By Chris O’Malley

Electric demand, industrial use and liquefied natural gas exports will make the Southeast the top destination for natural gas in the U.S. by 2019, according to a Bentek Energy study for America’s Natural Gas Alliance (ANGA).

Richard Smead, managing director of RBN Energy, presented the study results at a meeting of MISO’s Entergy Regional State Committee in Austin, Texas, last week.

Demand in the 10-state Southeast region will increase by 9.5 Bcf/d by 2024, about 39% of the projected demand growth in the U.S.

Gas burned to produce power will increase by 2.2 Bcf/d in the region, a 31% jump, with triple-digit increases in Tennessee (+290%), Kentucky (+276%) Arkansas (+150%).

“The rate of growth in power generation has been huge. A lot of that is driven of course by coal retirements … which raises the question of whether gas is capable of doing this,” Smead said. The answer, he said, is yes.

The study concludes that there is enough supply and pipeline capacity to meet any plausible power generation demand scenario in the Southeast “with stable, affordable power,” Smead said.

LNG Exports

Combined with LNG exports and increased industrial demand, the Southeast will become the nation’s top demand region by 2019, surpassing the Northeast. LNG exports will be responsible for more than half of the Southeast’s demand growth, with LNG shipments from three terminals in the Gulf and one in Georgia projected to hit 5.7 Bcf/d by 2021.

The Northeast is projected for a 3.4 Bcf/d increase in demand by 2024, less than a quarter of its projected 15.1 Bcf/d increase in production.

The Southeast’s demand growth will exceed its projected 3.1 Bcf/d increase in production, but its existing pipeline infrastructure — originally built to carry gas from the Gulf of Mexico to other regions — and pipeline projects capable of carrying 13 Bcf/d should be able to handle the imports. The region currently imports more than 5 Bcf/d.

There are 200 major industrial projects proposed for the Southeast, including a methanol plant envisioned for Louisiana. That guarantees that the pipelines will get built, Smead said. “It’s not being left to the [electric] utilities to pay for it all.”

Break-Even Prices Down

Meanwhile, producer break-even prices have fallen below the levels assumed in the Bentek study, which projects North American production growth of 26 Bcf/d by 2024.

“We’re running into studies now that are indicating between big increases in efficiency and the gas coming forward with oil production … that producer break-even prices are really closer to $2.50 to $3 [per MMBtu], meaning production growth just keeps on going,” Smead said.