Natural gas has become the fuel of choice in the United States, especially in the power generation sector. Its clean burning properties, high efficiency factors and relatively low price have made it the logical choice for residential, industrial, and commercial use. However, the rapid growth in the demand for natural gas has not been matched by the growth of transportation networks to be able to supply the volume of natural gas that are demanded. Consequently, certain areas of the country experience constrained supplies during peak demand seasons and that results in significantly higher prices.

The rapid development of horizontal drilling and hydraulic fracturing technologies has resulted in the tapping of significant new reserves of natural gas in the US. Essentially, the entire outlook on the natural gas resources in the country has drastically changed from just a few short years ago. The US Energy Information Administration has issued its Annual Energy Outlook 2014 (April 2014) in which it evaluates trends in the use of natural gas from 2014 through 2040. The sections below briefly summarize the findings of the report.

Gas Supply

The findings of the Annual Energy Outlook 2014 related to natural gas supply are:

  • Natural gas production grows by an average rate of 1.6% per year from 2012 to 2040.
  • The greatest increase in natural gas production is from supplies derived from Shale gas reservoirs. Shale gas production is expected to increase from 9.7 trillion cubic feet (Tcf) in 2012 to 19,8Tcf in 2040.
  • Natural gas supplies from the Marcellus Shale in the Mid-Atlantic states exceeds projected demand from the New England and Mid-Atlantic from 2016 through 2040.
  • By 2016, the US becomes a net exporter of natural gas, with peak exports of 3.5 Tcf in 2030.

Gas Demand

The findings of the Annual Gas Outlook related to natural gas consumption are:

  • Natural gas consumption grows by an average rate of 0.8% from 2012 to 2040.
  • U.S. total natural gas consumption grows from 25.6 Tcf in 2012 to 31.6 Tcf in 2040. Natural gas use increases in all of the end-use sectors except residential use for residential space heating that declines as a result of population shifts to warmer regions of the country and improvements in appliance efficiency.
  • Consumption of natural gas for electric power generation grows by about 2 Tcf and makes up about 33% of the increase in total natural gas consumption by 2040.
  • Consumption of natural gas by the industrial sector increases by 2.5 Tcf by 2040. Energy-intensive industries take advantage of relatively low natural gas prices for their highest growth rate through 2028. After 2028, industrial sector consumption of natural gas continues to grow but at a somewhat slower rate.
  • Consumption of natural gas for electric power generation grows by about 2 Tcf by 2040. Increasingly restrictive air emission regulations makes natural gas the preferred fuel source of choice as older coal-fired electrical generations are retired.
  • Although transportation use currently accounts for only a small portion of total U.S. natural gas consumption, natural gas use by heavy-duty vehicles, trains, and ships shows the largest percentage growth of any fuel in the projection. Consumption in the transportation sector grows from about 40 billion cubic feet (Bcf) in 2012 to 850 Bcf in 2040.
  • Net LNG exports increase by 3.5 Tcf from 2012 through 2030 and remain flat thereafter. LNG export volumes are uncertain based on unpredictable factors but unrest in regional economies such as currently present in the Ukraine and the shutdown of the nuclear generating industry in Japan may significantly increase the global demand for LNG exports.

As noted in the first bullet of the sections above, natural gas production grows by an average rate of 1.6% per year from 2012 to 2040 which is more than double the 0.8% annual growth rate of total U.S. consumption over the period. The growth in production meets increasing demand and exports, while also making up for a drop in natural gas imports. In short, the US transitions from being a net importer of 1.5 Tcf of natural gas in 2012 to a net exporter of 5.8 Tcf in 2040. The US becomes a net exporter of natural gas before 2020.