EIA Outlook Confirms Strong US Gas Growth
The US Energy Information Administration (EIA), in its Annual Energy Outlook 2018 (AEO2018) released February 6, has confirmed consensus projections that domestic natural gas production will increase dramatically between now and 2050.
The outlook, which presents a range of modelled projections subject to a variety of economic conditions rather than a simple forecast, predicts in its Reference case that US natural gas production will average close to 120bn ft3/day in 2050, up from around 78bn ft3/day in 2017. But different cases, the EIA notes, offer significantly different outcomes: in the High Resource Technology case, where supply costs are lower and a greater resource is available, production in 2050 reaches 150bn ft3/day; in the Low Resource Technology case, with higher supply costs, production through 2050 is essentially flat at some 80bn ft3/day.
“Near-term production growth across all cases is supported by growing demand from large natural gas-intensive, capital-intensive chemical projects and from the development of liquefaction export terminals in an environment of low natural gas prices,” the outlook says.
Shale gas production from the Marcellus and Utica developments in the US Northeast drive much of the domestic production growth, the EIA notes, although production of gas associated with tight oil production in the Permian basin also contributes significantly.
While natural gas production is expected to climb, AEO2018 also notes that Reference case benchmark natural gas prices at Henry Hub will be held in check by some of the same factors that push output higher, and will, in fact, be 14% lower than those projected in AEO2017. By 2050, AEO2018 projects in its Reference case, natural gas at Henry Hub will average about $5/mn Btu.
“Natural gas prices in the AEO2018 Reference case are lower than in the AEO2017 Reference case because of an estimated increase in lower-cost resources, primarily in the Permian and Appalachian basins, which support higher production levels at lower prices over the projection period,” the outlook says.
In the Low Resource Technology case, the price in 2050 is projected at $9.40/mn Btu, while in the High Resource Technology case, the price in 2050 is projected at around $3/mn Btu, virtually unchanged from today.
Natural gas exports in the Reference case, meanwhile, reach close to 28bn ft3/day by 2050, led primarily by LNG exports (about 14bn ft3/day) and increased pipeline exports to Mexico, largely in the early years of the forecast period.
Pipeline exports to Canada increase gradually throughout the forecast period, reflecting the proximity of Marcellus and Utica production to key eastern Canadian markets, while pipeline imports from Canada, in a projection not likely to be welcomed by challenged western Canadian producers, decline gradually, to around 3.5bn ft3/day by 2050 from about 7bn ft3/day in 2017.