Gas Demand, Energy Use Rise Together Gas Producers Say Prices Will Climb And Spur Development Of Sources

MONDAY, JAN. 1, 1996

The American Gas Association predicts a 5 percent jump in U.S. natural gas demand during 1996 and says gas provided most of the muscle for this year’s increase in total energy consumption.

Natural gas sales for 1995 are expected to total 22.2 quadrillion British thermal units, a 3.7 percent increase from 1994’s 21.4 quads, when final statistics are compiled. Total energy use during the year is forecast to increase 1.4 percent to 86.88 quads from 85.66 quads in 1994.

Increased use of natural gas for utility and non-utility electricity generation and a reduction in oil-fired generation are the primary reasons natural gas demand is likely to grow 5 percent in 1996 to an estimated 23.48 quads, said Michael Baly, AGA president and chief executive officer.

One quad is roughly equivalent to 1 trillion cubic feet of natural gas.

“The robust growth in natural gas demand this year has happened in spite of 1995 being a slightly warmer-than-normal year,” Baly said. “Since 1986, natural gas demand has increased about 32 percent, at a rate of about 3 percent a year, and we expect that trend to continue.”

“One major increase in gas use in 1995 came in the electric generation sector,” Baly said. “During the first eight months of 1995, oil consumption by electric utilities, largely in dual-fuel gas/oil power plants, dropped 41 percent compared with the same period in 1994. Gas use went up by about 8 percent.”

A December 1995 report by the White Plains, New York-based National Economic Research Associates Inc. also sees increased gas use for electricity generation.

NERA said natural gas consumption for electricity generation increased about 25 percent in the past two years and it expects such growth to continue for the next 10 years.

“If electricity demand increases in line with our forecast … and half of the (added) non-utility power generation is gas-fired, then by the year 2005 the U.S. will consume about 10 trillion cubic feet of natural gas a year, 85 percent more than current consumption by electric utilities and non-utility generators,” said Marion B. Stewart, editor of the NERA report.

Stewart, who expects consumption to remain stronger than originally forecast, also forecasts consumption in the U.S. will reach 21.6 Tcf this year, 4 percent more than in 1994.

“Industrial gas use rose more than 6 percent during 1995 … with gas consumption by electric utilities soaring 13 percent,” Stewart said.

NERA predicts total gas sales will rise by an additional 2 percent in 1996 and projects a 5 percent increase in prices.

“Even under relatively optimistic conditions regarding the ability of gas drillers to add reserves in the lower 48 states and Western Canada, we see the need for real (inflation adjusted) wellhead prices to rise above $2.50 (a million British thermal units) by 2005 in order to provide adequate stimulus to gas exploration and development,” Stewart said.

“Even at that price, however, it seems likely that gas will remain the fuel of choice for most generators, particularly in regions of the country where siting concerns and pollution control have high priority.”

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