Utilities Natural Gas US Industry Structure and Outlook

  • The US has a proven natural gas reserve of more than 324 trillion cubic feet as of 2015, a drop of 16 percent compared to the reserves estimated in 2014 
  • The rate of natural gas production has declined by 2 percent Y-o-Y in 2016, the main reason for the decline in price was drop in rig count and exploration activities, largely due to global decline in demand and the oversupplied domestic market
  • Natural gas production is expected to grow at about 1.40 percent CAGR, from 2017 to 2019 
  • The expected rise in exports to European and Asian markets, coupled with domestic demand, are the major reason for the forecast of increase in production
     

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  • The major consumer of natural gas is the electrical power sector, which accounts for nearly 40 percent of the total consumption; followed by the industrial sector at 30 percent 
  • Major reasons for the rise of demand in the power sector are the drop in natural gas prices, and the stringent policies and regulations supporting clean energy generation 
  • Demand in the commercial and residential sectors are highly seasonal, and rise drastically during winters, due to the increase in heating demand 
  • Demand for natural gas from the industrial sector is expected to grow by 1.68 percent until 2019, as major energy intensive chemical and fertilizer projects are expected to be online by 2017

Utilities Natural Gas US Industry Structure 

  • Natural gas storage has a significant role in maintaining the supply demand balance, and price adjustments 
  • As of 2014, 9233.35 Bcf was the underground gas storage capacity. By 2018, an additional 1.4 percent capacity will be added 
  • Capacity additions in the pipeline sector will be a crucial move. In order to expand the natural gas market by 2020, an additional 7144 miles of pipeline additions and renewals is projected 
  • The rig count has been showing a declining trend from 2014, due to the drop in prices and a decline in demand in 2015 
  • The rig count is expected to increase from 2017, as both domestic gas demand and LNG export demand are expected to be higher
  • Federal Energy Regulatory Commission (FERC) overlooks the regulation in the natural gas sector in the US, and the market is divided into five geographical zones Few states have full market deregulation, wherein the consumer has an option for natural gas procurement. The others have to procure energy through municipal utilities 

Latest News, Insights and Industry Updates 

  • The Consumers Energy Company has a strong customer base in Michigan, for gas and electric power, and have an extensive distribution network for gas supply 
  • Gas delivery has a majority of residential clients, nearly 56 percent; hence the total delivery is seasonal, which makes dependency on storage facilities a priority
  • The Consumers Energy Company has 15 gas storage fields, with a combined capacity of 309 Bcf

US Cost Structure Analysis 

Apart from the energy charges mentioned above, other fixed charges such as monthly customer charge and monthly surcharge are charged to the customer based on the category of the customer.

Utilities Natural Gas US Price Trend and Forecast

Historical Price

  • The average industrial natural gas price  in 2016 declined by 9.8 percent Y-o-Y,  compared to 2015, and reached $3.5 per thousand cubic feet
  • The over supply situation, and drop in  seasonal demand from almost all the  consumer sectors owing to milder  climate, were the main reasons for the price hike

Price Forecast

  • The average industrial gas price in 2017  is expected to increase and average  about 4 – 4.25 $/thousand cubic feet 
  • The prices are expected to be 14 to 20  percent high during 2017, compared to  the 2016 price, as domestic demand is expected to be high 
  • The global demand for gas, mainly from  all the Asian and European market, also  turns out to be a major factor for price hike