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Industries using more natural gas

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WASHINGTON, DC - There is some encouraging news for the Valley's shale boom.

The U.S. Energy Information Administration reported Thursday that natural gas use for industrial purposes was more than 3% from the first five months of 2013 compared to the same period in 2012.

Higher industrial gas usage reflects recent economic gains and sustained, historically low natural gas prices that have provided operators of natural gas-intensive industrial facilities in the United States a cost advantage relative to competing facilities that rely on higher-cost energy sources.

Industrial customers form an important gas-use sector, using natural gas for a variety of purposes, including the following:

Firing boilers for steam needs

Direct heating for melting, baking, or drying commodities, such as in steel, paper, glass, and food

Operating a combined heat and power (CHP) facility, which provides both heat and local electricity to run a factory, instead of buying electricity from the grid

In recent years, the electric sector has overtaken the industrial sector as the largest natural-gas consuming sector.

However, there has been modest but consistent annual growth in industrial gas use following the sharp economic decline during 2008 and 2009.

Unlike the electric sector, whose demand for natural gas is highly price-sensitive, the industrial sector is slower to respond to changes in price.

Many industrial plants can increase marginal production relatively quickly, but they often have limited flexibility when choosing fuel energy and feedstock sources.

Entirely new petrochemical or manufacturing plants are capital-intensive and take several years to come on line.

The real, inflation-adjusted price of natural gas is currently low by historic standards, and the price of natural gas to industrial consumers is typically close to the spot price because of their large purchasing power and regularity of consumption.

If natural gas prices remain low, the industrial sector is poised to grow, and existing industrial natural gas consumers stand to become increasingly competitive both here and abroad.

Various manufacturing indicators show an up tick in industrial activity.

For example, the Federal Reserve's forecast of the Manufacturing Production Index in 2013 is expected to near its 2007 peak, underscoring economic recovery since the financial crisis.

 

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