The natural gas industry is optimistic about its own future, but safety – be it pipeline, environmental or cyber – continues to be a key concern, according to Black & Veatch’s second annual Strategic Directions in the North American Natural Gas Industry survey.

The overwhelming majority of the survey’s 336 respondents expect the US natural gas industry to benefit from demand growth – both domestic and in export markets – and marginally higher prices. But many of the critical issues that have long faced the industry, such as regulatory hurdles, infrastructure bottlenecks, and obtaining and maintaining a social license to operate have yet to be resolved.

Breaking Energy spoke with Peter Abt, Black & Veatch Managing Director and leader of the Oil & Gas strategy practice within its management consulting division about the results of the survey, which can be read in full here.

Key takeaways:

• US natural gas has a bright future: More than 95% of survey respondents were “optimistic” or “very optimistic” in their general outlook on industry growth to 2020, up from 92% in last year’s survey. Abt noted that while producers are “optimistic by nature”, what is less common is that the midstream and downstream portions of the industry share their sunny outlook. 
• Electricity generation will drive demand growth. The report says that more than 85% of respondents expect electric power generation to “materially increase natural gas consumption by 2020”. Other factors, such as LNG exports, are expected to contribute to demand growth, but power generation is the primary driver. “A lot of that is driven by the expected growth in power demand, coupled with the administration’s recent moves to place additional burdens on coal-fired generation capacity, and the expectation that we will retire coal-fired capacity as it becomes less economic to generate with coal, gas-fired generation will fill that gap,” Abt said.   

• Prices are headed upward: “This year’s respondents are closely aligned with last year’s in that they believe prices will increase to a range between $4.50 and $7.49 per million British thermal units (MMBtu) through 2020.” Power generation, environmental regulations and broadly increasing demand are the top three drivers of higher prices. 
• LNG exports will average around 6 bcf/d by 2020. When asked how much LNG the US would be exporting in 2020, “a large percentage said they don’t know”, said Abt. But most responses were in the 4-6 billion cubic feet per day range, with a few as low as 2-4 bcf/d and a few as high as 6-8 bcf/d.
• Safety is a key issue:  “Safety, by far, is the area of greatest concern,” according to the report. Cybersecurity, aging infrastructure, pipeline integrity and reliability were all listed as areas of concern.

• New England could see more winter price spikes. A dearth of gas pipeline capacity serving the New England and New York markets led to dramatic price spikes last winter, and conditions have not changed. “The entities that have contracted for pipeline capacity on a firm basis need that capacity to serve the local heating load, and gas-fired generators typically don’t contract for pipeline capacity on a firm basis, so they’re left to compete in the daily market for interruptible capacity,” Abt said. “Competition is intense to get access to that capacity, and it causes gas price spikes.” Industry and regulators have yet to work out who should bear the cost of additional pipeline capacity, meaning that if winter weather is normal-to-severe, the region can expect price spikes again this year.