The other day I heard someone make a US natural gas demand call for a 100 plus Bcf/d by 2021.  This is a jaw-dropping forecast considering the US natural gas market is at about 72 Bcf/d today.  An incremental 28 Bcf/d – a bigger volume than the entire Marcellus & Utica combined.  The speaker achieved his goal and got my attention if nothing else (and by the way BTU Analytics’ natural gas demand forecast through 2021 is more conservative at an incremental 10-15 Bcf/d by 2021).  However, let’s consider this aggressive demand forecast and the reality in order to achieve 100 plus Bcf/d. To start with, every switching opportunity for gas in North America has to switch at maximum capacity – Mexico exports, LNG, industrial demand, power burn to name a few.  And if North America goes all in on gas, doesn’t this set up a start of the natural gas demand cycle all over again (remember the power plant demand build out driven by Enron, Duke, El Paso and Dynegy of the late 1990s/early 2000s which pushed Henry Hub moving from $2 range in 1999-2000 spiking to over $10 in January 2001)?

In order to reach 100 plus Bcf/d demand, on the supply side, the resource is there, albeit the North American gas market would need to rally to higher price levels than where they are today to achieve the necessary production response.

On the demand side, again every gas opportunity has to go at maximum capacity.  Mexico exports have an incremental 8 Bcf/d of pipe capacity being built – fill it all 24-7-365.  LNG has an incremental 7 Bcf/d of permitted and under construction terminal capacity – fill it all.  That gets us 15 Bcf/d.  Industrial demand and res/com will have to add a few Bcf here and there.  The rest of the 13 Bcf/d gap, to get to the 100 Bcf/d demand forecast, would fall on power burn.

Read more: https://btuanalytics.com/natural-gas-demand-cycle/