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Study sees need for huge investment in natural gas infrastructure

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The United States and Canada will require annual average midstream natural gas investment of $8.2 billion per year, or $205.2 billion total, from 2011 to 2035, according to a new study by ICF International on behalf of the Interstate Natural Gas Association of America Foundation. The new infrastructure is needed to accommodate new gas supplies (mainly shale gas) and growing demand for gas from electricity generators, said the study, North American Natural Gas Midstream Infrastructure through 2035: A Secure Energy Future.

The report’s reference case projects real natural gas prices that rise from $4 to between $6 and $7 per MMBtu (2010$) by 2021 through the end of the study period. It also assumes U.S. population growth at an average rate of about 1% per year and U.S. Gross Domestic Product growth at an average 2.8% per year. Electric load is assumed to increase at an average 1.3% per year, while oil prices average about $80 per barrel in real terms.

The study projects that natural gas consumption in the United States and Canada will increase by an average 1.6% per year through 2035. Total natural gas use across all sectors is projected to rise to about 109 Bcfd in 2035. Incremental demand growth between 2010 and 2035 is 35 Bcfd, of which 26 Bcfd, or 75%, occurs in the power sector.

From a newly projected natural gas resource base of almost 4,000 Tcf, U.S. and Canadian natural gas supplies are projected to grow by 38 Bcfd from about 75 Bcfd in 2010 to about 113 Bcfd in 2035, adequate to meet expanded demand projections in 2035. Unconventional natural gas supplies account for all of the incremental supply as production from conventional areas declines, according to the study. Unconventional supplies (shale, coal bed methane and tight gas plays) will account for approximately two-thirds of the total gas supply mix in 2035.

Not all areas will require new gas pipeline infrastructure, but many areas (even those that have a large amount of existing pipeline capacity) may require new investment to connect new supplies to markets, the study found. In recent years, natural gas producers and marketers have been the principal shippers on new "supply push" pipelines, the ICF study said. "These ‘anchor shippers’ have been willing to commit to the long-term, firm contracts for natural gas transportation service that provide the financial basis for moving forward with these projects."

"This report shows a vibrant natural gas market in the future, and it also demonstrates the need for additional midstream infrastructure to support it," said INGAA President and CEO Don Santa. "The good news is that the natural gas industry has a proven track record of constructing and financing this level of infrastructure."


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