Navigant sees gradual increase in Henry Hub natural gas prices

Navigant Consulting sees healthy long-term prospects for the North American natural gas market, with Henry Hub prices returning to above $5/mmBtu after 2020 and reaching $6.93/mmBtu by 2035.

That’s one of the highlights from the “North American Natural Gas Market Outlook, Fall 2013,” which was released in early December.

Navigant isn’t the only entity to weigh in on natural gas prices and gas-fired generation recently. ICF International (NYSE:ICFI) released a quarterly report on power generation and fuel trends and the Energy Information Administration (EIA) said this month that it expects gas to overtake gas as the top power generation fuel by 2040.

“Over the short term, North American natural gas prices are projected to recover from 2012 lows, but will stay at moderate price levels for the next few years,” Navigant said. Natural gas prices at Henry Hub are projected to average $3.81/mmBtu between 2013 and 2015. From 2016 to 2020, Henry Hub prices are expected to rise to more than $5/mmBtu as a result of a combination of factors.

Navigant expects that North American consumer natural gas demand will increase from 77.8 Bcfd in 2013 to 108.7 Bcfd in 2035.

“Most of the significant growth in the sector will occur over the next decade, driven by a combination of greater use of gas-fired generation plants, higher natural gas demand for industrial use and growth in natural gas vehicle sales,” Navigant said in a summary of its report.

Projected domestic consumption of natural gas will grow at an average of 2.2% per year from 2013 through 2020, with the growth rate moderating to an average of 1.2% per year thereafter.

Much of the projected growth prior to 2020 will be due to increased coal-to-gas substitution in the power sector as a result of persistently low natural gas prices, Navigant said.

Increased industrial use of natural gas in the United States and Canada is also a growth factor, Navigant said.

Total North American natural gas consumption for gas-fired generation and industrial use are projected to grow at average annual rates of 3.7% and 2.4% respectively through 2020. Between 2020 and 2035, projected natural gas demand growth will slow to 1.9% annually for gas-fired generation and 0.5% annually for industrial use.

The report also predicts that natural gas vehicle (NGV) fuel demand will increase market share from “negligible” amounts in 2013 to 5.9% of total U.S. consumer demand.

The percentage of unconventional gas that makes up North American dry natural gas production is projected to grow from 35% in 2013 to 58% in 2035. The overall North American dry natural gas production will grow by 44% from 87.3 Bcfd in 2013 to 124.5 Bcfd in 2035.

Navigant estimates the U.S. will become a net liquefied natural gas (LNG) exporter in 2017 and net natural gas exporter in 2019. In addition to pipeline exports to Mexico (2.6 Bcfd in 2035) and eastern Canada (1.9 Bcfd in 2035), the U.S. is projected to export domestically-produced gas in liquid form to the global market.

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.