Environmental concerns over coal emissions have caused a noticeable trend among power plants in recent months to abandon the hazardous power generator completely. According to the American Petroleum Institute (API), a continued increase in demand for natural gas for use in power generation is expected to be the biggest driver for U.S. gas demand in 2015.
John Felmy, chief economist for API:
“The biggest trend is probably what we’ve seen in previous years and that’s more natural gas in power generation, as we see more coal plants shut down, primarily for environmental regulations.”
With rapid advancements in horizontal drilling over the past three years, the United States has taken over as the global leader in energy development. Look no further than the Marcellus and Utica shale plays in the Pennsylvania and Ohio region, respectively. The shale combines to form the largest natural gas producing region in not only the United States, but the entire world. In fact, the region is projected to produce 16 Bcf/d of natural gas in 2015, up from 2 Bcf/d in 2010. The increase domestically in natural gas production has seen the transportation industry in the United States take advantage, from standard vehicles, to trains, to big rigs, the market for natural gas is growing quickly.
“We’ve seen, for example, some truck stops invest in the infrastructure to be able to supply LNG or CNG,” said Felmy. “I just saw an announcement of a couple of ships to be built in San Diego that would be powered by natural gas. Clearly the railroads are looking at natural gas as an opportunity because of relative cost, although that’s narrowed somewhat because of the sharp fall in diesel prices.”
Felmy says that steep challenges still face the auto industry when it comes to incorporating natural gas.
“Vehicle use of natural gas is very small,” Felmy says. “It’s only about one-tenth of 1 percent of the gas consumption. So it’s got a ways to go to catch up with the other sectors.”
Felmy says that the biggest challenge for automobiles is the upfront cost to convert a gasoline—or diesel fueled—vehicle to natural gas or to build a new natural gas-fueled vehicle. He says that even the project that’s the furthest along is not going to be operational until the beginning of 2016. What natural gas producers must focus on now is how many terminals ultimately get built and how much LNG can be exported from those terminals.