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EIA Sees LNG Exports At Least Doubling by 2050 as Demand Holds Steady, Though Unknowns Abound
U.S. natural gas production and LNG exports are likely to grow between now and 2050 with domestic gas consumption dropping only slightly, according to the Energy Information Administration (EIA).
All of the scenarios modeled in EIA’s latest Annual Energy Outlook (AEO) released Thursday show the United States remaining a net exporter of natural gas and petroleum products through mid-century, driven by rising international demand.
On the homefront, meanwhile, “Despite the shift toward renewable sources and batteries in electricity generation, domestic natural gas consumption remains relatively stable – ending recent growth in most cases,” researchers said. “Natural gas production, however, in some cases continues to grow in response to international demand for liquefied natural gas, supported by associated natural gas produced along with crude oil.”
The AEO Reference Case shows annual LNG exports totaling 9.98 Tcf by 2050, up from 3.96 Tcf recorded in 2022.
“With growth in more market based-LNG, the strength of the relationship between international natural gas prices and oil prices has eroded,” researchers said. “However, we expect that future oil prices will still affect additional LNG export capacity and overall export levels.
“When the Brent price is high relative to the U.S. Henry Hub price, like in the High Oil Price case, building more LNG export capacity and exporting LNG are more economical than when the Brent price is lower relative to Henry Hub.”
Lower 48 onshore and offshore dry gas production, meanwhile, totals 41.68 Tcf in 2050 in the Reference Case, up from 36.1 Tcf in 2022.
Lower 48 natural gas consumption by the residential, commercial, industrial, transport and power generation segments totals 26.2 Tcf by 2050 in the Reference Case, versus 28.8 Tcf in 2022.
Modeling trends in energy demand and production is a tricky business with numerous variables, as EIA researchers know firsthand.
A new wrinkle affecting this year’s AEO, for example, is the Inflation Reduction Act (IRA) of 2022. President Biden’s landmark climate bill squeaked through the Senate last year, upending prior assumptions about the pace and extent of decarbonization in the U.S. economy.
As a result of the IRA, U.S. energy-related carbon dioxide (CO2) emissions by 2050 are 17% lower in this year’s reference case compared with last year, the authors highlighted.
By 2030, the scenarios modeled in the latest AEO show U.S. energy-related emissions falling by 25-38% from 2005 levels by 2030.
Researchers highlighted that domestic consumption cases for the industrial and power generation segments are especially wide-ranging.
Subject To Change
“More natural gas is consumed in the industrial or electric power sectors than in any other sectors of the U.S. economy,” researchers said. “Projected consumption in both sectors is very sensitive to changes in our side case assumptions, particularly in the Oil and Gas Supply cases…These cases, which result in the most and the least natural gas consumption in the industrial sector, vary widely due to differences in resource extraction assumptions.
“By 2050, natural gas consumption in the industrial sector diverges from the Reference Case by 14% in the Low Oil and Gas Supply case and 18% in the High Oil and Gas Supply case.”
For the power sector, meanwhile, “our projections for natural gas consumption generally fall but range widely, with consumption in 2050 diverging from the Reference case by over 50% in the bounding cases…”
The authors also noted that across all cases, “relative to 2022, natural gas generating capacity ranges from an increase of between 20% to 87% through 2050.”
Still, “Uncertainty in natural gas prices across cases leads to various projections for combined-cycle units in the short term, but in the long term, natural gas demand from the electric power sector stabilizes across all cases…
“As electricity generation shifts to using more renewable and battery sources, domestic natural gas consumption for electricity generation is likely to decrease by 2050 relative to 2022, which contrasts with relatively stable growth over the past decade,” the authors said.
What’s The Market For Heat Pumps?
In the residential segment, despite policy incentives for electrification and outright bans on new gas hookups in some cities, replacement of natural gas for space heating is likely to be slow going.
“Natural gas-fired heating equipment, including furnaces and boilers, continue to account for the largest share of energy consumption for space heating in U.S. residential and commercial buildings across all cases throughout the projection period,” researchers said. “Over time, older heating equipment is replaced by newer, more efficient equipment that meets updated federal minimum energy efficiency standards.”
They added, “Despite the growth in adopting heat pumps, natural gas-fired heating equipment, including furnaces and boilers, continue to account for the largest share of energy consumption for space heating in U.S. residential and commercial buildings across all cases through 2050, researchers said.
The market share of electric heat pumps, including ground source heat pumps, is seen growing to between 14% and 15% of households in 2050 across all cases, versus 11% in 2022.
Hurdles to adoption include a large existing market share for long-lasting, non-heat pump equipment; the high cost of purchasing and switching technologies; and reduced overall demand for space heating as building efficiency improves and heating degree days decrease.
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