The use of natural gas for power generation will continue to expand, the industrial sector of the U.S. economy will see a modest revival, and the demand for natural gas vehicles (NGV) will continue to rise through 2035, according to analysts at Navigant Consulting Inc.

Meanwhile, as gas prices recover in the coming years, drilling is expected to return to dry gas plays, including the Barnett, Fayetteville and Haynesville shales. But the bulk of the growth in gas production will continue to come from Appalachia and the Eagle Ford Shale.

According to Navigant’s “North American Natural Gas Market Outlook — Fall 2013,” released earlier this month, consumer demand is forecast to increase from 77.8 Bcf/d in 2013 to 108.7 Bcf/d by 2035.

“Most of the significant growth in the sector will occur over the next decade, driven by a combination of greater use of gas-fired generation plants, higher natural gas demand for industrial use and growth in NGV sales,” the analysts said in an executive summary of the report. “Projected domestic consumption of natural gas will grow at an average of 2.2% per year from 2013 through 2020, with the growth rate moderating to an average of 1.2% per year thereafter.”

The analysts said a good portion of the projected growth prior to 2020 will be due to increased coal-to-gas switching for power generation, a trend that will benefit from persistently low gas prices and scheduled retirement of existing coal-fired generation plants. Natural gas demand will also increase — and fuel a renaissance of U.S. industry — thanks to low gas prices and the use of gas for Canadian oilsands production.

“Total North American natural gas consumption for gas-fired generation and industrial use are projected to grow at average annual rates of 3.7% and 2.4%, respectively, through 2020,” the analysts said. “Between 2020 and 2035, projected natural gas demand growth will slow to 1.9% annually for gas-fired generation and 0.5% annually for industrial use.

“Regardless of this slowdown, all indications are for healthier development of the North American natural gas market. Additionally, U.S. fuel demand for NGVs will increase from 0.2 Bcf/d in 2013 to 5.0 Bcf/d in 2035. U.S. NGV fuel demand will increase its market share from negligible amounts in 2013 to 5.9% of total U.S. consumer demand.”

Navigant said that during the forecast period, gas consumption in the residential and commercial sectors will remain flat, with an average annual growth rate of 0.1%, because the impact of household growth will be offset by efficiency gains.

The analysts said that the collective projected dry gas output growth from the aforementioned shale basins will account for 79% of the total U.S. dry gas production growth from 2013 through 2035. Overall, North American dry gas production is forecast to grow 44%, from 87.3 Bcf/d in 2013 to 124.5 Bcf/d in 2035.

“As gas prices recover in the coming years, drilling activities are expected to return to dry plays including Haynesville, Fayetteville and Barnett, which will contribute to an overall increase in U.S. natural gas production,” the analysts said. “The bulk of the U.S. dry natural gas production growth, however, is projected to come from the Appalachia and Eagle Ford…”

By comparison, the analysts said gas volumes produced from conventional resources, such as the offshore Gulf of Mexico, are projected to decline.

“Similarly, growth in the Western Canadian Sedimentary Basin [WCSB] shales more than offsets the projected steep decline in Canadian conventional production,” the analysts said. “As a result, the percentage of unconventional gas that makes up North American dry natural gas production is projected to grow from 35% in 2013 to 58% in 2035.”

Navigant predicts that the U.S. will become a net exporter of liquefied natural gas (LNG) by 2017, and a net exporter of gas by 2019. Citing projects scheduled to come online on the Gulf Coast, the U.S. West Coast and in Canada, the firm predicts up to 7.8 Bcf/d of LNG will be exported from North America by 2022.

The analysts also predicted that gas prices will recover from 2012 lows but will remain at moderate levels for the next few years. Henry Hub prices are projected to average $3.81/MMBtu between 2013 and 2015. From 2016 to 2020, prices were projected to rise above $5/MMBtu.

“After 2020, natural gas prices are projected to continue the upward trend — albeit at a slower rate — reaching $6.93/MMBtu in 2035,” the analysts said. “These projected price levels are supportive of natural gas drilling economics, and therefore enable sustainable upstream development.

“At the same time, end-users, industrial players and utility operators will continue to benefit from moderate and stable natural gas prices.”