Thursday, June 18, 2015

PUC Releases Outlook Report For 2014 Natural Gas Markets

The Public Utility Commission Thursday released the 2014 Pennsylvania Gas Outlook Report, which provides insight into trends in the natural gas market, both nationwide and within Pennsylvania.
The report summarizes the financial and supply data for the state’s natural gas distribution companies and looks at changes and trends in many aspects of the natural gas market, including usage, financial status of utilities, and market pricing.
Among the key findings of the report are--
-- Total Gas Consumption: Total natural gas consumption in Pennsylvania increased from 706.2 Billion cubic feet in 1997 to 1,090 Bcf in 2013.
-- Electric Generation: Natural gas consumption for electric generation increased from 21 billion cubic feet in 1997 to 414 Bcf in 2013-- from 3 percent of total usage to 38 percent of total usage.  There are 10,003 megawatts of natural gas fired electric generation in Pennsylvania, about 24 percent of generating capacity.  As of December 2013 there are 11,609 MW of proposed new natural gas fired generation capacity proposed in Pennsylvania, although typically about 25 percent actually gets built.
-- Marcellus Shale Production: Marcellus shale production has risen from 2.7 Bcfd in October 2010 to over 16 Bcfd in January 2015. Despite this vast increase in production, many portions of eastern Pennsylvania and New England are still subject to higher priced gas in general, as well as dramatic spikes in price during cold snaps in the winter heating season. These price differences are mostly caused by a lack of pipeline capacity to transport the glut of supply to the markets where it is most needed.
-- New Pipeline Projects: There are almost 12 Bcfd of pipeline projects slated to come online in 2015 in the Northeast region which are listed in the report.
-- Dramatic Shift In Gas Use: There has been a dramatic shift in the use of natural gas from primarily residential and industrial uses to electric power generation from 1997 to 2013.  The following chart outlines this shift.  Reasons for this increase include more supply of natural gas and the resultant lower cost for natural gas, the advancement of efficient natural gas generation technology, and retirements of older coal-fired plants.

Natural Gas Deliveries By End Use

Electric Power
3 percent
38 percent
39 percent
25 percent
22 percent
15 percent
36 percent
22 percent

-- Gas Customers: There are approximately 2.8 million natural gas customers in Pennsylvania, with about 2.6 million of these being residential customers.4 There are 31 regulated natural gas utility companies in Pennsylvania, and 10 of these are major distribution companies with gross revenues greater than $40 million per year.
-- Gas Usage: In total, gas usage rose by 10.9 percent between 2012 and 2013, while customer count remained rather flat, rising only 0.8 percent. The reason for this seeming mismatch of rising gas usage with relatively little customer growth is due to a combination of two factors. First, the vast majority of the new gas customers are large volume transportation customers (this customer class saw a 7 percent increase in customer count in 2013), thereby posting a significant increase in total usage for a relatively modest increase in customer base. Second, while the number of residential customers remained steady, this customer class used much more gas per customer in 2013 over 2012, likely a result of the colder than normal temperatures in the winter heating season of 2013-2014.
-- Price Of Gas: Henry Hub spot prices averaged $4.38 per million British thermal units (MMBtus) in 2014, up from $3.73 in 2013. EIA predicts that the Henry Hub annual average spot price will average $3.83/MMBtu for 2015. However, based on natural gas futures contracts,18 it appears that the market expects average prices to fall for the coming year, producing an average price of $3MMBtu for 2015, dramatically lower than EIA estimates.
-- Marcellus Wells In PA: As of Jan. 2, 2015, 18,609 unconventional drilling permit applications have been filed with the Pennsylvania Department of Environmental Protection. Of those applications, 8,827 unconventional wells have been drilled.
The information contained in the report is intended to be a resource for industry and academic analysts, as well as Commission staff, and is prepared to provide data about the regulated gas industry in Pennsylvania and the broader natural gas markets in the region and nationally.
A copy of the report is available online.

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