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Study: Natural gas cost could rise 70% by 2020 with no Alaska gas, LNG terminals
Easing restrictions on gas drilling in the mountain West, plus ending moratoriums in the eastern Gulf and off the East Coast could keep natural gas prices essentially where they are out to 2020, according to a new study commissioned by the American Gas Foundation.
That is the “expanded” scenario run by the study, which uses three different sets of assumptions to examine how opening new areas to exploration, building the Alaska gas line and liquefied natural gas imports could affect the natural gas market in the next decade and a half.
Keeping the system as it is, with no Alaska gas, no added LNG terminals, tight drilling restrictions and high use of gas for electricity would mean prices of nearly $14 per million Btu of gas, the study found, with demand reduced by 12 percent by the higher cost.
But even the industry-funded study doesn’t expect the status quo to continue for the next 15 years. Expected scenario sees major changes An “expected” scenario suggests major changes in the gas supply mix by 2020.
LNG imports are the big change by 2020 in that scenario, providing 22 percent of supply, while Alaska adds 9 percent, Canada 8 percent and domestic supplies 61 percent.
That scenario has Canadian exports to the United States declining 30 percent as Canada uses more gas domestically and, like the Lower 48 producers, barely maintains the current production level. It figures gas will be flowing from Alaska around 2014.
Currently, Canada provides 15 percent of U.S. supply, and domestic producers 85 percent.
Gas prices under the expected scenario would reach $8.15 per million Btu by 2020 (with no inflation adjustments), compared with $5.47 per million Btu under the expanded scenario. Demand is roughly the same under each of those snapshots.
Generating plants are the big driver of demand over the next 15 years, according to the study, which estimates the United States will use 40 percent more natural gas in 2020 than it did in 2003. Generating demand is projected to rise 150 percent, while commercial and residential demand is expected to grow about 21 percent and industrial use by only 4 percent to 12 percent.
Authors of the study were two analysts from the American Gas Association, the industry’s trade organization, and two from Energy and Environmental Analysis Inc. The full report can be found on the gas foundation’s website, www.gasfoundation.org.
—Allen Baker
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