Days of volatile natural gas prices are gone, ANGA official says

The days of ‘volatile’ natural gas prices are probably gone, as evidenced by the fact most major forecasts don’t show U.S. gas prices rising much above $6 or $7/mmBtu by 2030, a trade group official told PennWell’s Power-Gen conference Nov. 14.

Figures show natural gas production in the United States is growing nearly twice as fast as the demand for gas, said Michelle Bloodworth, senior director of power generation for America’s Natural Gas Alliance (ANGA).

The trade group represents North America’s largest independent gas exploration and production companies. Gas producers also need less time to set up a new well than in the past, Bloodworth told the conference in Orlando, Fla.

“Are we going to see the volatility that historically we have seen with natural gas?” Speaking as an industry veteran, “the answer is no,” Bloodworth said.

Bloodworth also said increasing development of inland shale from different parts of North America make natural gas consumers less susceptible to infrastructure damage from hurricanes in the Gulf of Mexico.

There is currently an over-abundance of supply. So even with coal plant retirements, potential liquefied natural gas (LNG) exports and a predicted increase in gas demand for manufacturing and transportation; the price should not skyrocket, Bloodworth said.

Natural Gas now has 28% of the U.S. power market and that share is growing. Gas is expected dominate new generation capacity additions for years, Bloodworth said.

Pipeline capacity is probably a bigger issue, Bloodworth suggested. The gas industry wants to “get that natural gas to power projects that hopefully many of you in the room are developing,” she said.

Increased scrutiny over hydraulic fracturing or fracking has proven manageable so far, Bloodworth said. Some states are drafting their own rules.

EPRI official says many keeping diverse mix as insurance

Revis James of the Electric Power Research Institute (EPRI) largely agreed with Bloodworth on the price prediction.

“Prices are low” and “could be low for a while,” said James, who is director of EPRI’s Technology Assessment Center.

But James also noted many power generators are still planning to maintain a diverse mix in case future natural gas prices turn out higher than expected.

Cheap natural gas prices can also have a depressing impact on new renewable generation, James said.

Gas generation is clearly benefitting from its low fuel cost and environmental advantages versus coal – not to mention its ability to “cycle” to support intermittent generation, James said.

This large amount of stopping-and-starting by gas plants can cause some equipment wear issues that must be monitored, James said.

Speaking as someone with more of a coal and nuclear plant background, James also worries about the life expectancy of natural gas power plants. Where nuclear and coal plants can, with proper upkeep, have a life expectancy of 60 years, gas plants have traditionally have not been so durable.

If a power generation unit has to be replaced after 20 years, it’s not a good thing for the fleet. A future challenge will be development of more durable gas-fired power plants, James said.

Many power companies are currently investigating the operational and economic issues of merely trying to “mothball” uneconomic coal “and gas” units that might be revived at some point when markets issues change.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.