AGA: U.S. gas demand to log record in '96

U.S. Gas Supply/Demand Outlook [30079 bytes]

The American Gas Association predicts U.S. natural gas demand will be a record 22.8 quadrillion BTU (quads) this year.

In a midyear forecast, it said 1996 demand should be 2.2% higher than last year's level of 22.3 quads, breaking the record of 22.7 quads set in 1972.

In a separate forecast, AGA predicted U.S. gas demand will grow more than 30% in the next 20 years, to 29 quads by 2015, with increases in all market sectors.

Gas demand surging

AGA Chairman George Davidson Jr., also chairman and CEO of Consolidated Natural Gas Co., said, "Natural gas demand has risen by more than 30% since 1986. At the same time, demand for all energy forms in the U.S. has risen by less than 20%.

"We've been saying for some time that clean-burning, abundant natural gas is the fuel for the 1990s and beyond. This forecast is further evidence that a lot of consumers agree with us."

The 1996 forecast said demand will rise in three of the four core markets: residential demand will grow 8% to 5.4 quads; commercial demand 9% to 3.5 quads; and industrial demand 3% to 9.1 quads.

In the fourth core market, electric generation by utilities, demand is expected to fall 15% to 2.8 quads because of increased supply of hydro power this year, higher wellhead prices, and peak heating demand that caused interruptible transportation to be interrupted.

Because of reduced demand by electric utilities, total 1996 demand will be 0.5 quads lower than AGA estimated at yearend 1995, when it said 1996 demand would increase 4.9%.

The 1996 forecast of 22.8 quads assumes weather will be normal for the rest of the year, economic growth will be at a 2.5%/year rate in the second half, crude oil prices will average $18.90/bbl, and there will be 20% above-average availability of hydro power.

The AGA forecast also provides high and low case projections. Demand could be as much as 4.7% higher than in 1995 if the coming winter is colder than normal, the economy is stronger than assumed, oil prices rise, and hydro and nuclear power capacity is reduced. It could be 0.4% lower if all those factors are reversed.

20 year outlook

In predicting U.S. gas consumption could grow to 29 quads by 2015, AGA said enough exploratory and development wells could be drilled to meet that demand with wellhead prices less than $2.09/MMBTU, in 1996 dollars, through 2010.

AGA Pres. Michael Baly said advances in end-use technologies, environmental policies, market opportunities created by electric industry restructuring, and industry's ability to provide sufficient supplies at competitive prices will help consumption rise.

The study said residential demand will grow 30%, reaching 6.5 quads by 2015. More than 1 million new residential customers are expected to be added yearly, with gas dominating the new housing market.

Industrial and cogeneration demand is expected to grow 13% to 11.3 quads by 2015. Competition from a restructured electric industry is expected to be intense, but some plants will need to burn gas to meet emissions limits.

Transportation demand may grow to 1.4 quads by 2015, divided about equally between pipeline compressor fuel and vehicle fuel.

Electricity generation and independent power production demand is expected to absorb 6.3 quads/year by 2015, an increase of more than 75% from 1995.

On the supply side, Baly said, "Domestic gas production is expected to account for 85% or more of total U.S. gas supply throughout the forecast period, with domestic production reaching 25.1 quads by 2015. However, additional advances in gas supply technology are crucial in order to continue the efficient development of the gas resource base."

He said imports will total 13% of U.S. supplies in 2015 because of their economic attractiveness. Imports from Canada are projected at 3.4 quads/ year and liquefied natural gas as much as 0.5 quads/year by 2015. Imports from Mexico should be counterbalanced by U.S. exports to that country.