Houston (Platts)--21Oct2009/504 pm EDT/2104 GMT

The passage of proposed US climate change legislation is expected to expand the market for natural gas-fired power generation over the next 20 years like never before, Black & Veatch analysts said in Houston Wednesday.

"We've never seen this business like this before," Roger Smith, president of B&V's Enterprise Management Solutions, said at a meeting with reporters. "Gas is going to be a bigger player than it ever has been."

Smith said that electric utilities going forward are more likely to build gas-fired generation units than those powered by other fuels. "No CEO in his right mind is going to be betting on coal or nuclear," he said.

Smith said power generators are engaged in a "dash for gas," which is expected to drive gas demand from just below 60 Bcf/d in 2010 to over 80 Bcf/d in 2033. With the recent discoveries of large unconventional reserves of gas in domestic shale plays, power generators are beginning to become more comfortable with the notion that they can count on sufficient and relatively inexpensive gas supplies in the future, he said.

This in turn will cause generators to rely increasingly on gas for baseload electricity, rather than using it as a marginal fuel. "If you have baseload needs, your best bet will probably be gas," Smith said.

Projecting gas price trends out to 2030, Smith predicted that gas would trade in an average range of $6/Mcf to $8/Mcf over the next two decades. "It looks like gas prices are going to be fairly stable for the foreseeable future," he said.

In addition, Smith said that planned additions to the US interstate gas pipeline system will ensure that, "no matter where gas is, there is the capability of getting it to the market."

The drive to build new pipeline infrastructure is coming from producing areas, rather than the consuming regions of the country, he said.

Dean Oskvig, CEO of B&V Energy, said US domestic power demand will grow by about 1.5% in 2010 and about 2% in the following two years, as the US economy recovers from the current recession.

Peak demand growth will level out in succeeding years to about 1% annually through 2033. The total US generating capacity is expected to grow about 20% from about 1,000 GW currently to 1,200 GW in 2033, he said.

Much of the consulting and engineering firm's forecasting is based on the assumption that Congress will pass some kind of climate change legislation in the next year or so. What form that legislation takes will have a big impact on the choice of fuels that power generators make going forward, Oskvig said.

--Jim Magill, jim_magill@platts.com