Unconventional natural gas production in the Lower 48 states — most notably coal-bed methane supply — is expected to account for more than one-third of all U.S. gas production by 2025, according to the Energy Information Administration (EIA).

The Department of Energy (DOE) agency’s projection was one of several “reference case” scenarios presented in the EIA’s “Annual Energy Outlook 2003,” which looked at the most likely natural gas production, consumption and pricing trends for the next 20 years.

In its “reference” or mean case, the EIA estimated Lower 48 unconventional production is likely to grow to 9.5 Tcf by 2025 from 5.4 Tcf in 2001, giving it a 36% share of all U.S. gas production by then. It pegged total domestic gas production at 27.47 Tcf by 2025, far below the projected consumption level of 35.8 Tcf in 20 years. The EIA expects gas imports — which are projected to be 7.93 Tcf by 2025 — to play a critical role in making up the shortfall.

Much of the growth in unconventional supplies will come from the Rocky Mountain region, it said. It forecasts Rocky Mountain gas production will rise by 2.7 Tcf between 2001 and 2025, with Alaska seeing the second largest growth.

Production of known conventional gas supplies in the Lower 48 states is projected to grow from 10.8 Tcf in 2001 to 12.9 Tcf by 2020, and then fall back to 12.5 Tcf by 2025, according to the EIA. At the same time, production from unproven gas resources is likely to slide, accounting for only 8% of all U.S. gas production in 2025 compared with 15% in 2001, it said in its “reference” case.

The EIA projects that deepwater drilling activity will “increase gradually” over the period to 5.7 Tcf, but its overall share of domestic production will fall to 21% in 2025 from its current 27% share.

In its “reference” forecast, the agency expects a long-line Alaska gas pipeline to be built and making deliveries to the Lower 48 region by 2021. By 2025, it projects that Alaska will be supply 2.6 Tcf.

The EIA also assumes that a gas pipeline from the MacKenzie Delta in western Canada to U.S. markets will be in operation by 2016. It expects Canadian net imports to increase by 1.7 Tcf by 2025, but Canada’s percentage contribution to U.S. supply will remain unchanged from the present — 15%.

It sees liquefied natural gas (LNG) imports climbing to 2.1 Tcf a year in 2025, representing 6% of total domestic gas supply. This projection “is based on expectations that all four existing LNG import facilities will be fully reopened and expanded — and that three new facilities will be constructed in the Gulf of Mexico and Florida areas — by 2025,” the EIA energy outlook said. The three new LNG facilities are expected to have a combined gas delivery rate of 2 Bcf/d, it noted.

The agency anticipates Mexico will remain a net importer of U.S. gas through 2019, at which time it will begin receiving LNG from an import terminal planned for Baja California. “By 2025, the United States is expected to import about 300 Bcf of natural gas from Mexico per year.”

Wellhead gas prices in the Lower 48 states by 2025 will depend on the rate of technological advances over the years, the EIA noted. Under a rapid technology scenario, wellhead prices could fall to as low as $3.38/Mcf by 2025, while slower technology could result in wellhead prices of $4.35/Mcf or more, according to the energy outlook report.

At the end-user level, “a portion of [an] increase in wellhead prices is expected to be offset by a projected decline in average transmission and distribution margins as a larger proportion of the natural gas delivery infrastructure becomes fully depreciated,” the EIA said. “The average end-use price is expected to increase by 89 cents/Mcf between 2005 and 2025 (in constant 2001 dollars), compared with an increase of $1.07/Mcf in the average price of domestic and imported natural gas supplies over the same period.”

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