United States natural gas production is expected to increase every year through 2035 thanks to increased shale development, according to the U.S. Energy Information Administration's (EIA) complete version of the Annual Energy Outlook 2012 (AEO2012). Just as the preliminary report released in January found (see Shale Daily, Jan. 24), the EIA also believes the United States will transition from being a net importer to a net exporter of natural gas in approximately nine years.
The EIA said much of the growth in gas production in the AEO2012 reference case results from the application of recent technological advances and continued drilling in shale plays with high concentrations of natural gas liquids and crude oil. In the case, shale gas production increases from 5 Tcf per year in 2010 (23% of total U.S. dry gas production) to 13.6 Tcf per year in 2035 (49% of total U.S. dry gas production).
This rapid growth in domestic production will exceed consumption in the country early in the next decade, the EIA said.
However, uncertainties surrounding shale gas development forced the EIA to create alternate cases providing different scenarios. "When looking forward to 2035 there are unresolved uncertainties surrounding the technological advances that have made shale gas production a reality," the EIA said. "The potential impact of those uncertainties results in a range of outcomes for U.S. shale gas production from 9.7 to 20.5 Tcf per year when looking forward to 2035."
EIA Administrator Adam Sieminski added that "uncertainty is inherent in long-term projections. By modeling scenarios using a range of assumptions about market, policy, and technology drivers, we gain a better understanding of the potential impacts in critical areas of uncertainty."
The reference case sees gas prices to all users slumping through 2015 before rebounding by 2020. Using 2010 dollars, the average price to all users reference case for 2010 was $7.16/MMBtu, which drops to $6.45/MMBtu in the 2015 case before rebounding to $6.77/MMBtu in the 2020 case. The 2035 case envisions gas prices of $9.30/MMBtu.
The United States is projected to become a net exporter of liquefied natural gas (LNG) in 2016, a net pipeline exporter in 2025, and an overall net exporter of natural gas in 2021. The outlook reflects increased use of LNG in markets outside of North America, strong domestic natural gas production, reduced pipeline imports, increased pipeline exports and relatively low natural gas prices in the United States compared to other global markets, EIA said.
On a broader energy scale the rate of growth in energy use slows over the projection period, reflecting moderate population growth, an extended economic recovery and increasing energy efficiency in end-use applications. U.S. energy consumption grows at an average annual rate of 0.3% from 2010 through 2035 in the AEO2012 reference case. "The U.S. does not return to the levels of energy demand growth experienced in the 20 years prior to the 2008-2009 recession, because of more moderate projected economic growth and population growth, coupled with increasing levels of energy efficiency and rising energy prices," the EIA said.
The EIA also foresees continued growth in domestic crude oil production. "Domestic crude oil production has increased over the past few years, reversing a decline that began in 1986," the EIA found. "U.S. crude oil production increased from 5.0 million b/d in 2008 to 5.5 million b/d in 2010. Over the next 10 years, continued development of tight oil, in combination with the ongoing development of offshore resources in the Gulf of Mexico, pushes domestic crude oil production higher."
Because technology advances that have provided for recent increases in supply are still in the early stages of development, future U.S. crude oil production could vary significantly, depending on the outcomes of key uncertainties related to well placement and recovery rates. Those uncertainties are highlighted in several cases completed as part of AEO2012 and discussed in an article examining impacts of uncertainty about current estimates of the crude oil and natural gas resources.
In addition to the reference case, the EIA also ran 29 alternative cases which show how different assumptions regarding market, policy and technology drivers affect projections of energy production, consumption, technology and market trends and the direction they may take in the future.