The US Energy Information Administration's Annual Energy Outlook 2017 is projecting growth in natural gas production from now until 2050, and sees gas exports helping drive the US to switch to being a net energy exporter by 2026.
Gas production "is actually going to go up quite a bit, with relatively low and stable prices," supporting higher levels of domestic consumption, especially in the electric and industrial sectors, EIA Administrator Adam Sieminski said in a briefing on the annual report Thursday.
EIA's outlook examined eight cases in making projections for energy markets, this year extending those out to 2050. It looked at a reference case that assumes current regulation and central views of economic forecasters, as well as some improvement in known technologies. It also examined cases that assumed low and high economic growth, low and high oil prices, low and high oil and gas resource and technology, and one case that assumed no Clean Power Plan to rein in CO2 emissions from the power sector.
In the reference case, natural gas production would grow at nearly 4% annually from 2016 to 2020, before rising at a lower rate as net export growth eases, domestic gas use becomes more efficient and prices slowly rise, the report said. After 2020, the reference case puts gas production growth at a 1% annual average.
Gas prices would rise modestly from 2020 through 2030, in the reference case, as electric power consumption rises. After that, prices would stay relatively flat at about $5/MMBtu from 2030-2040 because of technology improvements, before rising again in the following decade, the outlook said.
Under the high oil and gas resource and technology case, which assumes major improvements in production technology and greater resource availability, EIA projected increased production at lower prices, in turn boosting domestic consumption and exports.
Turning to gas demand, EIA assumed consumption increases across most of the cases through much of the projection period, despite some near-term decreases. Rising demand from industrial and power markets would drive that growth, with relatively little increase from the residential and commercial sectors because of efficiency gains, EIA said. Industrials would be the largest consumers in the reference case during most years.
After 2020, the reference case sees power sector gas use rising, assuming help from the Clean Power Plan and expiring renewable tax credits. Gas use in 2040 would be 6% higher in the reference case than in one assuming the CPP policy is cast aside.
On trade, EIA projected that LNG would dominate US gas exports by the early 2020s in the reference case. After 2020, it said gas exports would grow at a more modest rate as US-sourced LNG becomes less competitive. Gas exports to Mexico are seen rising in the near term as infrastructure comes online but then leveling off in the early 2020s.
EIA projected LNG export levels would vary greatly across the scenarios the agency considered -- with exports at their highest in the high oil price case,and high oil and gas resource and technology case. Because LNG is mostly traded under oil price-linked contracts, and exports are sensitive to the oil prices, Sieminski noted.
Overall, EIA's reference case projected total US energy consumption will be relatively flat, rising 5% between 2016 and 2040, with what EIA cast as minimal variation across all the cases.
Sieminski said a key takeaway from the report is that the US will see fairly strong domestic production of energy and relatively flat demand.
"You put those two together and it implies that the US could become a net energy exporter over the projection period in most of our cases," he said.
But EIA expects significant changes in the fuel mix, with natural gas increasing the most, driven by demand in the industrial and electric power sectors. Coal use declines as coal loses market share to natural gas and renewable generation, although it regains a larger share over natural gas through 2020.
Gas would make up nearly 40% or US energy production by 2040 in the reference case. Nearly 70 GW of new wind and solar photovoltaic power is seen added from 2017 to 2021, with most wind capacity being built before the end of 2023 to comply with the CPP.
"One of the interesting things is that the price of natural gas probably makes a bigger difference than the CPP does," Sieminski said. "As far as how much natural gas will be used in the industrial and electric power sectors."
