Bentek: U.S. shale gas revolution could be powered by demand

Additional natural gas demand from re-emerging and non-traditional sources could exceed 5 billion cubic feet per day by 2019 as numerous proposed projects come online in the U.S and Canada, according to a report from Bentek Energy.

The report “Debunking the Alternative Gas Demand Myth” looks at the prospective demand stemming from new and old sectors – those that had downsized or closed in the early 2000s – and concluded that new demand, rather than new production, could become the driving force of the U.S. shale revolution during the next five years.

Evaluating the capacity of the power-generation, industrial, residential/commercial and export sectors, Bentek analysts focused on project types posing the greatest market-altering potential if they grow simultaneously at their estimated paces:

• Natural gas-fired power plants
• Ground and marine transportation
• Liquefied natural gas (LNG) exports
• Ammonia, methanol and nitrogen fertilizer production

The report considers the viability of new and revitalized sectors given the inherent economics of each and expected market conditions between now and 2019.

“Given the magnitude of potential demand growth, it’s critically important to provide a realistic assessment of industries that increasingly use natural gas as a fuel or feedstock in the production of other products,” said Rocco Canonica, Bentek analyst and lead report author. “If demand growth reaches its full potential, we could expect a tighter U.S. market and upward price pressure – a sharp contrast to today’s cheap and abundant natural gas from shale formations such as North Dakota’s Bakken.”

Bentek is tracking 14 gas-to-liquids (GTL) projects in North America, including 13 in the U.S. and one in Canada, and as many as nine of these could be in service by 2019. There are more than a dozen announced projects in the U.S. that would use natural gas as feedstock to produce methanol for petrochemical production or other uses. Bentek expects that at least 10 of these will be built.

Many of these industrial applications, however, face a large number of risks, including project financing risk, commodity price risk, infrastructure constraints and competition from other demand sources for the same supply pool.

Press Release, August 27, 2014