Forecast: Power industry to cool winter demand for gas

Power companies will trim their demand for natural gas this winter while the industrial sector will expand its use of the fossil fuel, according to projections from the Natural Gas Supply Association.

The trend of coal-to-natural gas switching in the power industry — which last year briefly led natural gas use to exceed long-time leader coal in U.S power generation — is expected to slow this winter, the trade organization said in its forecast released this week. Utilities have turned to natural gas as the shale gas boom has cut its price and federal regulations on emissions have put pressure on higher-carbon coal.

“Coal-to-gas switching is expected to continue for a sixth straight winter, but switching is forecasted to average 4.2 billion cubic feet per day rather than last winter’s near record amounts,” said Natural Gas Supply Association Chairman Greg Vesey, who also serves as Chevron’s vice president of gas supply and trading, in a written statement.

Overall, NGSA expects moderate growth in supply and demand for natural gas this winter, resulting in stable prices during the season, which is expected to have weather and economic conditions similar to last winter.

With booming expansion natural gas-fed facilities, like petrochemical and gas-to-liquids plants in the United States, the industrial sector is projected to increase demand for natural gas this winter and for the rest of the decade. Energy Ventures Analysis forecasts industry use of the fuel will grow by about 3.5 percent, compared to last winter.

Residential and commercial use will remain stagnant, the consulting firm forecasts.

Vesey said natural gas supply and storage will be as robust as last year. However, that supply increasingly comes from associated gas produced as a waste product during oil extraction instead of that produced directly from natural gas wells, he said.

“The growth of associated gas explains how natural gas production continues at strong levels despite a 28 percent drop in the number of gas well completions,” Vesey said in a written statement. “We expect associated gas to continue to be a key component of winter supply as oil drilling in the Bakken and Eagle Ford shales continues and new gas infrastructure is put in place to reduce gas flaring.”