In a new long-term forecast, the Energy Information Administration (EIA) projects that a 12.9% annual increase in liquefied natural gas (LNG) imports along with new supply from Alaska will carrying most of the load in meeting 1.5% annual growth in domestic gas demand through 2025.
In the 2005 Annual Energy Outlook (AEO2005), a preview of which was released last Thursday, the EIA examines two world oil price scenarios to evaluate the impact of alternative oil price trends on the total energy picture. But the two scenarios show only modest differences in the evolution of U.S. energy markets to 2025, and both cases project a dramatic increase in reliance on LNG imports to meet domestic natural gas demand growth.
Projected natural gas consumption grows from 22 Tcf to almost 31 Tcf between 2003 and 2025, while domestic dry gas production is expected to grow by only 0.6% to 21.83 Tcf in 2025 from 19.07 Tcf in 2003.
The rapid growth of gas-fired generation is one of the main drivers in a projected 1.5% annual increase in domestic natural gas demand over the forecast period. “The growth in demand for natural gas slows in the later years of the forecast (0.9% per year from 2015 through 2025, compared with 2.1% per year from 2003 to 2010) as rising natural gas prices lead to the construction of more coal-fired capacity for electric generation,” EIA said.
Coal will remain the primary fuel for generation over the period, but natural gas’s share of generation is projected to increase to 24% of the total in 2025 from about 16% in 2003. EIA expects 87 GW of new coal-fired power generation capacity and 168 GW of gas-fired generation to be constructed between 2004 and 2025.
To meet all the new gas demand from power generation, the U.S. won’t be able to rely on Canada as much as it had in the past, EIA said. From 1986 to 2000, when U.S. natural gas consumption grew from 16.2 Tcf to a high of 23.3 Tcf, 40% of the increased demand was met by imports, predominantly from Canada. But based on the latest assessment from Canada’s National Energy Board, “it is unlikely that futures production from Canada will be able to support a continued increase in U.S. imports.”
As a consequence, over the next two decades the U.S. will rely much more on imports from other countries. Total LNG imports are projected to increase from 0.4 Tcf in 2003 to 6.4 Tcf in 2025.
With the projected completion of an Alaskan natural gas pipeline in 2016, total Alaskan production is projected to increase from 0.4 Tcf in 2003 to 2.2 Tcf in 2025. “A key issue for U.S. energy markets is whether the investments and regulatory approvals needed to make those natural gas supplies available will be forthcoming and what ramifications will be if they are not,” EIA noted.
The completed AEO2005, which will be released early next year, will include a constrained natural gas supply case to examine the implications of a possible future in which no Alaska natural gas pipeline is built, no new construction is started on additional LNG terminals and production technology advances more slowly than it has in the past.
The reference case in AEO2005 projects that average natural gas wellhead prices will increase from $4.98 to $5.30/Mcf (2003 dollars) between 2003 and 2005. After 2005, wellhead prices are projected to decline to $3.64/Mcf in 2010 as supply expands from increased drilling and through the initial availability of new import sources. After 2010, wellhead prices are projected to increase gradually, reaching $4.79/Mcf in 2025 for an average annual decline of 0.2% over the 23 years between 2002 and 2025.
Other projections in the AEO2005 include the following:
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