EIA Projections on Natural Gas – 7/20/16

U.S. consumption of natural gas is projected to rise from 28 trillion cubic feet (Tcf) in 2015 to 34 Tcf in 2040, according to EIA’s Annual Energy Outlook 2016 (AEO2016) Reference case. The industrial and electric power sectors make up 49% and 34% of this growth, respectively.

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The rise in natural gas consumption coincides with the relatively low prices caused by the boom in shale fracking. In the AEO2016 Reference case, average annual U.S. natural gas prices are expected to rise through 2020 on export demand to Mexico via pipeline, and others via LNG exports, before stabilizing at a still relatively cheap spot price.

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Because gas-fired electricity generation produces fewer carbon dioxide emissions than coal-fired generation, natural gas is expected to play a large role in compliance with the Clean Power Plan(CPP), which takes effect in 2022, provided that the CPP survives the court challenges brought against it.

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Growth in U.S. natural gas production is expected to come mostly from fracking of shale gas and tight oil plays. The EIA projects that, by 2018, the United States will be a net exporter of natural gas for the first time since the 1950s.

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The cheapness of natural gas in the U.S. has decimated coal-burning plants and left the coal industry valued at less than 10% of what it was worth a decade ago. Coal closures are expected to drastically reduce U.S. carbon emissions and air pollution related health risks.

The closures are also in part the result of U.S. EPA pollution regulation, which has recently added more stringent limits on mercury and other toxins that can be met with the installation of costly scrubbers that reduce the profitability of coal plants. A similar decline in coal is likely once the CPP comes into force in 2022 if it survives its Supreme Court case as was the case with the mercury rule in 2015.

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