US agency report details scenarios that would stunt gas market

Washington (Platts)--2Mar2004

Various restricted supply scenarios could seriously affect US gas consumption and pricing in the coming years, according to a new report by the Department of Energy's Energy Information Administration.

Under a worst-case scenario, US gas demand could be cut by roughly 4.5 Tcf by 2025, with consumption in the electric generation sector taking the hardest hit, said the report.

EIA analyzed four different restricted supply scenarios and compared each with the findings of its recent annual energy outlook: no new Alaska gas pipeline; new LNG terminals limited to just three projects totaling 2.5 Bcf/d; future unconventional gas production remaining stagnant; and a combined case incorporating all three negative assumptions. EIA concluded that by 2025, consumption would range from 700 Bcf lower than the reference case in the no-Alaska-pipe scenario to 4.5 Tcf lower in the combined case, dropping from 31.4 Tcf to 26.9 Tcf. Under the low-LNG and low unconventional resources scenarios, projected consumption drops to 30 Tcf and 29.7 Tcf, respectively.

The biggest impact of the combined case would be on electric generators, which would consume just 5.4 Tcf in 2025, compared with the 8.4 Tcf projected in the annual outlook. The Lower-48 states wellhead price impact in 2025 ranges from 20 cts/Mcf higher in the no-Alaska-pipe case to $1.21/Mcf higher in the combined case.

The impact on industrial gas use under the various scenarios would be smaller than for electric generation, EIA said, noting that "a widespread shutdown of US capacity in gas-intensive sectors, such as fertilizer and bulk chemicals, is unlikely." Projected consumption in this sector falls from 10.3 Tcf under the reference case to 9.6 Tcf in the combined case. Energy expenditures in the sector would be 6% higher in 2025 under the combined case, but represent just 3.2% of annual manufacturing expenditures that year, said the report.