The Outlook for Natural Gas Production, Demand, and Trade ...€¦ · The Outlook for Natural Gas...
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www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis
The Outlook for Natural Gas Production, Demand, and Trade: Short- and Long-term Perspectives
Industrial Energy Consumers of AmericaMay 03, 2017 | Arlington, VA
byHoward Gruenspecht, Acting Administrator
Short-term view
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Henry hub natural gas pricedollars per million BTU
Note: Confidence interval derived from options market information for the 5 trading days ending Apr 6, 2017. Intervals not calculated for months with sparse trading in near-the-money options contracts.Source: Short-Term Energy Outlook, April 2017
Natural gas prices are forecast below $4 per million BTU through 2018, but weather and other factors contribute to wide uncertainty
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Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018
Historical spot priceSTEO forecast priceNYMEX futures price95% NYMEX futures upper confidence interval95% NYMEX futures lower confidence interval
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U.S. natural gas production and tradebillion cubic feet per day (Bcf/d)
Source: Short-Term Energy Outlook, April 2017
U.S. natural gas production expected grow in 2017 and 2018 with natural gas exports exceeding imports in 2018
billion cubic feet per day (Bcf/d)
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2015 2016 2017 201874
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Annual Change Federal Gulf of Mexico production (right axis) Annual Change U.S. non-Gulf of Mexico production (right axis)
U.S. imports (right axis) U.S. Exports (right axis)
Total marketed production (left axis) Marketed production forecast (left axis)
U.S. working natural gas in storagebillion cubic feet deviation from average
Note: Colored band around storage levels represents the range between the minimum and maximum from Jan. 2012 –Dec. 2016Source: Short-Term Energy Outlook, April 2017.
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Monthly U.S. working natural gas storage levels in 2018 are forecast to be slightly below the 2012-16 monthly average level
Forecast
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-40%
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120%
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Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Jan 2018
Deviation from average
Storage level
Long-term projections: overview
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Key takeaways related to natural gas from AEO2017• Across most cases, natural gas production increases despite relatively low and stable
prices, supporting higher levels of domestic consumption and natural gas exports
• With modest electricity demand growth, the primary driver for new electricity generation capacity in the Reference case is the retirement of fossil fuel units, spurred by the Clean Power Plan (CPP), the near-term availability of renewable tax credits, state-level policies to promote renewables, and nuclear retirements;
• Even if the CPP is not implemented natural gas and renewables are the primary sources of new generation capacity; the future generation mix is sensitive to the price of natural gas and the growth in electricity demand
• Despite growth in the number of households and the amount of commercial floorspace, improved equipment and efficiency standards contribute to residential and commercial energy consumption remaining relatively flat or declining slightly from 2016 to 2040 in the Reference case
• With economic growth and relatively low energy prices, industrial energy consumption increases during the projection period across all cases; energy intensity declines in the Reference case and most side cases as a result of technological improvements
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Why long-term projections might/could/will be wrong
• Different relative fuel prices
• Faster / slower economic and energy demand growth
• Changing policies and regulations
• Changing consumer preferences
• Faster / slower technology progress
• Technology breakthroughs
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AEO2017 includes side cases with different assumptions of macroeconomic growth, world oil prices, technological progress, and energy policies• Oil prices are primarily driven by global market balances that are mainly influenced by
factors external to the NEMS model; in the Reference case, oil prices reach $109/b in 2016 dollars, compared to $43/b in the Low Oil Price case and $228/b in the High Oil Price case
• In the High Oil and Gas Resource and Technology case, lower costs and higher resource availability than in the Reference case allow for higher production at lower prices; in the Low Oil and Gas Resource and Technology case, more pessimistic assumptions about resources and costs are applied
• The effects of economic assumptions on energy consumption are addressed in the High and Low Economic Growth cases, which assume compound annual growth rates for U.S. gross domestic product of 2.6% and 1.6%, respectively, from 2016–40, compared with 2.2% annual growth in the Reference case
• A case assuming that the Clean Power Plan (CPP) is not implemented can be compared to the Reference case to show how that policy could affect energy markets and emissions
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Energy consumption varies modestly across the AEO cases, bounded by the High and Low Economic Growth cases total energy consumptionquadrillion British thermal units
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1980 1990 2000 2010 2020 2030 2040
2016history projections High Economic
GrowthLow Oil PriceHigh Oil PriceHigh Oil and Gas Resource and TechnologyReference Low Oil and Gas Resource and Technology Low Economic Growth
Source: EIA, Annual Energy Outlook 2017
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Energy production varies more substantially across AEO cases, bounded by the Oil and Gas Resource and Technology casestotal energy productionquadrillion British thermal units
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1980 1990 2000 2010 2020 2030 2040
High Oil and Gas Resource and Technology High Oil PriceHigh Economic GrowthReference Low Economic GrowthLow Oil PriceLow Oil and Gas Resource and Technology
2016history projections
Source: EIA, Annual Energy Outlook 2017
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The United States becomes a net energy exporter in most cases as petroleum liquid imports fall and natural gas exports rise net energy trade quadrillion British thermal units
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1980 1990 2000 2010 2020 2030 2040
Low Oil PriceLow Oil and Gas Resource and TechnologyHigh Economic GrowthReference caseLow Economic GrowthHigh Oil PriceHigh Oil and Gas Resource and Technology
2016history projections
net imports
net exports
Source: EIA, Annual Energy Outlook 2017
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Although population and economic output per capita are assumed to continue rising, energy intensity and carbon intensity are projected to continue falling in the Reference case
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1980 2010 2040
2016history
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1980 2010 2040
2016history
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1980 2010 2040
2016history
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1980 2010 2040
2016history
Reference
Source: EIA, Annual Energy Outlook 2017
U.S. population million people
gross domestic product per capitathousand dollars per person
energy intensitythousand British thermal units per dollar
carbon intensity metric tons CO2 per billion British thermal units
Electricity
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direct use
electricity sales
residential I commercial I Industrial I transportation-2
-1
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1980 2000 2020 2040
2016history projections
Electricity use continues to increase, but the rate of growth remains lower than historic averages in the Reference case
Source: EIA, Annual Energy Outlook 2017
electricity use by sector billion kilowatthours
electricity use growth rate percent growth (three-year rolling average)
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Fuel prices and current laws and regulations drive growing shares of renewables and natural gas in the electricity generation mix as coal’s share declines over time in the Reference case
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U.S. net electricity generation from select fuels billion kilowatthours
natural gas
2016history projections
petroleum
coal
renewableenergy
nuclear
Reference
2020 2030 2040
2016projections
No Clean Power Plan
Source: EIA, Annual Energy Outlook 2017
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Natural gas resource availability affects prices and plays a critical role in determining the mix of coal, natural gas, and renewable generation
2015 2025 2035 2015 2025 20350
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U.S. net electricity generation from select fuels billion kilowatthours
natural gas
2016history projections
coal
renewableenergy
ReferenceLow Oil and Gas Resourceand Technology
High Oil and Gas Resource and Technology
Source: EIA, Annual Energy Outlook 2017
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Lower capital costs and the availability of tax credits boost near-term wind additions and sustain solar additions; whereas coal-fired unit retirements in the Reference case are driven by low natural gas prices and the Clean Power Plan
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2016history projections
solarwindoil and gasnuclearothercoal
annual electricity generating capacity additions (+) and retirements (-) (Reference case) gigawatts
Source: EIA, Annual Energy Outlook 2017
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Source: EIA, Annual Energy Outlook 2017
The assumption that 25% of nuclear plants that reach age 60 are retired leads to net nuclear capacity decreases in AEO2017
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2016history projections
Reference
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assumed uprates
new reactors
actual/announcedretirementsprojectedretirements
nuclear electricity generating capacitygigawatts
year-over-year nuclear capacity changes gigawatts
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Food for thought – electricity
• Possible effect of “deep decarbonization” strategies for buildings and transportation in increasing electricity use
• Actual retirement pattern of existing nuclear capacity
• “Going big” (larger, more interconnected grids to smooth effects of intermittent renewables) vs. “going small” (microgrids, on-site storage)
– To what extent is experience with cellular communications technology an appropriate indicator for developments surrounding distributed renewable power?
• Relative roles of storage and load that is more responsive to variable generation in accommodating more non-dispatchible generation on the grid
Hydrocarbon production and trade
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Reference case oil prices and production rise from current levels, price paths and production levels in the side cases are very different from those in the Reference case
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North Sea Brent oil price2016 dollars per barrel
2016history projections
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2016history projections
crude oil productionmillion barrels per day
High Oil and Gas Resource and Technology
High Oil PriceReference case
Low Oil PriceLow Oil and Gas Resource and Technology
Source: EIA, Annual Energy Outlook 2017
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In the High Oil Price and the High Oil and Gas Resource and Technology cases, the United States becomes a net petroleum exporterpetroleum net imports as a percentage of products suppliedpercent
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Low Oil PriceLow Oil and GasResource and TechnologyReference
High Oil PriceHigh Oil and GasResource and Technology
net imports
net exports
2016history projections
Source: EIA, Annual Energy Outlook 2017
Both use and production of natural gas increase across most AEO cases; the range across cases is wider for production than for use
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Natural gas consumptiontrillion cubic feet
2016history projections
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Natural gas production
High Oil and Gas Resource and TechnologyHigh Oil PriceHigh Economic GrowthReferenceLow EconomicGrowthLow Oil PriceLow Oil and Gas Resource and Technology
billion cubic feet per day
2016history projections
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U.S. dry natural gas production is the result of continued development of shale gas and tight oil plays
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U.S. natural gas production by type trillion cubic feet
shale gas and tight oil plays
tight gasother Lower 48 onshoreLower 48 offshoreother
2016history projections
Source: EIA, Annual Energy Outlook 2017
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2016projections
High Oil and Gas Resourceand Technology
billion cubic feet per day
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Plays in the East lead production of U.S. natural gas from shale resources in the AEO Reference case
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Shale gas production by region trillion cubic feet
East
Gulf Coast
rest of U.S.
Reference case
2016history projections
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billion cubic feet per day
High Oil and GasResource andTechnology
2016projections
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Increasing demand from industrial and electric power markets drive rising domestic consumption of natural gas in the Reference case
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electric power
industrial
transportationcommercial
residential
2016history projections
natural gas consumption by sector trillion cubic feet billion cubic feet per day
Source: EIA, Annual Energy Outlook 2017
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natural gas tradetrillion cubic feet
2016history projections
LNG imports
billion cubic feet per day22
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Increased natural gas trade is dominated by liquefied natural gas exports in the Reference case
Source: EIA, Annual Energy Outlook 2017
liquefied natural gas (LNG) exports
to Canada (pipeline)
to Mexico (pipeline)
from Canada (pipeline)
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U.S. LNG export levels vary across cases and reflect both the level of global demand, as well as by the difference between domestic and global natural gas prices
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liquefied natural gas exportstrillion cubic feet billion cubic feet per day
2016history projections
Source: EIA, Annual Energy Outlook 2017
High Oil PriceHigh Oil and Gas Resource and Technology
ReferenceLow Oil and Gas Resource and TechnologyLow Oil Price
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Future domestic natural gas prices depend on both domestic resource availability and world energy pricesHenry Hub natural gas price2016 dollars per million Btu
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Low Oil and Gas Resource and TechnologyHigh Oil PriceReference case Low Oil PriceHigh Oil and Gas Resource and Technology
Source: EIA, Annual Energy Outlook 2017
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Food for thought – natural gas production and trade
• Technology developments – to what extent will they continue to offset depletion of hydrocarbon resources
• Possible pursuit of deep decarbonization, particularly in the electricity generation and buildings sectors
• Geopolitics in key oil and natural gas producing regions – both internationally and within the United States
• Competitiveness of gas-fired generation with other technologies in developing countries where projected electricity demand growth is concentrated
• Technologies and policies affecting vehicle choice, which given dominant role of transportation sector in oil demand can significantly affect markets for oil and natural gas
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For more information
U.S. Energy Information Administration home page | www.eia.gov
Annual Energy Outlook | www.eia.gov/aeo
International Energy Outlook | www.eia.gov/ieo
Short-Term Energy Outlook | www.eia.gov/steo
Monthly Energy Review | www.eia.gov/mer
Today in Energy | www.eia.gov/todayinenergy
Drilling Productivity Report | www.eia.gov/petroleum/drilling/
State Energy Portal | www.eia.gov/state/
North American Collaboration on Energy Information | www.nacei.org/