In addition to the traditional residential and commercial use of natural gas for heating purposes, there are five other expanding outlets for gas usage.
First, the most visible has been in the generation of electricity. Coal’s power production share should be about 35.6% in 2015, down from 38.7% in 2014. Natural gas will come in at 31.2% for 2015, up from 27.4% in 2014.
Renewables will provide about 7% in 2015. But over half of new generating capacity coming on line this year is powered by renewables 55%, with almost all of the remainder (44%) using natural gas as the primary fuel.
Here’s where it gets interesting. We are expected to replace 90 gigawatts of power production by 2020, all aging coal-fueled plants. As much as another 30 gigawatts would be impacted by EPA non-carbon limits (mercury, nitrous, and sulfurous oxide emission standards).
I initially estimated that each 10 gigawatts moved to natural gas would require 1 bcf/d more in supply. It is now coming in at closer to 1.2 bcf/d, with the transition showing a quicker upfront movement than I had initially anticipated. The slowdown over the past year, therefore, is simply a reflection of a higher front loaded movement.
The bottom line is this. If only 75% of the replacement fuel sourcing moves to natural gas (and that would be giving renewables a decidedly bigger slice than anticipated), we require almost three times the current surplus inventory just for power generation, and even then for electricity that remains at today’s levels.
Other Sectors Switching to Natural Gas
Second, industrial usage is increasing again, with annual increases above 3% estimated for both 2015 and 2016.
Third, the move to LNG (liquefied natural gas) and CNG (compressed natural gas) for high-end truck traffic is just about completed in Canada and is moving forward in the U.S. Transition of lighter truck traffic and a bridge to passenger vehicles will take longer, but municipal and bus usage has picked up with natural gas-powered and hybrid vehicles becoming emphasized (or in some cases mandated) for taxi fleets in several cities.
Fourth, and of greater impact, is the transition to natural gas and away from oil as feeder stock for petrochemicals. This makes the competition for new cracker facilities such a focal issue. There are seven major projects under consideration at the moment, with some smaller satellite units also possible. Of the main sites, three facilities are likely to be approved. Beaver County in western Pennsylvania should be one of the three, with the other two probably on the Gulf Coast.
This element alone will have a major impact both upstream and downstream, with the Marcellus occupying a main location for a broader gas footprint. SWN controls a whopping 750,000 acres in untapped gas deposits in Marcellus.
However, it is the fifth that comprises the most significant game changer we are going to be witnessing in our lifetimes. This refers to the massive transformation unfolding in the global LNG market.
U.S. produced LNG will be shipped all over the world!
This is getting in on the ground floor. All you need to do is hang tight and enjoy the ride.
AI
