Exports/power markets remain bullish while production issues mount
Overland Park, Kansas (21 October 2015) – A new Black & Veatch report finds U.S. natural gas industry leaders are optimistic about the sector even as global forces reshape commodity pricing forecasts. The 2015 Strategic Directions: U.S. Natural Gas Industry report explores factors such as the ongoing supply boom, tempered demand growth and the impacts of a drastic drop in the price of oil on the industry’s ability to plan for the future.
“Over the past year, falling commodity prices have changed the natural gas landscape even as demand forecasts remained positive,” said John Chevrette, president of Black & Veatch’s management consulting business. “Across the value chain this creates opportunities to develop strategies for sustainability and to boost growth in the low price environment.”
Rising demand from the power sector and LNG exports continue to be viewed as areas of growth. Safety, aging infrastructure and environmental regulation ranked as the top concerns for the industry. Economic growth and the availability of pipeline capacity rounded out the top five industry issues.
Report data shows that the final version of the U.S. Clean Power Plan (CPP) fostered concern within the industry due to a focus on renewable energy and limits on carbon dioxide (CO2). Reduction of CO2 emissions from new and existing power plants in the United States rank first and second among issues believed to have an overall positive impact on the industry. This is tied to the likelihood of new gas power replacing higher emission coal-fuelled energy.
The ongoing shale revolution has oil and natural gas production levels near their peak, even as producers cut rig counts in response to dramatically lower commodity prices. However, new regulatory and non-governmental hurdles are creating headwinds for broader development of midstream assets/
The growing connection between gas and distributed energy resources also reflects a bright spot for local distribution companies (LDCs). Wind and solar back-up, plus growing interest in natural gas as part of microgrids are propelling expansion plans.
“The current natural gas market reflects the decoupling of the mid- and downstream sectors from the more price sensitive production side. Yet, over the long term, firms across the spectrum that embrace operational efficiency and seek out new markets will survive these challenging times.”
Dean Oskvig, President of Black & Veatch’s energy business
Key findings:
More than 80 percent of the industry viewed the outlook for the North American natural gas industry as positive.
Eighty-five percent expect the power sector to see material increases in gas consumption to fuel generation.
Nearly 75 percent view new CO2 regulations as being positive for the natural gas industry.
Regulatory uncertainty was the top concern (82 percent) in the medium term for pipelines.
Six in 10 local distribution companies have launched or are planning natural gas expansion programs.
Two-thirds of LDCs see distributed energy resources powered by natural gas to be an opportunity for future growth.
Editor’s Notes:
- This year’s survey was conducted from 23 July 2015 through 19 August 2015. The online questionnaire was completed by 404 participants who, through a series of screening questions, identified themselves as natural gas utility/service providers or natural gas industry providers.
- The overall results of the survey have a precision of +/-4.8 percent at the 95 percent confidence level.
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