Government still foresees 30-Tcf gas market by 2025

GAS DAILY - Tuesday, January 18, 2005

     Despite lofty gas prices that have led to some permanent demand destruction, U.S. gas demand will surpass 30 Tcf by 2025, an Energy Information Administration official predicted last week.

     EIA Deputy Administrator Howard Gruenspecht, speaking at a meeting of the International Assn. of Energy Economics, offered a preliminary look at the agency’s 2005 projections that will be released in a few weeks. He said domestic gas consumption is expected to rise from 21.9 Tcf/year in 2003 to 30.7 Tcf/year in 2025—down slightly from the 31.4 Tcf/year EIA projected in its year-ago outlook.

     Electric generation will continue to be the fastest-growing gas-demand sector, nearly doubling from 4.9 Tcf/year in 2003 to 9.4 Tcf/year in 2005, Gruenspecht said. Despite sharp price increases in 2004, gas remains the fuel of choice for electric generation, partially because the relative cost of building gas-fired plants is declining, he added.

     Meanwhile, domestic gas production will experience moderate growth over the next two decades to approximately 20 Tcf, or 55 Bcf/day, in 2025, he said. With conventional production remaining flat or experiencing slight declines, future growth will depend on unconventional sources such as coalbed methane, Alaskan gas and liquefied natural gas imports from abroad.

     Because demand growth is expected to outstrip supply over the next 20 years, imports will rise from about 15% of domestic supply in 2003 to as much as 38% in 2025, Gruenspecht projected. “The compositions of imports is changing a lot,” he said, noting that receipts from Canada, which totaled 2.8 Tcf in 2003, will likely fall to 2.3 Tcf/year by 2025. LNG imports should be able to fill the gap, climbing from 400 Bcf/year in 2003 to 6.4 Tcf/year in 2025. “There’s a lot of LNG in this projection,” he acknowledged.

     The agency estimates that total U.S. energy consumption will approach 140 quadrillion Btu/year by 2025 and will grow at an average annual rate of 1.4% over the period—slightly lower than the rate cited a year ago, Gruenspecht said.

     Residential usage is expected to grow to almost 15 quads by 2025 from a little more than 10 quads in 2003. That is a marginally higher rate than EIA projected last year, partially as a result of a number of new homes being built with higher ceilings, he said.

     Industrial end-use consumption is expected to grow from about 25 quads in 2003 to 30 quads in 2005—down sharply from almost 35 quads the EIA projected last year. “Industrial consumption will grow, but not quite as much as we thought,” Gruenspecht said, citing demand destruction and fuel-switching in the sector.

JM