09-12-04

US demand for energy will easily outstrip domestic supplies over the next two decades, despite a modest increase in energy production, the Energy Department said in a report. This difference between consumption and production will leave America increasingly dependent on foreign imports of both oil and natural gas.

Total imports of fuel are expected to climb by roughly 40 %, accounting for 38 % of total US energy needs by 2025, up from 27 % today, according to the annual 2005 energy outlook from the Energy Information Administration, the statistics arm of the Energy Department. At the same time, US energy production is expected to increase by less than 1 % annually for the next 10 years, the report said.

Increases in production will largely rely on a new Alaskan natural-gas pipeline, increased production of non-conventional natural gas supplies such as coal-bed methane and more imports of LNG -- although they will be insufficient to meet demand. The United States will remain heavily dependenton foreign oil over the next two decades, with imports of oil and refined petroleum products accounting for 68 % of total demand by 2025, up from 56 % in 2003.

"We're calling for increased demand from [the Organization of the Petroleum Exporting Countries] in 2005," compared with forecasts in 2004, said Guy Caruso, administrator of the Energy Information Administration.

Natural gas demand is forecasted to increase to 30.7 tcf by 2025, up from 21.9 tcf today. Strong demand for electricity generation and industrial demand will drive 75 % of this demand, the report added. While demand for natural gas swells, domestic production is forecasted to hit 21.8 tcf by 2025, falling 40 % shy of estimated total demand for the period.

At least six new terminals capable of receiving liquid natural-gas imports will need to be built in the next two decades, although there is speculation that as many as 12 will need to built during this period.

If the United States can successfully build new offshore gasificationfacilities able to receive LNG off tankers and transform it back into its gaseous state, these additional supplies will likely place downward pressure on natural gas prices as early as 2010, according to Caruso.

"We're expecting [LNG] will be delivered at under $ 4 per thousand cf on both the East and West coasts," he said.

The report also expects a natural gas pipeline able to ship Alaska's abundant supplies to the lower 48 states to come online by 2016, thanks to the passage of financial incentives by Congress this year. Expanded development of non-traditional natural-gas supplies is expected to grow to 8.6 tcf in 2025, from 6.6 tcf in 2003.

"Average wellhead prices for natural gas are projected to increase from $ 4.98 per thousand cf (2003 dollars) in 2003 to $ 5.30 per thousand cf in 2005," the report added. "After 2005, natural gas wellhead prices are projected to decline to $ 3.64 per thousand cf in 2010." This drop is tied to the completion of new liquid natural-gas facilities completed, Caruso said.

The natural gas share of electricity is also projected to increase to 24 % in 2015 from 16 % in 2003. But coal will remain the primary fuel for electricity generation through 2025, accounting for roughly 50 % of generation in 2025 compared with 51 % in 2003.

Coal production in the United States is expected to increase to 1,270 mm short tons in 2015 from 1,083 mm short tons in 2003, the report added. The majority of coal production, roughly 60 %, will occur west of the Mississippi by 2025, according to Caruso.

While upgrades to existing nuclear plants are expected to increase the generating capacity of the current fleet to 102.7 GW in 2025 from 99.2 GW in 2003, new nuclear plants are unlikely to be economical to build, the report contended. Production of renewable energy is expected to remain relatively stable over this period at 130 bn kWh, due to access to lower-cost fossil fuel generation.
Hydrogen energy was not included in the study. "Hydrogen does not come into play during thistime frame," Caruso said.

Source: AFX