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Strategy & Transformation

Natural Gas Outlook and the Effects It Will Have on Storage

Recently, we attended the S&P Global Platts Gas Storage Outlook Conference. When possible, after we attend events we provide a recap of what we learned for the sake of sharing knowledge. This is our interpretation of what we heard and should be received as such.

The majority of presentations and panels focused on the current state and the long-term outlook for the natural gas market. Gas production is up, prices are down and this will likely continue in the short-term. In the long-term, gas demand is expected to increase because there is a need for a more dispatchable, cleaner and cheaper energy generation source. Let’s explore these reasons in more detail.

Dispatchable – Use of renewables and gas fired generation is expected to increase

The consensus among the panels was that the more we rely on renewables to supply electricity, the more important gas fired generation will become. Renewable energy is less predictable given its dependency on wind, sun or other highly variable and unreliable factors. This means that alternative energy sources must be readily available and easily dispatchable. Gas can fill this void. Gas fired generation is more flexible than coal, meaning it can ramp up and down quicker to fill gaps in renewables energy supply.

Cleaner – Decarbonation and emission regulations favor gas fired generation

According to the panelists, natural gas is the most environmentally friendly hydrocarbon fossil fuel and is the lowest CO2 producer of all fossil fuels. As electricity consumption grows, natural gas can fill the void when renewables are not available. Speakers seemed to favor renewables, electric heat, electric appliances, and electric cars, even though their companies are net-long natural gas. Also they pointed out that as the demand for electricity grows, natural gas consumption will increase. Conversely, coal and heavy crude oil generation will decrease due to environmental reasons. Other factors that the panelists believe will contribute to this shift towards natural gas are public sentiment and increasing energy regulations.

Cheaper – Gas is a lower cost alternative to coal

Gas prices have fallen as producers have become more efficient and increased output. This has made it a cheaper alternative to coal and led to further investments in storage, pipeline capacity and LNG export capacity.

Other impacts of increased production

Given the fact that the long-term gas outlook is favorable, there will be impacts on storage and price volatility:

Localized Storage - The increased reliance on renewable energy will likely lead to further investment in localized natural gas storage. Tim Hermann with Southern Gas Company emphasized, “the ability to address a specific market’s critical operating needs remains one of the most important factors in the gas storage space”. Gas will need to be dispatched quickly when interruptions occur from renewable generation and to avoid pipeline constraints – making localized storage a necessity.

Increased Price Volatility - The expected shift to renewable energy will create further demand for natural gas for the reasons listed above. Local price volatility is also expected to increase as dependence on renewables grows. 

At Veritas Total Solutions, one way we stay up-to-date with the latest energy industry trends is by attending industry conferences and events. We believe in sharing our thoughts and ideas with peers, clients and colleagues so everyone can benefit from what we learned at these conferences and events. These were a few of the trends and themes we heard at the S&P Global Platts Gas Storage Outlook Conference. Please note, all of our event recaps are interpretations and opinions on the topics discussed. If you want to chat with us about a specific event or if you are interested in learning more about our specific capabilities, contact Jeff Olle at jeff.olle@veritasts.com or subscribe to our blog to stay connected.

Written by Jeff Olle

Jeff has over 20 years of proven sales, business development, finance and risk management experience. As the Business Development Director, Jeff is charged with continuing the strategic growth initiatives of Veritas. Jeff attends various energy events and he will share his learning, thoughts and ideas with us.