On Monday, EIA published its base case version of its 2014 Annual Energy Outlook (AEO2014). EIA predicted that natural gas production will rise steadily throughout the forecast period, reaching 37.5 trillion cubic feet (Tcf) per year by 2040, an increase of 56% over 2012 levels. This projected increase in production is notably higher than the outlook a year ago in AEO2013, largely the result of higher shale gas production growth. The increase in supply will satisfy higher growth in both domestic consumption and exports.
Shale gas production is expected to double, reaching 53% of all produced volumes by 2040, up from 40% in 2012. As with overall gas production, production from shale plays is higher than in AEO2013 because of an updated, more localized assessment of well recovery and decline rates. Natural gas from tight formations continues to be an important source of supply, as well.
Total domestic natural gas consumption is projected to grow by 6.0 Tcf from 2012 to 2040, when it would equal 44% of the 13.5 Tcf increase in U.S. production. Other highlights:
- All consumption sectors except residential grow significantly through 2040.
- The greatest increase occurs in industrial gas consumption, including lease and plant fuel, which will rise by 2.5 Tcf. This is 59% higher than projected in AEO2013, the result of increased manufacturing shipments, particularly for chemicals, as well as generally higher levels of energy intensity.
- The electric generation sector is projected to increase its gas consumption by 2.0 Tcf from 2012 to 2040 in AEO2014, up significantly from its projected 0.2-Tcf increase over this period in AEO2013. Natural gas satisfies the majority of growth in U.S. electric generation.
- The use of natural gas in the transportation sector also shows strong growth.
According to the AEO2014, the United States will become a net exporter of natural gas by 2017, two years earlier than seen in AEO2013. Net natural gas exports will reach 5.8 Tcf by 2040, versus net imports in 2012 of 1.5 Tcf. The growth in net exports accounts for 54% of projected production growth through 2040, and is 39% higher than projected in AEO2013. Other AEO2014 trade highlights:
- Net LNG exports will rise by 3.5 Tcf over the AEO2014 projection period. This increase is attributable to a more optimistic assessment of the number of liquefaction trains that can simulataneously be constructed in North America, as well as the increased capacity to produce natural gas domestically.
- By 2040, net pipeline exports to Mexico will grow to 3.1 Tcf, from 0.6 Tcf in 2012. This growth is 32% higher than seen in AEO2013, as the AEO2014 factors in the effect of additional pipeline infrastructure built for the Mexican market to receive more gas from the United States via pipeline, and less gas from LNG imports.
- While the United States is projected to continue to be a net importer of natural gas from Canada, the volume decreases to 0.7 Tcf by 2040, versus 2.0 Tcf in 2012. Pipeline imports from Canada are largely projected to occur in the western United States, with exports to Canada from the eastern United States projected to increase significantly.
(For the Week Ending Wednesday, December 18, 2013)
- Following three weeks of weather-driven increases, natural gas spot prices decreased slightly at most trading locations in the country. However, the Henry Hub spot price increased slightly, from $4.24/MMBtu last Wednesday, December 11, to $4.26/MMBtu yesterday.
- At the New York Mercantile Exchange, the January 2014 contract declined from $4.337/MMBtu last Wednesday to $4.251/MMBtu yesterday, ending five consecutive weeks of increases in the front-month contract price.
- Working natural gas in storage decreased to 3,248 Bcf as of Friday, December 13, according to the EIA Weekly Natural Gas Storage Report (WNGSR). Stocks declined by a record 285 Bcf for the week. This is the largest withdrawal since EIA started publishing weekly storage data in 1994. Storage levels are 13.1% below year-ago levels and 7.4% below the 5-year average.
- The natural gas rotary rig count totaled 369 this week, a decrease of 6 from the previous week, according to data released December 13 by Baker Hughes Inc. The oil rig count rose by 14 to 1,411 active units. The total rig count is 1,782, up 7 rigs from the previous week, but down 17 from a year ago.
- The weekly average natural gas plant liquids composite price rose 1.2% this week (covering December 9 through December 13) compared to the previous week, and is now at $11.00/MMBtu. Propane and ethane drove the increase in the composite price, rising by 5.0% and 7.2%, respectively, over this period. Isobutane decreased by 5.3%, while butane decreased by 3.8%, and natural gasoline decreased by 2.4%.