Demand for natural gas has failed to grow in proportion to the decline in oil deliveries because of concerns over unresolved regulatory issues in the United States said industry analysts and gas utility company sources. Natural gas is not free to compete said Larry Makovich director of utilities service at Data Resources Inc problems on pipeline open access and take-or-pay liabilities still weigh heavily on end-users decision to switch to natural gas. A manager with an East Coast gas distribution company agreed that reluctance among end-users often stemmed from fear of unresolved regulatory issues. The fact that at the federal level open access is not yet firmly in place threatens to impede free flow of natural gas from producers to consumers he said. Michael German an economist with the American Gas Association said while a significant amount of gas was now replacing oil in dual-fuel boilers the progress of expanding the marketshare of gas was slow. First quarter natural gas consumption data is not available until June. In the first three months of 1987 residual fuel demand fell by an average of 55000 barrels per day according to the American Petroleum Institute. Natural gas however was not able to take full advantage of the decline in oil consumption. AGAs German said that while industrial consumers were concerned with regulatory issues in their long-range capital investment decisions in the dual-fuel boiler market relied on spot purchases. With all the capability of switching (from oil to natural gas) already there price of the fuel is the only concern he said adding that compared with the same period last year January natural gas price at burner tip is 16 pct lower for industrial users and 32 pct lower for utilities. German attributed the sluggish performance of natural gas to lower demand in the utility sector as a whole. March was warmer than normal which cut down gas consumption not only in home heating but also in electricity generation he said. In March according to API monthly statistics residual fuel deliveries fell by 13.6 pct to 1.2 mln barrels per day from the same period a year ago. While API specifically mentioned lower natural gas prices had put residual fuel at a price disadvantage among electric utilities and industrial users industry analysts believed the role of natural gas was over-stated. Makovich of DRI noted much of the decline in oil in the fuel mix was taken up by new nuclear capacity coming on stream in the last few years. Nuclear capacity rose nine pct in 1986 and he projected the same rate of growth for 1987 and 11 pct growth in 1988. In contrast oil and gas together represented only 15 pct of the fuel mix in 1986 and should decline to 13 pct by 1989 he said. Within this sector gas share fell to 66 pct in 1986 from 76 pct a year ago due to competition from falling oil prices he added. But this year gas was expected to recapture only two pct of the share Makovich said. Michael German of AGA agreed and said Nevertheless outlet for several hundred billion cubic feet of gas a year is significant in a glutted market.
GAS GROWTH SEEN HURT BY REGULATORY UNCERTAINTY