The President and CEO of Tulsa-based Williams Companies says the natural gas market in the U.S., as far his company is concerned, is doing far better than analysts predicted for 2021.
Speaking to potential investors this week at the J.P. Morgan Energy, Power & Renewables Virtual Conference, Alan Armstrong pointed to a Wood Mack forecast out through 2030 which predicted a flat natural gas market for 2021 and only a very small amount of growth from 2020 to 2021.
“But in reality, what we’re actually seeing right now is actually quite a bit stronger than that, this forecast was expecting the 2021 power demand to be off by almost 5 Bcf a day, but that is not occurring,” said Armstrong. “And the expectation was that high gas prices would cause a switching back to coal. So far, we have not seen that and here in the second quarter we’re actually seeing a really nice pull through on gas demand from power.”
He said it’s clear the macro setup is looking “a lot better than this forecast” and LNG exports combined with a recovered industrial market and power generation “is setting up for a pretty nice year here for 2021 demand growth.”
It’s Armstrong’s assessment that as coal fired generation comes off line, “there’s always a question around renewables and the impact on that,” and operators need a reliable backup and that’s where natural gas plays an important role. He said as a result, it’s driving a lot of continued growth on Williams’ Transco system.
Armstrong pointed to renewable energy sources to help Williams move its natural gas to markets. Solar arrays have been installed on existing assets that use a large amount of electricity. Armstrong called it a “perfect opportunity” for the company where it has the benefit of backup of gas-fired generation in the same markets where it also converts over to solar power.
He also took note of the hydrogen front.
“We’re not going to get left behind on that. We’re going to be at the forefront of understanding where those opportunities exist,” he told those considering investments in Williams. Already the company is working with local utilities for their ability to bring hydrogen into the mix.
He explained the challenge is the lower energy content of hydrogen which means added transmission capacity will be necessary.
“We’re going to be at the forefront of that, but there’s a lot — long ways to go to make hydrogen a part of our economy. It’s not going to be easy and it’s not going to be tomorrow.”
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