The Rise of Supply and Demand
Advancements in natural gas extraction technologies have launched an unstoppable ripple through the energy market, underscoring the rising significance of powerful shale basins in the U.S., such as the Marcellus and Utica plays in the Northeast, the Permian Basin in western Texas and southeastern New Mexico, the Niobrara Formation in Colorado and Wyoming, and many more. Suddenly, regions formerly dependent on coal and nuclear power had an abundant supply of a cleaner, more cost-effective option to source.
“The Northeast has rocketed toward natural gas,” says Dave Daley, a regional practice manager at Burns & McDonnell. “There is an enormous new supply of natural gas in the U.S. now, and the market has responded with new sources of demand that didn’t exist 10 years ago.”
Unlike coal, which primarily serves the power industry in the U.S., natural gas provides a wide range of profitable potential. While natural gas continues to heat homes, the power industry has taken an interest in its ability to respond to gaps in reliability left by renewable sources — a valuable option for a basic supply of electricity, or the baseload. As an added benefit, natural gas burns cleaner, produces a significantly lower level of carbon dioxide (CO2), and does not produce ash ponds, ash piles or other waste collections.
“Natural gas could be a solid baseload supply for the next 30 to 50 years,” says Tom Graves, an economist and market strategist at Burns & McDonnell. “As the nation transitions to more renewable energy, natural gas can provide a bridge to the flexible power we need to fill in those gaps.”
The chemicals industry also is responding to this abundant domestic fuel source. The Marcellus field produces wet gas — natural gas that contains a substantial amount of heavy hydrocarbon compounds that must be stripped out — and the chemical industry has developed a market for that liquid byproduct. As a result, the number of ethane cracker facilities has risen, breaking down these compounds to create polyethylene used in packaging, insulation, bottles and more, as well as other chemical components, such as ethylene oxide, vinyl acetate and ethylene dichloride.
Whether producing, consuming or converting, the demand for natural gas has spread across the nation — even into areas that don’t have indigenous sources, such as Georgia, Florida and Alabama. To reach these markets, the pipeline industry is charting new courses.