American Oil and Gas Reporter - December 2018 - 39

SpecialReport: Natural Gas White Papers
either 2016 or 2017.
New projects have come on line in
2018 to boost demand, and even more
new builds and capacity expansions are
scheduled to start up in 2019. Notably,
Yara and BASF started a new ammonia
plant in Freeport, Tx., in April that is expected to consume 60 MMcf-70 MMcf a
day when running at full capacity. Also,
OCI and G2X Energy's NatGasoline
methanol plant in Beaumont, Tx., began
operations at the end of June with 163
MMcf/d of nameplate capacity.
Besides fertilizer and methanol plants,
new ethylene, propylene and polyethylene
facilities also are boosting natural gas
and natural gas liquids demand this winter.
Increased NGL production is leading to
more NGL exports, and being absorbed
by new domestic facilities that turn that
feedstock into downstream products.
As shown in Figure 1, taken from the

On Line

Under Construction
18.0 0.7

Permit Received

08.0

Announced

16.0

07.0

0.6

06.0

0.6

05.0

13.0
0.5

04.0

0.4
8.0

0.3

8.0

0.3

03.0
4.0

2015

2016

2017

2018

2019

2020

2021

2.0

02.0
01.0

2022

No.

1.0
Demand

No.

Demand

No.

Demand

No.

Demand

No.

Demand

No.

Demand

No.

0.1

Demand

9.0

Demand

20
18
16
14
12
10
8
6
4
2
-

No.

No. of Projects

FIGURE 1
New U.S. Industrial Projects and Natural Gas Demand

Industrial, Power Sectors

2023

Note: 33 new projects in 2015-17 with 1.5 Bcf in new demand; 46 new projects in 2018-23
with 2.1 Bcf in new demand.
Source: Energy Ventures Analysis

FIGURE 2
Electric Generation Sector Winter Demand for Natural Gas
30
25
20
Bcf/d

Looking at the Winter Outlook's consuming sectors, demand levels in both
industrial and power generation are expected to set new records, although increasing only about 2 percent compared
with last winter. Industrial demand has
been robust this year, growing by 1.2
Bcf/d through the first nine months. While
some of this growth can be attributed to
below-normal temperatures from January
to April, NGSA says the rest is structural
growth, which should continue. Industrial
demand is forecast to grow by 0.45 Bcf/d
over last winter to average 24.5 Bcf/d.
Healthier activity in energy-intensive
industries has provided a solid base for
industrial sector demand, and new facilities also are contributing to the growth.
The sectors' performance, as measured
by the U.S. Federal Reserve's production
indices, as well as industrial capacity
utilization, have been stronger than in

NGSA Winter Outlook, a total of 33
projects with 1.5 Bcf/d in combined demand and a total investment of $53 billion
entered service between 2015 and 2017.
From 2018 to 2023, another 46 projects
representing 2.1 Bcf/d and a total investment of $79 billion are expected to come
on line. In 2019, 18 projects with 700
MMcf/d of demand have been permitted,
announced or are under construction.
Most of these projects are located in
Texas and Louisiana.
The Winter Outlook forecasts that
power demand for natural gas will increase
by 0.7 Bcf/d this winter compared with
winter 2017-18, averaging 24.8 Bcf/d
(Figure 2). This may seem relatively low
in comparison with the 3 Bcf/d of yearto-year growth in power sector demand
experienced last summer, but reflects the
fact that heating degree days are expected
to be slightly lower this winter, reducing

Demand (Bcf/d)

The increased production has been split
between dry gas and associated gas. From
August 2017 to August 2018, total dry
gas production jumped by 4.6 Bcf/d, led
by the Haynesville Shale, the Marcellus
dry gas play, and the Utica Shale. The
Marcellus wet gas play, the Permian Basin
and the SCOOP/STACK plays in Oklahoma
accounted for the vast majority of the 4.4
Bcf/d rise in associated gas output.
Looking at all the variables in NGSA's
Outlook, the picture that emerges for the
upcoming winter is of a natural gas market
experiencing substantial growth in both
demand and supply. Record demand will
be driven by the longer-term shift to natural
gas in the electric and industrial sectors
resulting from natural gas' competitive
prices and environmental benefits.
Last winter, prices at the Henry Hub
averaged $2.99 per MMBtu. In mid-November, Henry Hub natural gas futures
for December and January were trading
above $4.00/MMBtu range on the New
York Mercantile Exchange, although April
and May 2019 futures prices were ranging
between $2.75-$2.85/MMBtu. The National
Oceanic & Atmospheric Administration
forecasts winter weather to be near-normal
to slightly warmer than normal (1 percent
warmer than last winter and 2 percent
warmer than the 30-year average).

19.7

20.1

21.8

12/13

13/14

14/15

24.3

21.2

24.1

24.8

17/18

18/19

15
10
5
0

15/16

16/17

Note: Light blue represents cold winter; red represents warm winter.
Source: Energy Ventures Analysis

DECEMBER 2018 39

American Oil and Gas Reporter - December 2018

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