19-07-04

Natural gas supply from several "frontier regions" will need to be developed in order to meet the projected 30-tcf US gas market by 2020, according to a study, which was sponsored by the Interstate Natural Gas Association of America.

The study noted that gas production from traditional basins in the US and Canada is declining, with volumes from traditional basins expected to decline from 19.3 tpy -- 80 % of US and Canada output -- to 16.2 tpy, or 61 % of North America production.

"Much of the growth of the gas market over the next 20 years must be sustained by development of currently untapped supplies from areas that are generally more remote from the consuming markets in North America," the study said, listing the frontier supplies as LNG, unconvential gas in the US and Canadian Rockies, Arctic gas, eastern Canadian gas and supplies from deep-water offshore US Gulf of Mexico.

The study also found that, in order for the US market to efficiently satisfy natural gas demand by the end of the next decade, about $ 61 bn worth of pipeline and storage infrastructure investment must be made in both the US and Canada.

About $ 42 bn of that investment needs to go toward new pipeline and storage projects including the Alaskan and Mackenzie Delta projects, while the rest is needed for replacement of current pipe, the study said, adding that any delays in the construction of the infrastructure "can be costly to natural gas consumers and to the stability of North American energy markets".

A two-year delay in pipeline and LNG terminal construction, for instance, will raise US natural gas prices by an average of 78 cents/mm Btu from 2005-2020. Overall, the delay would cost US gas consumers more than $ 200 bn by 2020, it said. To eliminate the risk of delays, federal and state regulators need to focus on ways to attract capital to pipeline and storage projects, the report said.

State utility regulators, in particular, should review existing rules that discourage local distribution companies from entering into long-term capacity contracts for transportation and storage that are necessary to underpin new infrastructure projects. Also, the natural gas industry should work with state and local officials to ensure that all the benefits of a pipeline are presented to the public during the project review process, the report said.

Federal and state regulators should also conduct regional analysis to identify infrastructure needs in multi-state regions, it said, and safety concerns, particularly regarding LNG, "must be met with a balanced and informed evaluation of risk".

Source: Petroleumworld