U.S. natural gas production and LNG exports projected to rise as foreign markets grow
Energize Weekly, March 16, 2022
Natural gas production in the U.S. is poised to increase through 2050, spurred by exports – with a likely rise in shipments to Europe in the wake of the Russian invasion of Ukraine adding an additional boost.
The federal Energy Information Administration (EIA) is forecasting a 25 percent growth in natural gas production over the next 30 years, based on current laws, regulations, and market conditions.
“Much of the modeled growth in natural gas production results from rising demand for U.S. natural gas exports, especially for liquefied natural gas (LNG),” EIA said. “We project natural gas exports to continue to rise through the early 2030s before leveling off.”
In 2021, U.S. natural gas exports set a record for the seventh consecutive year. Most natural gas export growth comes from LNG, but exports of natural gas by pipelines to Mexico and Canada also increased.
The U.S. was already set to become the world’s largest LNG exporter in 2022 with two new liquefaction units coming online on the Louisiana Gulf Coast. The EIA is projecting U.S. exports will rise to 14 billion cubic feet per day (Bcf/d) this year.
Australia and Qatar have been the top two LNG exporters with the U.S. third, but according to Kpler LNG Service, the U.S. has already edged ahead of Qatar.
Asia has been the fastest growing market for American LNG, rising 67 percent between 2019 and 2020 to 3.1 Bcf/d – almost half of all U.S. exports for 2020. Europe accounted for 38 percent of U.S. LNG shipments in 2020.
Geopolitical events, however, may reshape the LNG trade. The European Commission last week announced a plan to reduce demand for Russian natural gas – currently 40 percent of its supply – by two-thirds by the end of this year and gain independence by 2030.
The plan calls for increasing liquified natural gas imports by 50 million cubic meters from suppliers other than Russia.
“We must become independent from Russian oil, coal and gas. We simply cannot rely on a supplier who explicitly threatens us,” European Commission President Ursula von der Leyen said in a statement.
Germany has set aside $1.7 billion to buy LNG from countries other than Russia, according to Rystad Energy. It hasn’t said from where all the LNG will come.
There are currently six domestic export terminals, four on the Gulf Coast (two in Texas and two in Louisiana), one in Maryland and one in Georgia, and 14 projects with federal permits that have yet to be built.
Those projects have mainly been waiting for company financing decisions and investor backing.
“We project global demand for natural gas will continue to be high, making it more economical to build additional LNG export facilities in the United States,” the EIA said. “These LNG capacity expansions, coupled with increasing demand for natural gas abroad, result in an increased forecast of LNG exports to 5.86 trillion cubic feet by 2033 … up 65 percent from current levels.”
Much of the growth in U.S. production will come in the Appalachia Basin and the Mississippi-Louisiana salt basins, but nearly half will come as natural gas from oil production – known as associated gas.
“The most significant increase in production of associated natural gas is in the Wolfcamp formation of the Permian Basin in the U.S. Southwest,” the EIA said. “The Wolfcamp and Haynesville formations’ proximity to LNG export terminals on the U.S. Gulf Coast in Texas and Louisiana has facilitated production growth in these regions.”
While some of the Appalachia Basin gas may also reach export markets, the majority will head to domestic markets, as there are pipeline constraints in getting it to LNG terminals.
“We project that continued growth in natural gas exports through 2025 will be driven by increases in LNG capacity at facilities that are currently under construction,” the agency said. “Additional LNG trains at Sabine Pass and Calcasieu Pass in Louisiana and at Golden Pass in Texas are now expected to enter service much earlier than anticipated.”