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Industrial gas use headed for 30 percent drop Consultant expects overall consumption to grow by 1.7% a year through 2010 Gary Park Petroleum News Calgary Correspondent
Natural gas consumption in the United States and Canada will increase by 1.7 percent a year through 2010, despite a 30 percent slump in industrial use, Calgary-based consultant Ziff Energy Group forecasts.
Gas-fired power generation will lead the increase at a rate of 7.5 percent a year, consuming the equivalent of all the gas produced in the Gulf of Mexico by the end of the decade, Ziff senior associate Ed Porter told a June seminar on North American gas supply.
He said gas holds the key to near-term growth of North American power generation because coal-fired plants take five years to come on stream and nuclear plants need about 10 years.
For instance, Porter said, gas is the only option for Ontario if the provincial government delivers on its promise to shut coal-fired plants by the end of 2007.
Currently, those plants generate 7,500 megawatts of electricity, consuming about 800 million cubic feet per day of Ontario’s total gas needs of 2.6 billion cubic feet per day.
Porter doubts that the so-called clean-coal technology will be able to compete with gas-fired power any time in the next five to 10 years. Industrial demand for gas down On the industrial front, he said industrial demand for gas has taken a dive following a move offshore by companies that use gas as feedstock and fuel, or a switch to other fuels.
Petrochemical and fertilizer firms are being lured to countries such as Trinidad and Qatar that offer cheap, stranded gas.
If the Ziff estimates are accurate, industrial consumption will drop about 30 percent over 13 years from a peak 25.5 billion cubic feet per day in 1997.
Ziff Vice President Bill Gwozd predicted that liquefied natural gas imports to North America could reach 6 to 7 billion cubic feet per day, meeting 9 to 10 percent of North American needs, a major surge from today’s 1 billion cubic feet per day.
He estimated the delivered cost of gas from both Alaska’s North Slope and Canada’s Mackenzie Delta would be cheaper than the US$2.75-$3.50 needed to deliver a million British thermal units of LNG to North America.
But Ziff President Paul Ziff warned that except for the U.S. Rocky Mountain region, North American basins face a challenge meeting demand.
He expected gas well completions in the Western Canada Sedimentary Basin will total between 11,000 and 16,500 this year, compared with less than 5,000 in the mid-1990s.
But average productivity in the basin has fallen by about 6 percent a year over the past decade based on about 86,000 wells, Ziff said. Canada’s top producers not replacing production The consultant’s study of Canada’s top 30 producers found they replaced 90 percent of production in 2003, but, after negative reserve revisions, the replacement level dropped to 59 percent.
Even Ziff’s conclusion that natural gas is the best bet for power generation has been questioned by Nancy Southern, president of Canadian Utilities, one of Alberta’s leading utilities.
She predicted in mid-May that power station builders will try to switch fuels for their next projects after an 88 percent drop in the first quarter between the price fetched by a megawatt hour of power and the cost of gas burned in the generation process.
Southern said the Alberta oil sands, a major gas consumer, could also produce its own alternative fuel.
She said the next generation of oil sands producers may use discarded bitumen byproducts to replace gas for their power and processing plants.
Calgary-based investment dealer Peters & Co. said in a newsletter that coal is on the verge of a comeback as a low-cost fuel alternative for new power projects in the United States.
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