The United States (US) Energy Information Administration (EIA) forecasts that average US natural gas prices will be 9 percent lower in 2020 than in 2019 - Photo by NGI.

JAKARTA (TheInsiderStories) – The United States (US) Energy Information Administration (EIA) forecasts that average US natural gas prices will be 9 percent lower in 2020 than in 2019, the agency said in it’s Short-Term Energy Outlook on Wednesday (01/15). The lower prices will be the result of continued production growth primarily in response to the production outpaces demand.

The agency expects the natural gas spot price for the US benchmark Henry Hub will average US$2.33 per million British thermal units (MMBtu) in 2020, about 24 cents lower than the 2019 average of $2.57/MMBtu. Following a year of decline, EIA forecasts 2021 natural gas prices to rise by 9 percent because of upward pricing pressure from declining growth in natural gas production.

“EIA expects record volumes of US dry natural gas production to continue through 2020, from an estimated 92.0 billion cubic feet per day (Bcfpd) in 2019 to 94.7 Bcfpd in 2020,” the agency said in a statement.

Most US production will come from the Appalachian Basin in the Northeast, followed by the Permian Basin in western Texas and New Mexico and the Haynesville shale formation in eastern Texas. Cost reductions in drilling and well completions and improved drilling efficiency will support continued record-production levels in 2020.

In addition, a growing share of natural gas production is coming from oil wells that produce natural gas, also called associated gas. Increased takeaway capacity from the highly productive Appalachian and Permian production regions will further enable growth, EIA said.

However, in 2021, EIA expects dry natural gas production to decline by less than 1 percent to 94.1 Bcfpd in response to lower forecast natural gas spot prices in 2020, which would reduce Appalachian Basin production.

Total US natural gas consumption remains relatively unchanged compared with 2019 levels in the EIA forecast, increasing 1.7 percent in 2020, but decreasing 1.2 percent in 2021 to an average of 85.7 Bcfpd in 2021.

EIA forecasts natural gas consumption to decrease slightly in the residential and commercial sectors as a result of expected milder weather that will require less energy for space heating in the winter and air conditioning in the summer. Based on forecasts by the National Oceanic and Atmospheric Administration, EIA forecasts 1.8 percent fewer heating degree days (HDD) in 2020 compared with 2019, which had a colder-than-normal first quarter.

EIA sees US natural gas use in the electric power sector to increase by 1.3 percent in 2020 as a result of natural gas-fired generation additions that continue to displace coal-fired generation.

However, in 2021, because of a forecast of higher natural gas spot prices and increased competition from renewables, EIA estimates that natural gas consumption in the electric power sector will decline by 3.2 percent. EIA expects the natural gas share of electricity generation in 2021 to be 37 percent, about the same as its 2019 share, while coal’s share of electricity generation will fall from 24 percent in 2019 to 21 percent in 2021.

Natural gas consumption in the US industrial sector will continue to grow in 2020, increasing 4.6 percent, the agency said. New methanol plants that use natural gas as feedstock are scheduled to come online in 2020, which will support the increased industrial sector consumption. In 2021, EIA expects industrial sector consumption to flatten because of higher industrial sector natural gas prices.

The US became a net exporter of natural gas on an annual basis for the first time in 2018, and EIA expects that this trend will continue during the forecast period. In 2020, net exports will average 7.3 Bcfpd—an increase of 2.0 Bcfpd over the 2019 levels.

EIA sees 2021 net exports to rise further to 8.9 Bcf/d as new liquefied natural gas (LNG) projects enter service. The remaining trains at the Cameron LNG and Freeport LNG facilities, located along the Gulf Coast, and the Elba Island LNG facility in Georgia will be placed into service in 2020. EIA said LNG exports to increase from an estimated 5.0 Bcfpd in 2019 to 6.5 Bcfpd in 2020 and up to 7.7 Bcfpd in 2021, more than double the 2018 level.

EIA forecasts that gross exports of natural gas by pipeline will continue to grow, increasing to 8.1 Bcfpd in 2020 and 8.5 Bcfpd in 2021, or 8.8 percent higher than the 2019 level. Most of the increase will be driven by increasing natural gas demand and by pipeline projects in Mexico that are scheduled to come online by the end of 2021.

The agency sees imports of LNG to remain flat through 2021, and imports by pipeline will continue to decrease through 2020 when Appalachian production and takeaway capacity displace imported natural gas from Canada in the US Midwest markets.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com