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US To Be Energy Independent in Natural Gas by 2018

Dr. Robert Brooks, Founder, RBAC Inc., August 14, 2012

“On a net basis, the US will be energy independent in natural gas no later than 2018.” So says Dr. Robert Brooks, Founder of RBAC, Inc., and developer of the GPCM® Natural Gas Market Forecasting System.   “Earlier this year, we were predicting that the US would become a net exporter of gas by 2020, but more recent data has led us to move this estimate forward by another two years.”

To the surprise of analysts and producers alike, much lower levels of drilling for natural gas have not yet begun to decrease production. EIA forecasts lower but still positive growth this year and next, even with prices in the sub-$3 range. RBAC agrees. “Drilling has been focusing on higher-priced liquids for quite a while now, but this still results in a lot of by-product gas which has to find a home. A 25-30% year-on-year increase in gas-fired generation has helped absorb a lot of excess production, but in the long run, newer markets must be found or created.“

Two of these markets are exports and natural gas powered vehicles. “The US has tremendous reserves of natural gas and has developed the technology to produce it in a very economical manner. This has reduced the demand for pipeline gas from Canada and LNG from overseas and has created opportunities for pipeline exports to gas-hungry Mexico and LNG exports to growing markets in Asia.”

RBAC predicts that 1.0 to 1.5 billion cubic feet (bcf)/day of LNG will be exported beginning in 2017 from the Sabine Pass LNG facility in Louisiana. According to Dr. Brooks, “Booming Appalachian production from the Marcellus Shale presents another excellent export opportunity for producers using Dominion’s Cove Point LNG facility. Exports could grow to several bcf/day if exports to both Free Trade Agreement and Non-Free Trade Agreement countries are approved. It’s even possible that US LNG exports could expand in a very big way in the Pacific Basin if Alaskan North Slope gas can be economically transported to Valdez in the south and then liquefied and sent to high priced markets in Asia. Of course, there are competitors in Canada who would like to move stranded gas in northern BC to several proposed export terminals in BC and Oregon.”

This wouldn’t mean no imports at all, says Brooks. “The US West Coast will still depend on pipeline imports from Canada and because New England has no gas storage, if gas demand continues to grow, it will require additional LNG imports or pipeline capacity will need to be expanded to bring in more Appalachian gas.”

Dr. Brooks also predicts that enough natural gas resource exists to support development of a whole new industry: natural-gas powered highway trucking. “Diesel fuel use in highway transportation reached 40 billion gallons in 2007. The recession reduced this to about 35 billion gallons in 2010, but it has since resumed growth. This is equivalent to 13 bcf/day of natural gas. Assuming demand for distillates grows at 1.5% per year and natural gas vehicles capture 20% of this market by 2035, total gas demand would increase by 5%, about 4 bcf/day.”

What about opponents of increased natural gas development in the US? Dr. Brooks is optimistic. “I believe the industry will respond professionally to demands by residents in natural gas producing areas that the new technologies be applied safely and with their interests in mind. The environmental footprint for natural gas drilling has been getting smaller and smaller as the industry learns how to continually do more with less. The future development of this extremely valuable resource will depend very largely on the level of ethics which the industry applies to itself. The smaller the environmental impact and the larger the local economic benefit, the more accepted this development will become.”

RBAC has been the leader in building the fundamental analysis tools used by the energy industry and related government agencies for nearly two decades. The GPCM® Natural Gas Market Forecasting System™ is the most widely used tool of its kind in its markets.  RBAC other products include the GPCM Daily™ Gas Model, GPCM Viewpoints®, NGL-NA™ Model, Global Gas Market Model (G2M2™) and a power model interface (GPCM-PMI™) for power demand modeling that integrates with Natural Gas and other fuels.

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