Higher U.S. benchmark natural gas prices in 2017 helped push power burn lower, despite a large increase in gas-fired capacity across the country that’s expected to continue this year, the Energy Information Administration said in a note on Tuesday.
The average Henry Hub price last year was $3.01/MMBtu, up about 50 cents from a 17-year low in 2016, when Lower 48 dry gas production also fell for the first time since 2005. Higher prices forced gas consumption for power generation, one of the industry’s leading sources of demand, to decline roughly 6% from 2016 levels.
Power burn dropped from 27.3 Bcf/d in 2016 to roughly 25.6 Bcf/d last year, based on data through October and projections for November and December.
Last year, EIA forecast there would be 11.2 GW of gas-fired capacity additions in 2017 and 25.4 GW this year. The agency said at the time that if all the plants came online, annual net capacity additions would reach their highest levels since 2005.
Last year’s power burn decline, however, was offset by a boom in gas exports led by growth in liquified natural gas (LNG) capacity and increasing pipeline exports to Mexico. The EIA now expects the United States to become a net gas exporter on an annual basis in 2017 for the first time since 1957.
U.S. LNG exports averaged 1.9 Bcf/d last year, or 1.4 Bcf/d higher than in 2016, as liquefaction capacity continued to expand. Assuming all liquefaction facilities currently under development are completed, the EIA said capacity could reach 9.6 Bcf/d by 2019, or become the third largest in the world behind Qatar and Australia.
Meanwhile, dwindling imports from Canada, in part because of Appalachia projects to deliver more natural gas to the Midwest and from growing pipeline shipments to Mexico, have increased exports. The EIA currently expects gross pipeline exports to both Mexico and Canada to increase by 0.6 Bcf/d this year and by 0.8 Bcf/d in 2019 to an average of 8 Bcf/d, according to its Short-Term Energy Outlook (STEO).*
Some of those shipments should be aided by a near doubling of U.S. export pipeline capacity to Mexico in the next two years. But EIA said Tuesday that such growth is highly “contingent on the timely completion of Mexico’s connecting pipelines,” which have experienced delays.
Overall, net U.S. gas exports are forecast to average 2.3 Bcf/d this year and 4.6 Bcf/d in 2019.
Despite growing exports and still strong power burn, the EIA noted earlier this month when it released the STEO that robust domestic natural gas production this year could help limit Henry Hub prices to an average $2.88/MMBtu.
*Correction: In the original version of this article, NGI incorrectly stated U.S. pipeline exports to Mexico. The STEO does not forecast pipeline exports to Mexico individually, but instead aggregates them into one gross pipeline export figure with Canada. Therefore, the EIA currently expects gross pipeline exports to both Mexico and Canada to increase by 0.6 Bcf/d this year and by 0.8 Bcf/d in 2019 to an average of 8 Bcf/d. NGI regrets the error.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 | ISSN © 2577-9966 | ISSN © 1532-1266 |