US to become net gas exporter in two years

THE threat of US LNG exports to Australia’s higher cost industry look likely to ramp up in a big way, with the Energy Information Administration projecting them to continue growing beyond 2017 when the EIA says the US will transition from a modest net importer of natural gas to a net exporter.
US to become net gas exporter in two years US to become net gas exporter in two years US to become net gas exporter in two years US to become net gas exporter in two years US to become net gas exporter in two years


Anthony Barich

In its Annual Energy Outlook 2015 with projects to 2040 issued yesterday, the EIA said it projected US export growth to continue after 2017, with net exports in 2040 ranging from 3 trillion cubic feet in the EIA’s “Low Oil Price” case to 13.1Tcf in its “High Oil and Gas Resource” case.

New York-based Barclays investment banking vice-chairman Grant Porter said at about this time last year that domestic US gas prices could still remain between $US4 ($A4.30 at the time) and $US6/million British thermal units, despite the fact that the US could be self-sufficient in energy and export 80 million tonnes of LNG.

While a lot has happened to the oil price since then which has jeopardised some LNG projects, particularly those in the US and Canada not yet sanctioned, Porter said at the time that US domestic prices within that $4-6 range would mean US LNG exports would remain competitive against current exporters to Asia, Australia’s key LNG customer.

“Even with the record winter we have had [in the US], we have worked through the gas storage inventory from 2 trillion to 800 million … take a look at the forward curve in the US [and it] is still $4.50 and $US4,” Porter told the Australian Petroleum Production and Exploration Association oil and gas industry conference in Perth last year.

As for the oil price, the EIA’s Outlook Reference case projects that continued growth in US crude oil production will lead to a 43% drop in Brent crude to $US56/barrel, but will rise steadily after that in response to demand growth from non-OECD countries.

“However, downward price pressure from continued increases in US crude oil production keeps the Brent price below $80/bbl through 2020,” the EIA said.

“US crude oil production starts to decline after 2020, but increased production from non-OECD countries and from countries in the Organisation of the Petroleum Exporting Countries contributes to the Brent price remaining below $100/bbl through 2028 and limits the Brent price increase through 2040, when it reaches $141/bbl.”

As for natural gas, the EIA forecasts the Henry Hub spot price (in 2013 dollars) to rise from $3.69/million British thermal units this year to $4.88/MMBtu by 2020, and to $7.85/MMBtu in 2040.

The natural beneficiaries of the growth in production of dry natural gas and natural gas plant liquids (NGPL) will be the manufacturing industries, including bulk chemicals and primary metals, which will see considerable expansion. The EIA also predicts an increased use of NGPL feed stocks in place of petroleum-based naphtha feed stocks.

On the petroleum front, the EIA says strong growth in domestic crude oil production from tight formations through 2020 will lead to a decline in net petroleum imports and growth in net petroleum product exports in all the Outlook’s reference cases.

“In the High Oil and Gas Resource case, increased crude production before 2020 results in increased processed condensate exports,” the EIA said.

“Slowing growth in domestic production after 2020 is offset by increased vehicle fuel economy standards that limit growth in domestic demand.

“The net import share of crude oil and petroleum products supplied falls from 33% of total supply in 2013 to 17% of total supply in 2040 in the Reference case.

“The US becomes a net exporter of petroleum and other liquids after 2020 in the High Oil Price and High Oil and Gas Resource cases because of greater US crude oil production.”