White Papers US Gas and LNG Markets | Page 3

US Gas and LNG Markets - Continuing Challenges are Forecast A ComTechAdvisory Whitepaper A CHANGING DEMAND MIX FOR US NATURAL GAS Though there are numerous factors that impact supply and demand for natural gas in any particular market, given the continuing increases in oil associated natural gas production in the US, the variables that will most affect prices will clearly be on the demand side for the foreseeable future. In this market, demand is driven by five components - residential & commercial demand (primarily for heating), industrial demand (manufacturing processes including combined cycle power generation and petrochem feedstocks), power generation, pipeline exports and LNG exports. Residential & commercial demand is generally weather driven. Comparing Jan–June 2018 to the same period in 2019, residential & commercial demand increased 3.3%, primarily due to colder temperatures in the Northeast US. However, variances in seasonal demand from year-to-year generally even out and any changes from “normal” demand are usually absorbed by underground gas storage. Additionally, any increased demand driven by economic growth or new building construction is expected to be offset by mandated improvements in energy efficiency. As such, the EIA expects little growth in natural gas use in this sector, forecasting only a 0.2% increase through 2050. Industrial demand generally follows economic growth patterns - an expanding economy will consume more natural gas for manufacturing and processing fuels & feedstocks. Overall though, current forecasts indicate growth through 2050 is expected to be slightly below 1% per year, with total demand from the industrial sector expected to grow to 37 bcfd in 2050, an increase of about 9 bcfd over 2019. The other three primary components of demand - power generation, pipeline exports (primarily to Mexico) and LNG exports - have become the predominate drivers of current and future demand growth and will have the greatest impact on prices and new infrastructure investment over the next several decades. With increasing supplies of solar and wind renewable power flooding the US market and the continuing retirement of coal-fired generation, more gas-fired generation will be required to provide baseload generation and ensure grid stability. In total, gas burned for power generation will account for about 39% of the overall power mix in the US in 2050, up from 34% in 2019, resulting in an 3.6% increase in natural gas demand for power generation - from 28.5 bcfd in 2018 to 33.3 bcfd in 2050. © Commodity Technology Advisory LLC, 2019, All Rights Reserved.