Sinking natural gas prices and dipping demand may be stealing today’s natural gas headlines, but its industry forecast is anything but dreary. In fact, natural gas isn’t just on the verge of a comeback—it’s on the cusp of a new era—and in the coming decades, both natural gas demand and profitability are expected to reach record heights. How’s that possible? It’s all thanks to new forms of natural gas consumption that will devour a sizeable chunk of excess supply—and as consumption climbs, prices will follow suit.
Here are the three game-changing factors that will revolutionize the future of natural gas in the coming decades.
1. The Growing Role Of Gas-Based Power Production
Believe it or not, power plants are one of the natural gas industry’s best customers. And not only are strict environmental laws causing electric companies to shift from coal to natural gas for power production, but the trend will only grow more prevalent as carbon emission mandates become tighter and tighter.
Case in point, experts forecast 2016 to be the first year that natural gas generation will exceed coal generation in the U.S. on an annual basis. As of March 2016, natural gas provides 33% of generation and coal provides 33%. Compare that to 2014, when coal’s share of power production was 38.7%.
2. The Use Of Natural Gas In New Industries
The long-term rise in natural gas consumption will be partially due to the transportation sector, a la the growing use of CNG Vehicles. However, a much greater impact will come from the massively important and high-demand petrochemical industry. In fact, petrochemical companies across the U.S. are already switching their production facilities from oil to natural gas.
3. The Global LNG Market
While power generation and petrochemical companies will take a nice slice out of natural gas supply, the largest factor that will outpace America’s state of abundance is the spanking new global LNG market. And thanks to rising global natural gas demand, both the U.S. and America’s natural gas industry are poised to play a massive role in the LNG market, and ultimately, make bank. Forbes forecasts America’s excess natural gas supply will make it the third largest LNG supplier in the world by 2020, only trailing behind Qatar and Australia. Here are more staggering stats:
- Last month, history was made when the U.S. shipped its first Liquefied Natural Gas (LNG) export ever
- It was also the first time the U.S. Department of Energy has allowed oil and gas exports in over 40 years
- By 2025, worldwide demand is expected to reach 500 million tons, which would be twice as much as the 2012 level of 250 million tons
- China alone expects to triple its natural gas consumption within five years
- Since 1 billion cubic feet of natural gas is equal to 21,000 tons of LNG, demand in 2020 will equal around 20 trillion cubic feet a year
What’s the difference between natural gas and LNG? Natural gas can’t be transported long distance, so it’s always been a locally traded commodity.
LNG, on the other hand, is cooled down to a liquid state that can be shipped anywhere in the world.