The U.S. natural gas industry is gathering steam amid changes and challenges that are remaking the business, according to a new report from Black & Veatch.
Last year the Overland Park firm’s annual report on the industry described a cautious optimism about likely growth because of the trove of natural gas being recovered from shale formations in the United States. The updated report released this week strikes a more confident tone, flatly stating that the industry is gaining traction.
“What a difference a year makes,” said John Chevrette, president of the company’s management consulting businesses.
The report, “2014 Strategic Directions: U.S. Natural Gas,” is based on a survey of 447 industry participants. It singles out the announcements of billions of dollars of planned pipeline projects as an example of the growing optimism about the long-term prospects of natural gas, which over the last century has seen its share of boom-and-bust cycles.
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More and more electric utilities are building natural gas plants when they retire coal-fired plants. And natural gas could soon be exported to other countries. A federal proposal to reduce greenhouse gases is giving a further boost to natural gas, which burns cleaner than coal.
Still, the future isn’t without potential blemishes. Regulatory hurdles and citizen opposition to planned pipelines are likely. Finding enough customers who commit to using pipeline capacity or buying natural gas exports are also important.
The industry itself is starting to undergo a shift. It once existed to serve gas utilities, mainly for industry and home heating, but electric utilities’ increased use of the fuel and the coming of natural gas exports are among factors revamping plans for the country’s network of gas pipelines.
A symbol of the transformation is the export of LNG, or liquefied natural gas. Several years ago, before the shale gas revolution, the United States counted on natural gas imports to help meet domestic demand. But no longer.
Deepa Poduval, a principal consultant for Black & Veatch, said 30 LNG export facilities have been proposed, although just a fourth of those are likely to be built. The U.S. Energy Department has approved seven so far. The first LNG export facility to be built in the United States since the 1970s, Sabine Pass in Louisiana, is expected to be finished in late 2015.
Poduval, though optimistic about the future of LNG exports, said it had been tough to secure regulatory approvals to get the LNG exporting facilities built. But increasingly another issue is determining whether they make business sense.
The first export facilities will be less expensive because existing plants once meant to import gas are being retrofitted. That means they are more competitive in snagging demanding foreign customers. Potential and more expensive new facilities will test the market when seeking purchase commitments.
Natural gas, which has made inroads in being used in commercial trucks, is also eyeing other transportation prospects. An LNG-powered railroad locomotive is expected to make a debut in 2016. And there are now about 40 marine vessels that rely on natural gas, and by 2020, 1,800 ships or boats could be using the fuel, according to the Black & Veatch report.