What does the future hold for natural gas? Difficulty in predicting demand adds to uncertainty
SAN DIEGO – Opinions differ on the future of natural gas given variables tied to demand and increased exports, panelists said at a National Association of Regulatory Utility Commissioners (NARUC) conference panel on Monday that focused on the accuracy and impacts of predictions about the natural gas market.
“How clear is the crystal ball?” asked Diane Burman, commissioner of the New York State Public Service Commission and co-vice chair of NARUC’s Committee on Gas said, “I think we see that at times it’s very cloudy and at times it’s shattered.”
The panel held during NARUC’s Summer Policy Summit in San Diego, covered predictions about resource availability, price, distribution, storage and greenhouse gas emissions.
The panelists agreed that the energy sector is in the midst of a natural gas “renaissance” and that the resource is abundantly available but differed on how its future might look.
Suzanne Lemieux, the manager of midstream and industry operations at the American Petroleum Institute (API), said that the price of natural gas will go up in the long term but remain highly competitive, citing U.S. Energy Information Administration (EIA) predictions.
When Nancy Lange, chair of the Minnesota Public Utilities Commission and moderator of the panel, asked Lemieux whether regulators could trust that prices would remain stable even if U.S. exports increase, she replied affirmatively.
“Yes, I think we do have a lot of confidence in that,” Lemieux said, noting that the EIA studies took increased liquefied natural gas (LNG) exports into account.
Andrew Weissman, senior counsel at Pillsbury Law and CEO of energy market advisory service EBW Analytics Group, noted the importance of predictions of demand for avoiding price spikes. Although long-term price is expected to be moderate, Weissman said, short-term variability presents an issue.
Price prediction studies, he said, assume that we know how much natural gas will be needed, but that some aspects of demand, such as winter demand, are highly unpredictable. Increased LNG exports, he said, will exacerbate unpredictability.
“What actually happens with natural gas prices though, already in the world that we’ve been living in, is that there are important portions of demand that can’t be readily predicted … and that causes very high-level price wobbles.”
Storage of natural gas could add some certainty, but doing so is expensive, Weissman noted, and isn’t done at a significant level. Long-term contracts at stable prices, he said, would have a similar stabilizing effect.
“At least my own view for what it’s worth is that looking at those issues and taking those kinds of steps is going to turn out to be absolutely critical in order to keep natural gas prices at a moderate level, Weissman said.
The panel also discussed how the availability of distribution infrastructure, the greenhouse gas emissions created by natural gas, permitting processes and technological advances could impact the future of the resource.
