Natural gas continues cutting into coal demand

Cheap natural gas has been increasingly displacing coal for electricity production during the year and appears to be continuing that trend, according to data from the U. S. Energy Information Administration and Simmons & Company International.

In April, for the first time on record, natural gas equaled coal as a source of electric power generation, according to EIA.

At that point, the amount of coal used for power generation had fallen by nearly a quarter from a year ago, according to the administration’s latest report.

Although no new detailed coal supply information is available, the EIA has said that coal use for power generation has continued to fall, while natural gas usage for electricity has grown.

The administration now projects that coal consumption for electricity this year will be at its lowest level in 20 years.

Daily natural gas consumption for electricity will jump 22 percent this year, to 25.3 billion cubic feet per day, according to EIA.

The changes have happened as natural gas producers have dramatically cut back on gas drilling. The number of rigs drilling for natural gas in the United States has fallen by nearly half over the last year, from 896 on Aug. 12, 2011, to 495 last week, according to Baker Hughes.

Production from existing wells have remained high enough to both feed increasing electricity demand and pad underground storage.

The pace of storage growth has slowed, however, with supplies increasing less than 1 percent last week, to 3.26 trillion cubic feet.

Simmons & Company International believes that increased gas demand for power generation “is due to gas stealing share from coal,” the company said.