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US Gas and LNG Markets - Continuing Challenges are Forecast
Pipeline exports are expected to grow as well. Though
some natural gas is exported to Canada via pipelines in
New York and Michigan, those volumes are more than
offset by Canadian imports in the western US. Mexico
has become an increasingly important market for gas
exports - helping to alleviate a backlog of supply in the
southern US, particularly in West Texas. With the recent
liberalization of the Mexican gas markets, US natural gas
is increasingly suppling power generation and industrial
demand in that country. Though exports to Mexico have
grown rapidly in the last couple of years - from 2.0 bcfd
in 2014 to 4.6 bcfd in 2018 - current forecasts expect
demand for US gas to moderate as more Mexican
domestic supplies are brought on-line and construction
of new power plants slows. Overall, the EIA forecasts
pipeline exports into Mexico will top out at 7.0 bcfd by
2050.
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LNG exports are expected to have the greatest impact
on the future supply & demand balance as several new
liquification and export facilities are completed and
brought online over the next 10 years. In fact, the EIA
projects that LNG exports will grow from 2.8 bcfd in
2018 to over 13.7 bcfd in 2030. However, after 2030,
current EIA forecasts note that US-produced LNG is
expected lose its price advantage compared to other
global suppliers (as US domestic gas prices increase
on tightening supply) and anticipates little or no growth
in LNG exports from 2031 to 2050.
In all, total US domestic demand (net of exports) for
natural gas is expected to grow from 29.34 TCF/year
to 35.0 TCF/year in 2050. Factoring in exports, US
domestic natural gas production will need to increase
from 29.5 TCF/year to 43.4 TCF/year (or almost 119
BCFD) in order to maintain market equilibrium.
LOOKING CLOSER AT LNG
In the 1990’s, most forecasts indicated that the US would require significant new quantities of
imported oil and gas, and as such, several LNG import facilities were constructed along the Gulf
Coast and in the Northeastern US to supply natural gas to the US markets. However, with the
advent of long-lateral horizontal drilling techniques and massive hydraulic fracturing, vast new
supplies of both oil and gas were opened for development in the tight sand and shales deposits
across the US, leading to the country becoming a net exporter of both oil and gas in the last
couple of years.
Simultaneously, the expanding global “green” movement
is increasing demand for natural gas to replace, in part,
coal for power generation. Coal to gas switching is not
only forecast to grow in the US, but also in the European
markets where coal is being rapidly retired and in the
Asian markets, where the pace of construction of new
coal-fired generation is slowing, despite increasing
demand for power to support rapid economic growth. As
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