U.S. natural gas supply will increase from 72 Bcf/d in 2015 to nearly 110 Bcf/d by 2035, driven largely by production increases in the Marcellus Shale, according to Navigant Consulting Inc.
Last year, U.S. production grew by 6.1 Bcf/d, or 9.2%, over the course of the year, the firm said in a new report, "North American Natural Gas Market Outlook, Year-End 2014." The "only possible constraint" to continued growth is the rate of infrastructure development in the Northeast, it said.
In the near term, the bulk of U.S. dry gas production growth is projected to come from the Appalachian Basin and from the Eagle Ford Shale the report said, adding that the two basins supply 55% of the country's shale gas production. Rounding out the top supply sources is the Gulf of Mexico, Navigant said (see related story).
New infrastructure in the Marcellus and Utica shale region, coming online around 2017, is expected to relieve bottlenecks and allow stranded gas to move to market, enabling prices to recover to levels similar to the broader North American gas market.
"The additional forecast takeaway capacity in the Northeast is expected to affect the broader gas market as well," Navigant said. "This is particularly true for the East North Central (ENC) Census region of the United States and the Canada East (CAN-E) region of Canada. With the Rover [see Daily GPI, Feb. 23] and Atlantic Sunrise [see Daily GPI,March 31] pipelines expected to come online in the next few years, the ENC is likely to see an increase in flows from the Appalachian region of about 1 Bcf/d, while the CAN-E region will see an increase of about 0.5 Bcf/d by year-end 2017."
Further, Navigant said, the Marcellus/Utica region buildout and other pipeline capacity additions "have far-reaching implications for prices further upstream and downstream into areas as far as Western Canada, the Midcontinent market in Chicago, and back down into the Gulf producing regions."
For the near term, the continental natural gas market will be largely supply driven, Navigant’s Gordon Pickering, director of the energy practice, told NGI. However, the report said demand growth will be steady, mainly driven by increasing demand for gas to fuel power generation.
"Supply side growth continues to drive most other aspects of the natural gas industry in North America," Pickering said. "...[T]his strong supply basis is giving rise to a new chapter of the gas industry, with the culmination of a half decade of new LNG [liquefied natural gas] project development and the beginning of a new, global market for natural gas."
For LNG, Navigant is projecting exports equivalent to about 8 Bcf/d from the United States and 2 Bcf/d from Canada by about 2021, Pickering said.
Navigant's outlook foresees declining gas prices in the near term and more stable, less volatile prices over the long term. "Natural gas demand from all sectors -- including the stagnant residential and commercial markets, the still-tepid industrial sector, new LNG exports, the potential spread of natural gas vehicles and, most importantly, the electricity generation sector -- is expected to grow."
Growing supply and demand with enhanced access to supply will create "a relatively more balanced market that exhibits improved reliability and lower price volatility," Navigant said.