23 January 2012 19:23 [Source: ICIS news]
HOUSTON (ICIS)--US shale production growth will lead to increased domestic natural gas consumption and put the US in a position of becoming a net exporter as prices remain relatively low and competitive, a government agency said on Monday.
Domestic natural gas consumption is projected to grow by 10% from 2010 to 2035, largely because of competition with other fuels, US economic growth and low prices, according to the US Energy Information Administration (EIA) in the early release of its Annual Energy Outlook for 2012.
“Prices do matter for the type of fuels,” said Howard Gruenspecht, the EIA's acting administrator.
The 2012 Annual Energy Outlook will be released in the spring.
Natural gas is expected to make up 26% of electricity production in 2035, compared with 20% in 2010, Gruenspecht said.
By 2035, shale gas will make up 49% of total US natural gas production, compared with 23% in 2010.
The total amount of technically recoverable natural gas in 2035 is projected at 2,214,000bn cubic feet (bcf), which includes the unproved shale gas reserves, Gruenspecht said.
The projection of unproved shale gas reserves was trimmed to 482,000 bcf from the 2011 forecast of more than 800,000 bcf because of new information from geological surveys and other studies, Gruenspecht said. This includes a reduction in the estimated output of gas from the Marcellus Shale.
“The US is projected to become a net exporter of liquefied natural gas (LNG) in 2016, an overall net exporter of natural gas in 2021, and a net pipeline exporter in 2025,” he said.
Natural gas production is expected to exceed consumption in the US with pipeline imports falling and pipeline exports increasing, largely because of relatively low natural gas prices compared with other parts of the world, Gruenspecht said.
Current natural gas prices are not yet discouraging production because of a variety of long-term and short-term trends, including the industry’s capability to develop more resources, technological success in quickly producing natural gas resources and the high market value of liquids-rich resources that give better returns to the drillers, Gruenspecht said.
Producers are targeting liquids-rich areas, where crude oil or natural gas liquids are developed with the natural gas, Gruenspecht said.
The projection for natural gas prices was slightly lower for the near future than the 2011 outlook. On 20 January, natural gas futures settled at $2.343/MMBtu.
“There is about 3,300 bcf of natural gas in storage, which is an amazing situation” Gruenspecht said.
Some of that reflects warmer-than-average seasonal weather, though some of it also reflects growth in natural gas production, Gruenspecht said. Shale gas reserves and the decline in well drilling completion costs contribute to increased storage.
The price of natural gas will increase as the shale gas resource base is developed and production shifts to resources that are more difficult and more expensive to produce.
Gruenspecht said prices for natural gas will continue to decline through 2012 and then make a steady climb to more than $7/MMBtu by 2035.
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