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Black & Veatch: growing opportunities for natural gas

Published by , Senior Editor
LNG Industry,

In its latest report, Black and Veatch outlines how emerging global markets, LNG projects and an increased number of coal plant retirements represent growing opportunities for the natural gas industry, despite low-price conditions.

The ‘2016 Strategic Directions: Natural Gas Industry Report’, reflects widely varying market outlooks for the upstream, midstream and downstream segment. However, the report maintains that optimism remains strong as organisations adapt for future growth.

The report states that advanced technology solutions, targeted programme management services and a greater focus on efficiency and maintenance help operators to increase revenue. Safety, including physical and cybersecurity, is also a key issue, with 70% of survey respondents identifying it as their top long-term industry issue.

John Chevrette, President of Black & Veatch management consulting, said: “Sustained low natural gas prices are forcing much of the industry to create efficiencies without sacrificing safety and reliability […] Safety’s intersection with cybersecurity and physical security at the distribution level must also be carefully evaluated as technology is increasingly used to boost system performance.”

The report analyses how coal plant retirements and lower operating dispatch costs have moved natural gas to its place as the primary energy source in the US. It also explores the links between rising use of distributed energy resources (DERs) and natural gas energy. Utilities will likely be impacted most by the growth of these energy sources, and may be required to adopt new rate models to comply with regulations that incentivise their use.

The report also found that upstream and midstream participants are coping with low prices by rewriting capital investment plans. This includes redirecting much of their focus to internal operations enhancements, which 71% of respondents listed as a current strategy. In some cases, organizations are concentrating on merger and acquisition activity to enhance balance sheets and gain access to untapped markets.

Hoe Wai Cheong, President of Black & Veatch’s Oil & Gas business, said: “For investors and project developers seeking to deploy capital in the gas sector, perhaps the best time to invest is now, when capital costs are lower […] Organisations that wait to consider investment options may lose a competitive advantage that could evaporate in a more demand-driven market.”

Black & Veatch also said that 51% of respondents indicated that natural gas export terminals, floating LNG (FLNG) facilities and LNG import terminals coming online will decrease LNG prices worldwide.

Just under half of respondents (48%), believe that US federal or state regulatory commission policies to establish new funding or cost mechanisms should be implemented to facilitate development of natural gas infrastructure.

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