U.S. gas prices are to gradually soften over the next 18 months if weather for the remainder of the year is close to the 20-year average “normal” – ICF International predicts in its new Forecast Energy Outlook. But the prices may remain uncertain due to regulatory pressures and increased demand.
Growth in gas production should provide sufficient storage refill after winter 2014’s record withdrawals, though it is unlikely working gas levels at the start of next winter will be as high as they have been in recent years. However, accelerating demand growth from liquefied natural gas and Mexican exports, the petrochemical industry and the power sector will place upward pressure on gas prices through the remainder of the decade. As demand growth increases, the potential for price volatility will increase.
As it has in recent years, the Marcellus Shale, stretching from West Virginia through Pennsylvania, is expected to be the fastest growing gas play. Together, the Marcellus Shale and the Utica Shale, concentrated in East Ohio, are expected to account for nearly 80 percent of the projected growth in natural gas production. The growth in shale gas production will require continued investment in new infrastructure to get these new supplies to market.
As far as regulation is concerned, the report points to the recent court rulings favouring the U.S. Environmental Protection Agency (EPA) and its Mercury and Air Toxics Standards (MATS) rule and the Cross-state Air Pollution Rule. EPA’s recent release of its proposed Clean Power Plan, regulating carbon dioxide emissions from existing generation sources, will draw much of that attention going forward. ICF’s retirement projection for U.S. coal plants leading up to the MATS compliance date remains steady in the range of 63 GW, based on a regulatory portfolio that includes EPA’s proposed regulations.
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