With projections for natural gas staying “far less expensive” than oil through 2040, substantial growth in gas use for electric generation and various industrial applications is also expected, according to the 2013 Annual Outlook by the U.S. Energy Information Administration (EIA).
The EIA outlook predicts a 44% increase in total U.S. gas production from 2011 through 2040, with shale gas being the overwhelming growth source. Shale gas production is forecast to grow by 113% over the nearly 30-year period, according to EIA. By 2040, shale gas will account for half of the U.S. production, compared with a 34% share in 2011.
While gas consumption overall is projected to reach 29.5 Tcf by 2040 from the 24.4 Tcf level in 2011, the EIA expects consumption to increase in all market segments except residential, and power generation and industrial will lead the way with estimated annual growth rates of 0.8% and 0.5%, respectively.
“Industrial output grows as energy-intensive industries take advantage of relatively low natural gas prices, particularly through 2025,” the EIA report said. “After 2025, growth in the sector slows in response to rising prices and increased international competition.” The industrial sector growth through 2040 includes 700 Bcf of gas used for gas-to-liquids (GTL) applications, which EIA noted are largely consumed in the transportation sector.
“Although vehicle uses currently account for only a small part of the total U.S. natural gas consumption, the projected percentage growth in natural gas demand by vehicles is the largest percentage growth in the projection.”
A combination of “clean” energy incentives and low natural gas prices will continue to increase the demand for natural gas for transportation, particularly heavy duty vehicles, and EIA projects that gas consumption in vehicles will reach 1 Tcf in 2040, compared with the 40 Bcf consumed by natural gas vehicles in 2011.
When looking at natural gas prices over the upcoming 30 years, EIA is forecasting that average price of gas will double, with gas remaining cheaper than oil on an energy-equivalent basis (Brent crude oil prices and Henry Hub spot gas prices).
“Crude oil remains far more expensive than natural gas through 2040, but the difference in the costs of the two fuels narrows over time,” the EIA report said. Over the period, the projections call for gas prices to rise from about $3.98/MMBtu in 2011 to average $7.83.MMBtu in 2040; oil prices only rise about 50% to an average energy equivalent price of $28.05/MMBtu in 2040.
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