The market expansion for producing natural gas and oil from shale might not be done yet, according to a Sept. 4 analysis from Bernstein Research.
The firm sees potential average 4% growth driven by four key drivers. These include declining shale oil well productivity, rising natural gas exports, continued displacement of coal by gas in the power sector and increased industrial gas demand.
The commentary was drafted by a Bernstein Research team that included three of the firm’s senior analysts – Scott Gruber, Bob Brackett and Hugh Wynne. Researcher Helin Shiah also worked on the report issued for Bernstein clients.
“Less than a decade ago, the Energy industry was mobilizing to build [liquefied natural gas] LNG import capacity across the eastern US. Now the industry is mobilizing for the opposite, LNG export,” the analysts said. Washington appears amenable to allowing modest exports given approvals for three LNG facilities to export 6.4 bcfd to countries with which the US does not have free trade agreements, the firm said.
Just as importantly in the power sector, Bernstein Research expects additional coal-to-gas switching for electric generation.
The Bernstein firm said its utilities team estimates the Mercury and Air Toxics Standards (or MATS) regulations will drive a 1.9 bcfd increase in gas consumption by 2015.
In addition, replacing coal with gas appears the primary route for the U.S. Environmental Protection Agency (EPA) aims to reduce carbon dioxide emissions, the Bernstein researchers said.
Not only do combined-cycle units emit 60% less CO2 per KWh than coal plants, but the combined-cycle fleet is only 45% utilized. The combined-cycle generating sector could achieve near 90% utilization. This means major CO2 reductions could be achieved “without a major investment program.”
A third leg to the natural gas growth stool could be industrial demand in sectors like fertilizer, plastics and oil refining.
In Canada, natural gas demand could rise 30% over the next decade, Bernstein Research said.
Bernstein Research is an affiliate of Sanford C. Bernstein & Co.