Exports and industrial use will be the key drivers of natural gas consumption growth in the United States through 2050, while demand from other sectors, including electricity generation, is expected to increase slowly or remain flat, according to the Energy Information Administration’s (EIA) latest long-term projections.
Under the baseline reference case in the agency’s Annual Energy Outlook 2021 (AEO2021), published Wednesday, the residential sector is the only source of natural gas consumption not expected to show growth between 2020 and 2050.
Incentivized by domestic end-use consumption and opportunities to sell to international markets via liquefied natural gas (LNG) exports, natural gas production is expected to grow throughout the next 30 years, according to EIA.
Domestically, industrial use figures to be the key source of demand growth.
“In the AEO2021 Reference case, the industrial sector is responsible for more of the growth in domestic natural gas consumption than any other U.S. sector because of the economic growth driving increased U.S. industrial output, coupled with a limited economic fuel-switching capability,” researchers wrote. “Industrial firms are very price sensitive and tend to continue using natural gas as ample supply keeps industrial pricing attractive in the Reference case projection.”
The chemical industry in particular is poised to reap the benefits of higher natural gas production and low natural gas prices, using the fuel as both a feedstock and for heat and power inputs, according to the agency.
Meanwhile, the AEO2021 reference case shows efficiency gains leading to much slower demand growth in the power sector compared to exports or industrial use.
“Even as natural gas-fired generation increases during the projection period, increased fleet efficiency from natural gas-fired generator additions of new combined-cycle electric generating technologies that operate at high usage levels — coupled with existing, less-efficient natural gas-fired technologies declining in use or retiring from the fleet — slow growth in natural gas consumption,” according to the AEO2021 report.
Residential consumption remains “nearly flat” throughout the projection period, according to EIA, with “low-to-moderate” growth in commercial buildings. The agency pointed to “demand growth being tempered by energy efficiency improvements” in space heating.
LNG Exports Doubling by 2029
EIA’s baseline projections show U.S. LNG exports more than doubling between 2020 and 2029 amid expected increases in international demand for natural gas.
However, the AEO2021 includes “side cases” that reflect uncertainty over future international demand and the competitiveness of domestic supply. Outcomes will depend on commodity prices, with low oil prices or high domestic natural gas prices potentially dampening LNG exports, according to the agency.
“Oil prices, which are traditionally used as a basis for global LNG price contracts, and U.S. natural gas prices both drive how competitive U.S. LNG exports are in global markets,” researchers wrote. “Henry Hub natural gas spot prices remain below $3/MMBtu” under a high oil and natural gas supply scenario but “exceed $6/MMBtu by 2050” in the case of low oil and gas supplies.
“With higher oil prices or lower U.S. natural gas domestic prices, LNG exports are much higher than in the Reference case, while the opposite occurs with lower oil prices or higher U.S. natural gas domestic prices,” according to the agency.
Production to Recover by 2023
Under the AEO2021 reference case, domestic natural gas production will recover to pre-pandemic levels by 2023 before continuing to rise through 2050, driven by shale gas and associated gas from oil plays.
“In the Reference case, more than half of the growth in shale gas production between 2020 and 2050 comes from shale gas plays in the Appalachian Basin in the East region, and most of the remaining growth comes from plays in the Gulf Coast and Southwest regions,” EIA said.
Associated gas output fell in 2020 amid the drop in crude oil production and relatively low commodity prices; EIA expects associated gas output to return to 2019 levels by 2024 “and then steadily increase at a modest rate through 2050” primarily on the strength of output from the Permian Basin.
© 2022 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 | ISSN © 1532-1266 |