Consumption in the domestic electric and residential sectors fell in 2021, but record LNG exports drove growth in net natural gas disposition, according to the U.S. Energy Information Administration (EIA). 

disposition

Natural gas demand, net liquefied natural gas exports and net storage grew by 3.6% last year compared with 2020, when the Covid-19 pandemic swept across the world. LNG exports are expected to continue to rise, EIA said, as the United States is likely to maintain its role as a top exporter. 

Wood Mackenzie analysts agree that domestic LNG exports are going to surge.

“As Europe diversifies to more secure supply sources and international buyers across the globe seek reliable low cost supply, North America is poised to deliver,” said Wood Mackenzie’s Dulles Wang, director for Americas gas and LNG research.

Tripling North American Production?

Over the next 11 years, Wood Mackenzie is estimating that LNG exports could triple North American gas production by 29 Bcf/d, or the “equivalent to adding two new Permian Basins,” Wang said. 

The global consultancy projected that while North American producers currently are focusing on capital discipline, they “will gradually increase investment over the next few years to support the market expansion.” 

Added supply could tug natural gas prices lower until new LNG export facilities are ready for use around 2030, after which point growth could slow, the consultancy said. 

However, Wood Mackenzie’s Eugene Kim, research director for American Gas, told NGI that the Biden administration’s Inflation Reduction Act’s “methane fee will encourage less leakage from natural gas production facilities thereby capturing additional volumes. Additional incentives to support renewable natural gas also promote additional volumes longer term.”

“New infrastructure will be needed to support the expansion…,” Kim said. 

While “it is increasingly difficult and costlier to build out new infrastructure takeaway capacity to connect supply to the market, especially in the Northeast,” additional pipeline capacity could “materialize with the bulk in the Gulf Coast to facilitate production growth from the Permian and Haynesville in support of U.S. LNG exports,” Kim said. 

“In many cases, these projects,” including Williams’ Louisiana Energy Gateway, would support LNG export growth.

[Newly Updated: NGI’s 2023 Map of North American Natural Gas Pipelines, LNG Facilities, Shale Plays & Market Hubs includes 200+ pipelines, 160+ market hubs, 60 LNG terminals, 40+ storage facilities, and more. Get your map today.]

Record LNG Exports

Last year U.S. gas exports hit a record high of 10.5 Bcf/d, spurred by a record 9.7 Bcf/d in LNG established by growing deliveries to Asia and Europe, EIA noted. Domestic gas exports to Asia increased by more than 50% year/year, helping boost the United States to become the third largest LNG supplier to Asia after Australia and Qatar. 

Deliveries to Europe also increased. Europe, including Turkey, received about 3.3 Bcf/d of U.S. LNG, an increase of about 32% year/year. In the first half of the year, Europe imported more U.S. LNG following a cold winter. Last December, with storage inventories still low and spot prices higher than those in Asia, Europe imported about 6.7 Bcf/d, a record volume, EIA said.

Since hitting a record last December, U.S. LNG exports to Europe have eclipsed more highs as the continent scrambles to replace Russian pipeline gas imports.

Prices Pressuring Pandemic Recovery

Elsewhere along natural gas dispositions, the United States saw declines in consumption across major end-use sectors in 2021 when compared with the pre-pandemic era of 2019, according to EIA. 

In the industrial sector, the second largest natural gas consumer within the United States, consumption went up by 0.8% year/year to 22.5 Bcf/d. EIA noted that last year’s elevated natural gas prices may have stymied industrial demand. In 2021, natural gas prices for the industrial sector jumped to $5.50/Mcf from $3.32 in 2020, and $3.90 in 2019. 

Residential gas use did not make much of a post-Covid recovery in 2021, according to EIA data. In 2019, the sector consumed more than 5.02 Tcf, which declined to 4.67 Tcf in 2020, before inching higher in 2021 to 4.72 Tcf. Similarly, deliveries to commercial end users did not recover to pre-pandemic levels, with the sector receiving 3.3 Tcf in 2021, compared with 3.5 Tcf in 2019.

Meanwhile, the U.S. power sector in 2021 consumed 30.9 Bcf/d of natural gas, 0.2% less than in 2019, and 2.7% lower than in 2020.

EIA said the decrease “may be largely related to weather,” as cooler temperatures in 2021 in the Southeast and Central Southwest – the two largest natural gas-consuming regions for the electric sector – pushed down cooling demand for buildings. In addition, natural gas prices for the sector surged to $5.17 in 2021, compared with $2.49 in 2020 and $2.99 in 2019. 

Regardless, EIA noted that gas consumption in the U.S. power sector has grown by more than 53% since 2010, and natural gas is the third-fastest growing fuel for power generation after solar and wind, respectively. In 2021, despite natural gas-fired generation declining for the first time in four years, the electric power sector accounted for about one-third of total U.S. natural gas consumption. 

In addition, natural gas consumption in the U.S. electric power sector has set new records in recent months this year, EIA said. The agency’s latest Short-Term Energy Outlook, however, forecast that demand for domestic consumption in the electric power sector could decline in 2023 relative to 2022.