Natural gas consumption is expected to continue growing into the year 2020 in the United States at the expense of coal and roughly at twice the rate of oil, leaving coal companies like Alpha Natural Resources (ANR) in a difficult position going forward, says Iain Reid, Senior Equity Research Analyst at Jefferies & Company, Inc.
“From 2012 onwards, we’re forecasting a rate of growth which is 2.7% per annum compound to 2020,” Reid said. “Gas demand is expected to grow faster than coal. In fact, it is displacing coal or should be displacing coal in the longer term in most of the major markets either due to price reasons or due to environmental reasons.”
Reid says the demand for natural gas from OECD countries has been difficult in the years since 2008, but demand since 2012 is on the rise. He adds, however, that Europe has been slower in its phasing out of coal due to cost pressures.
“[Reduction of coal consumption] hasn’t been the case in 2012 in Europe, which has got an environmental ambition to try and drive coal out of the generation market, but coal is so cheap now compared to natural gas in Europe. In fact, the opposite has been occurring in this year,” Reid said.
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