Key findings from Black & Veatch’s 2013 Strategic Directions in the North American Natural Gas Industry report shows an industry embarking on a period of sustained growth driven by low-cost shale gas resources. However, for the economy to fully realize its benefits, industry leaders will have to address the challenges of a rapidly evolving U.S. energy market.
“The report’s findings show that stakeholders across the value chain must work together and compromise on key issues,” said Peter Abt, Managing Director of Black & Veatch’s Oil & Gas strategy practice. “The general consensus is that more pipeline capacity is needed. How this capacity is financed – and who pays for it – is the area of disconnect. Without pipeline investment, the natural gas industry’s growth will slow and consumers could see dramatic price swings.”
The good news for the industry, however, is that growth is expected to continue. More than 95 percent of natural gas industry leaders stated they were “optimistic” or “very optimistic” in their general outlook towards future industry growth.
“The prevailing optimism across the industry is largely driven by expected growth in the power generation, LNG (liquefied natural gas) export and transportation markets,” said John Chevrette, president of Black & Veatch’s Management Consulting Division. “Black & Veatch’s projections have demand for natural gas from the power generation market nearly doubling by 2020.”
Other key findings from this year’s report include:
- Gas prices expected to rise. Participants and Black & Veatch analysts largely believe gas prices will rise to between $4.50 to $5.99 per Million British thermal units (MMBtu) between now and 2020.
- Safety, economic growth and regulation are top concerns. Participants from the upstream, midstream and downstream sectors rated the listed items within their respective list of Top 5 industry issues.
- Commodity enhancement is a growing trend among natural gas producers. There is growing interest among producers for onsite LNG and/or CNG (compressed natural gas) production. This provides producers with new market opportunities as well as potential operational enhancements.
- U.S. LNG exports have cost benefits over global competitors. In addition to lower pricing, U.S. LNG export prospects benefit from the existence of eight brownfield LNG terminal projects. These are facilities that were previously developed to import natural gas. Much of the existing infrastructure can be used for export terminal purposes. This speeds access to market for U.S. gas and supports their competitive advantage over most international projects.
- Cyber security is a tougher task for small utilities. Only 42 percent of respondents from small utilities (less than 100,000 customers) have cyber security programs in place or in the planning stages. Nearly 90 percent of large utilities (more than 1 million customers) state a similar level of preparedness.
Black & Veatch conducted its second annual natural gas industry survey from July 18 to Aug. 23 and received 336 qualified industry responses. Statistical significance testing was conducted and represented results have a 95 percent confidence level. Participants were asked to provide their view point on a range of industry issues, including operational, environmental and economic challenges. The Black & Veatch natural gas industry report is part of the company’s Strategic Directions series, which includes in-depth analysis of the electric, water, natural gas and utility telecommunications industries.