,
respectively. In the Reference case, production
of shale gas resources is projected to
increase through the end of the projection
period. U.S. liquids production begins to decline
towards the end of the projection period
as less-productive areas are developed. "
EIA's report states, " Almost all of new
electricity generation capacity is fueled by
natural gas and renewables after 2022 in the
36
1. A generational change. This chart shows generation by energy source as a percentage
of total net generation in the U.S. from January 1997 through March 2018. Source: U.S.
Energy Information Administration (EIA)
■ Coal
■ Natural Gas
■ Nuclear
■ Hydro
■ Non-hydro
renewables
■ Other
Reference case. This is the result of natural
gas prices that remain below $5/million
British thermal units until the very end of
the projection period and the continued decline
in the cost of renewables, especially
solar photovoltaic. "
Drilling into the data, FERC's analysis
says the summer could see a gas burn of
35.16 Bcf/d through August, " just 0.3 Bcf
less than the record high natural gas power
burn set in the summer of 2016 and 3 Bcf/d
higher than last year. The addition of over
16,000 MW of new capacity to the naturalgas
fired generator fleet since the record
highs in 2016 and relatively low natural gas
prices contribute to expectations for strong
natural gas generation this summer. "
Gas should continue to push coal out of
electric markets, according to FERC, although
coal is far from becoming a minor
fuel (Figure 1). " EIA generation forecasts for
June, July, and August show natural gas averaging
37 percent of total generation, while
coal averages 30 percent. This compares to
31 percent and 35 percent respectively during
those months, in 2017. " Not many years ago,
coal was the dominant generating fuel, producing
more than half of the electric power
in the U.S.
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Gas prices, continuing a long-term decline
driven by new supplies flowing from
fracking,
primarily
in
the Marcellus and
Utica shale formation in the middle Atlantic
region, and the Permian Basin in the Southwest,
are still falling. FERC noted, " Summer
2018 natural gas futures prices are generally
lower compared to those for summer 2017.
At $2.76/MMBtu, Henry Hub summer future
prices are down $0.52/MMBtu, or 16 percent,
compared to a year ago. "
FERC noted, " Growing gas production
from fields in Appalachia, Texas, and elsewhere
increased U.S. output to record highs.
In March 2018, the U.S. produced 84.9 Bcf/d
of marketed natural gas, a year-over-year
gain of over 8 Bcf/d. Continued production
at this volume should position the market
to meet summer demand and adequately restock
storage inventories. "
Natural gas storage looks solid, according
to FERC. The gas storage season started
slowly in April " at 1,354 Bcf, about 350 Bcf
less than the 5-year average. " Extreme cold in
the Northeast in December and January " led
to record storage withdrawals, resulting in a
deficit of 486 Bcf from the 5-year average
at the end of January. " EIA said it expected
inventories would grow to 3,800 Bcf by NoPOWER
| August 2018
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POWER August 2018

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