Energy – America’s treasure – was the topic of this column last September. Unfortunately, I may have grossly understated the enormity of this bounty and the need for infrastructure investment to meet needs.
Based on additional industry studies and worldview, it is now forecast that the oil and gas industry is expected to make more than $5.1 trillion (that’s TRILLION boys and girls!) in cumulative capital expenditures over the next two decades. This is staggering.
Global demand for energy will rise 37% by 2035, or 1.4% per year. Over this time frame, oil demand will rise 0.8% per year and natural gas demand 1.9% per year. Production of LNG in America will grow 8% annually through 2020. Our Energy Information Administration estimates consumption over the next 20 years at only 25.8% of resource use and just 16% of availability.
Other indicators exist. In 2008, 3.8% of all construction workers were on oil and gas projects; it was 6.4% in 2012 and expected to be 10% by 2017. Readers are urged to recognize and correlate energy-industry demand with equipment used by these energy sectors: pipe (57,201 miles are in design phase today), valves, compressors and storage tanks (in mid-April last year, America ran out of crude-oil storage space). These demand increases will translate to a 10-15% increase in steelmaking capacity.
Another way to view the matter is to look at world demand. ExxonMobil forecasts gas-demand growth will be 65% by 2040 versus 2010 and world LNG exports will triple. China is expected to equal or exceed the electricity generation of all Organisation for Economic Co-operation and Development member nations over the next 15 years. A Brookings Institution study predicts that over these same 15 years (to 2030), an additional 3 billion people will join the current 2 billion considered “middle class” worldwide today. With primary expansion in Asia, the Association of Southeast Asian Nations economies are forecast to triple and energy use expected to increase 80% by 2030. And know that these lands are home to 616 million people today, and 150 million of them have no access to electricity. Preferably, it will be generated by gas-fired plants.
Yet a different way to examine all this is to recall that Presidents Obama and Xi Jinping of China agreed in principle to carbon dioxide emissions targets in November 2014, ensuring that China has 15 more years of emissions increases before efforts will begin to reverse the trend in 2030 (snicker). China, which has 19% of the world’s population, is now responsible for 29% of per-capita emissions.
Elsewhere, your government plans to inhibit the American energy sector as follows. The Pipeline and Hazardous Materials Safety Administration is mandating via regulation that pipeline location information be “enhanced” to show position of buried lines to within 50 feet versus currently required accuracy to within 500 feet. The Interstate Natural Gas Association of America estimates that compliance will cost about $1.1 billion. But do not worry: The Federal Energy Regulatory Commission “is considering allowing interstate pipelines to recoup costs of complying with federal environmental and safety regulations. (Thanks so much for your kindness, bureaucracy.)
One of the opportunities readers might check is supplying equipment to third-party suppliers of gas to users in pipeline-restricted regions. In today’s world of $3.50-4.00 per Mcf gas (which is forecast to decrease), some consumers are paying as much as $11. A contractor can build a compressor station near a pipeline station and compress 500 psi of gas to 3,600 psi, store it in 2-foot-diameter tubes 16 feet long, and deliver it to users in a 50- to 75-mile service radius. This approach is rapidly growing in popularity.
All of this, of course, spells a bright economic future for American industry, especially in the natural gas and LNG sectors. America’s Natural Gas Alliance expects that 3.5 million new U.S. jobs will be created over the next two decades and that $475 billion of new economic growth and $2.5 trillion in revenues will change the face of our country.
Challenges exist, but increased gas-fired electric generation, using gas as a transportation fuel, our national reindustrialization, and both new and upgraded collection and distribution infrastructure (more than half the entire system is more than 40 years old) portends a macro-economic boom.
America is truly blessed with these energy resources. Our job – all of us – is to work to ensure the potential they offer is realized.