The United States is set to break it’s all-time natural gas production record in 2022. Despite tighter markets abroad, the United States continues to enjoy relatively affordable natural gas prices, with Henry Hub hovering between $5.00/mcf and $6.25/mcf for the past few months. Strip prices indicate a downward trend into the future. With very few export partners in North America, the United States has turned to LNG as a means by which excess natural gas can be exported to foreign markets.
In 2021, the United States produced about 94.6 Bcfd of natural gas per day on average. Currently, there are seven active LNG export terminals in the US, all of which are under the purview of the Federal Energy Regulatory Commission, or FERC. These seven terminals together are able to export a maximum of 12.6 Bcfd. The US is currently building two more export terminals with an export capacity of 3.7 Bcfd between them, and there are 14 projects that have been approved with a total capacity of 26.8 Bcfd. Six more projects have been proposed with a liquefaction capacity of 8.0 Bcfd. If all of these projects are built and functioning properly, the US might have something to the tune of 51.1 Bcfd of liquefaction capacity by the end of the decade.
The EIA forecasts relatively stable natural gas imports from Canada via pipeline, steadily increasing exports to Mexico via pipeline, and rapidly increasing natural gas exports to the wider world via LNG.
In recent weeks, US Henry Hub prices have demonstrated considerable fluctuation based on weather reports and news about the Freeport LNG terminal’s maintenance schedule. Europe’s energy crunch seems to have eased substantially, largely because of American LNG exports and because of a relatively mild fall and winter. European natural gas storage has returned to normal levels and there is more LNG available to the continent than import terminals can process. The United States, too, has been able to put more natural gas into storage, bringing gas storage more into the middle of the five-year gas storage range. However, the United States has experienced more severe weather episodes thus far into the late fall which has had ephemeral positive influences on gas prices.
Russia remains the largest global exporter of natural gas, but the United States, on the back of increasing LNG exports, has decreased the margin. The United States surpassed Qatar as the largest exporter of LNG in the world this year and, while both countries have announced new facilities and large expansions of existing LNG trains, the United States has more permitted LNG export capacity that will presumably be coming online in the coming years.
Gas Exports by Type (Pipeline v. LNG)
Summarily, domestic gas markets will continue to be influenced by several factors that have existed previously, most notably a growing domestic demand. However, markets will also be influenced in the long term by two relatively recent trends: increasing production from unconventional plays and increasing LNG export capacity. The future of gas price in the United States remains unclear, but it is likely that natural gas prices will continue to exhibit some volatility.
Sources
Published by N. Sönnichsen, & 5, J. (2022, July 5). Global Gas Exports by country 2021. Statista. Retrieved November 16, 2022, from https://www.statista.com/statistics/217856/leading-gas-exporters-worldwide/#:~:text=Global%20gas%20exporting%20countries%202021&text=Russia%20is%20the%20world’s%20leading,followed%20by%20Qatar%20and%20Norway.
Natural gas gross withdrawals. (n.d.). Retrieved November 16, 2022, from https://www.eia.gov/dnav/ng/ng_prod_sum_a_EPG0_FGW_mmcf_m.htm
Are us LNG exports increasing or decreasing? Natural Gas Intelligence. (n.d.). Retrieved November 16, 2022, from https://www.naturalgasintel.com/are-us-lng-exports-increasing-or-decreasing/
U.S. LNG export capacity to grow as three additional projects begin construction. Homepage – U.S. Energy Information Administration (EIA). (n.d.). Retrieved November 16, 2022, from https://www.eia.gov/todayinenergy/detail.php?id=53719