Weaker natural gas demand growth in the U.S. Pacific Northwest will put a squeeze on both domestic and Canadian suppliers, says a report by the Northwest Gas Association.
In a base-case scenario, it predicts that annual consumption growth for the region over the next five years will be held at 2.5 percent against the historic average of 3 percent.
The Pacific Northwest obtains the bulk of its supplies from the Western Canada Sedimentary basin and the Rocky Mountain states of Colorado, Utah and Wyoming, which are expected to raise production by a combined 14 percent by 2010, nearly all of that coming from the Rockies.
Average annual demand projections have been trimmed by 14 percent for residential users, 33 percent for the commercial/smaller industrial sector and 78 percent for large industrial consumers, but that weakening of demand will be partly offset by a 69 percent increase sales to gas-fired electrical generating facilities.
Efficiency, weather, economy, conservation all factors
The association said some of the tapering in consumption reflects greater efficiency in gas appliances and equipment, warmer weather patterns, an economy still working its way out of recession and increased conservation because of higher wholesale gas commodity prices.
The report said various factors could moderate production growth even more than the forecasts, including restrictions on access to public lands in the United States, lower initial flows from new wells, declining production as existing basins mature and tighter regulatory controls.
Aside from greater Rockies volumes, which could grow by 4 billion cubic feet per day, from 24 bcf to 28 bcf over the next five years, and growth in LNG imports, supply hopes are pinned on coalbed methane production in Canada and the Rockies and Arctic gas supplies from both the North Slope and Mackenzie Delta.
Having long been accustomed to cheap gas because of its proximity to stranded supplies, the Pacific Northwest has faced change in recent years with the advent of the Alliance pipeline from northeastern British Columbia to Chicago and the Kern River pipeline expansion sending more Rockies’ gas to California and Nevada.
As a result, regional consumers have seen a gradual disappearance of the price advantage they once enjoyed and should not expect any reversal because of declining production in major supply basins and the lead time needed to bring incremental supplies on line.
The association said that to “secure less volatile and potentially lower prices, access to North American frontier and global gas resources is critical.
“It is critical that the approval processes required to authorize these incremental supplies (as well as other new sources that may yet be developed) be reasonable, timely and certain,” said the report.
