VINACHEM

Coal-to-gas switching in the US could decline as much as 2.6 Bcf/dyear-on-year in 2013 because of higher natural gas prices, increasedrenewables generation and forecast lighter cooling demand this summer, areport BNP Paribas issued late Monday said.

Last April, when gas prices fell below the $2/MMBtu mark, it becamehighly competitive with coal in the power generation market. That month aswell, gas and coal were equally matched for the first time ever for powergeneration market share, Energy Information Administration data showed.

Since then, however, gas prices have steadily recovered, with BNPPreiterating its 2013 gas price forecast of $3.50/MMBtu.

Pointing to EIA data that shows that since that watershed April event,coal's share of the power generation market rose to 42.2% last October,compared with about 25% for gas.

"A portion of the market captured initially with low gas prices, hasreverted back to coal plants as prices have recovered," the report said.

Moreover, wind generation came online significantly last year, BNP said.Some 13.532 MW of new wind plants came online, compared with about 10,109 MWof new gas-fired units. About 60% of these wind additions occurred late in thefourth quarter and will likely play a role in further curbing gas demand thisyear, BNPP said.

Although coal-to-gas switching will continue to occur most aggressivelyin the South, the report said, BNPP sees the market share served by gasplants in the region sliding from 39.9% last year to 34.6% this year.

"The combination of this lost market share and slightly coolertemperatures will results in a 2.6 Bcf/d decline in electric power demandthis summer."

In the longer term, however, BNPP said electric power gas demand willremain relatively well supported as longer as gas prices stay below the$5/MMBtu mark.

According to futures settlements Monday, prices hold sustainable$5/MMBtu handles beginning in October 2019.