Growing U.S. Industrial Natural Gas Demand

October 16, 2016

Artist's rendering of Shell's Monaca Ethane Cracker outside Pittsburgh Source: Natural Gas Now (via Forbes)

Power generation, LNG exports globally and pipeline exports to Mexico and Eastern Canada, and new industrial demand are the three rapidly growing baseload natural gas demand markets. Let me start off on an important tangent: You should know that these expanding markets effectively ensure that U.S. gas production will deliver. Because again, we already know that the gas resource and proven reserves are there (here).

The industrial sector is second after power generation and accounts for 28% of U.S. gas demand, compared to nearly 40% two decades ago. Many feel U.S. industrial gas demand might have peaked at 23.3 Bcf/day back in 1997, but I’m not so sure. Industry still builds the cement, asphalt, and steel that build our cities, where a rising 82% of all Americans live.

Industry also makes the appliances, vehicles, electronics, and even the agricultural products that we rely on every day. The industrial sector uses natural gas as a fuel and/or feedstock to meet numerous energy requirements, making chemicals, plastics, and other key products. Ethane is a key component of natural gas and used as the primary building block of most plastics.

In fact, a rapidly expanding middle class is creating massive global demand for plastics and other chemicals that will increase by more than 4% a year, double the demand growth rate for energy. The chemical sector will account for over half of all U.S. manufacturing spending this year, increasing production of ethylene and polyethylene – the world’s most common plastic. Manufacturing accounts for nearly 85% of total industrial gas demand, with the rest consumed primarily in the agriculture, construction, and mining sectors.

U.S. non-export natural gas demand should continually increase by 1-2% per year, or 6 Bcf/day every five years, particularly as environmental laws are enacted that favor gas and renewables. Not including exports, EIA has "industrial and electric power sectors make up 49% and 34% of this growth, respectively." ....



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