Obama To Deliver Major Climate Change Speech

Surging US natural gas production is increasingly bumping up against infrastructure constraints, and while billions of dollars of investment in incremental pipeline capacity has been announced, numerous challenges remain. Environmental concerns, pipeline opposition, regulatory uncertainty and financial challenges represent short-term headwinds to an industry with an optimistic long-term outlook.

These are some of the findings revealed from analyzing survey responses submitted by over 400 “qualified natural gas market participants” on a wide range of issues covered in Black & Veatch’s 2014 Strategic Directions: U.S. Natural Gas Industry report. Safety remains the top industry issue among respondents, but gas supply/reliability, environmental regulations, aging infrastructure and capital access were also given high priority.

Long-term price increases are expected to be driven most by increased consumption for power generation and overall demand, followed by LNG exports. “This section of the report addresses the concerns that come with increased demand for and reliance on natural gas. From a regulatory perspective, survey respondents and Black & Veatch experts examine potential issues with pipeline expansion, changes in flow, underutilization, and the ability to move natural gas liquids (NGLs) to processing centers.”

Similarly, gas consumption increases to 2020 are expected to be led by power generation, LNG exports and the transportation sector respectively. Some of the transportation sector developments currently taking place are particularly interesting. As Breaking Energy recently reported, there is increasing momentum behind utilizing LNG to fuel rail locomotives and large ships. With regard to the latter, new emissions regulations are forcing marine transport operators to make some tough fuel-supply decisions.

“The regulatory push comes in the form of the North American Emissions Control Area (ECA).The new regulation is aimed at reducing emissions from ships around ports and within 200 miles of protected coastlines. North American ECAs cover virtually the entire continental coast line. The ECA has a tiered approach with Tier 1 set for implementation on 1 January 2015 and additional restrictions coming into place in 2020.”

Ships will need to start using low-sulfur fuel oil – which is more expensive than bunker fuel – and may also need to install scrubbers, like those used by coal-fired power plants, which present waste disposal costs and challenges. Switching to LNG is an alternate option that comes with its own set of challenges.

The full report can be accessed here.