Midstream Executive Sees ‘Light At End Of Tunnel’

PITTSBURGH—Natural gas prices are down, demand is weak and renewable energy sources are deepening their penetration in the residential and commercial energy sector, but Ryan Savage, vice president at The Williams Cos. Inc., said natural gas supply must rise to meet demand in the next decade. 

Admittedly, “that is difficult to talk about right now,” Savage said Dec. 4.

However, the projected demand of U.S. natural gas commitments to Mexico and LNG exports worldwide will match North American residential and consumer natural gas use by 2025, he said. Exports will eventually have to rise to more than 25 billion cubic feet per day (Bcf/d) from roughly 10 Bcf/d in 2019.

“If you’ve got demand growth like that, then we’ve got to increase supply,” he said.

With more than 20 years in the industry, Savage said he’s seen the ups and downs of prices before, in part because of the exuberance of producers. But the longstanding paradox of the industry is that the “cure” for low commodity prices—oil or gas—is low prices themselves.

“We’ve been through this before where we find something that’s a good thing and maybe produce a little too much of it and move a little too much of it and we get a little bit of an overhang,” he said.

LNG export projects under construction, permitted by the Federal Energy Regulatory Agency (FERC) or awaiting a final investment decision (FID) would give U.S. producers another 10.6 Bcf/d of export capacity.

Savage said patience is required while demand catches up, though supply will also have to increase. The Permian Basin is expected to increase gas production by 9.7 Bcf/d from 2018 to 2023, according to Wood Mackenzie. But in the Northeast, the Marcellus and other shale plays are also forecast to grow production by 6.5 Bcf/d. The Haynesville Shale and Cotton Valley areas will also increase production by 5.9 Bcf/d.

“It’s clear to me that natural gas is going to have to grow to meet that demand and it’s going to come from the most advantaged space,” he said. “And, sure, some of those are going to be oil-based spaces, but here in the Northeast in the Marcellus we have a tremendous resource that’s been proven. We’ve had producers that have done pretty amazing work in a low-cost environment of driving costs down.”

In the near-term, however, pricing remains an ugly reality.

“It’s always the elephant in the room right now,” he said. “It’s not good. It’s very bad. But you’ve got to get comfortable with the demand story internationally and in the export market. I think when you get comfortable with that, you can see the light at the end of the tunnel.”