8. NATURAL GAS

Figure 8.1 Share of natural gas in different energy systems, 1978-2018

IEA (2019). All rights reserved.

The revolutionary growth in gas production bolstered its price competitiveness to drive up natural gas consumption, particularly in electricity generation.

*Latest TFC data are for 2017. Note: TFC = total final consumption.

Source: IEA (2019a), World Energy Balances 2019, www.iea.org/statistics/.

Supply and demand

Production

The United States has been the world's top producer of natural gas since 2009, when the country surpassed production levels of the Russian Federation (hereafter “Russia”). Over the last decade, total supply of natural gas increased by 29% to 852.7 billion cubic metres (bcm) in 2018, mainly thanks to a remarkable 40% growth in indigenous gas production from 571.1 bcm to 861.9 bcm. In 2017, the volume of gas exports (89.7 bcm) exceeded the volume of imports (86.1 bcm) for the first time in history when the United States became a net exporter of gas (Figure 8.2). In 2018, net exports increased significantly to 20 bcm.

Figure 8.2 Overview of US total supply of natural gas, 2000-18

The US has been the top gas producer since 2009 and a net exporter since 2017.

Note: Stock changes are the change in stock level of recoverable gas held on national territory – the difference between opening stock levels at the first day of the year and closing stock levels at the last day of the year of stocks held on national territory. A stock build is shown as a negative number and a stock draw as a positive number.

Source: IEA (2019b), Natural Gas Information 2019, www.iea.org/statistics/.

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8. NATURAL GAS

US natural gas production has been growing strongly since 2005 thanks to the shale revolution. Growth has been uneven: it went through a brief stagnant period in 2012 and 2013, with just 1% growth since the shale gas production boom in 2005, followed by the first drop in production by 11.2 bcm to 755.3 bcm in 2016 (Figure 8.3). However, gas production picked up and returned to sharp growth again in 2017 and 2018, mostly driven by a recovery in the oil price that supported light tight oil (LTO) and its associated gas production, indicating a second wave of the shale gas revolution. The notable increase in domestic shale gas production remains an integral element of US natural gas development, and the share of shale gas in total gas production reached around 66% in 2017. In 2018, US natural gas production increased to 861.9 bcm.

Figure 8.3 US natural gas production, 2007-17

IEA (2019). All rights reserved.

Shale gas from the Appalachian and Permian basins is the primary driver of natural gas growth in the United States.

Note: Other production includes conventional gas and other unconventional gas such as tight gas and coalbed gas. Source: IEA (2018), Gas 2018: Analysis and Forecasts to 2023, www.iea.org/gas2018/.

From a geographic perspective, in 2017, the top gas-producing states by shares of total production were: Texas (23.1%), Pennsylvania (19.7%), Oklahoma (8.5%), Louisiana (7.7%) and Ohio (6.3%). Gas produced in the federal offshore waters of the Gulf of Mexico accounted for 4% of the total (EIA, 2018a).

There are seven major regions for shale production (LTO and shale gas) in the United States that went through successive waves of developments: Haynesville and Eagle Ford in the early 2000s; Appalachia in the mid-2000s; and Permian (which produced the largest amount of associated gas) from the mid-2010s (Figure 8.4). Developments in the Bakken, Anadarko and Niobrara basins are mainly oilrather than natural gas-driven. The Permian basin is a sedimentary basin located in western Texas and south-eastern New Mexico, and the Appalachian basin refers to Ohio, Pennsylvania and West Virginia’s Marcellus and Utica shale plays.

Northeast dry shale gas, predominantly from the Appalachian basin, will maintain its integral role in the US gas portfolio, and is still registering strong growth. Though pipeline bottlenecks are limiting near-term gas deliveries, associated gas from the Permian basin will be the strongest production growth story.

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This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

Source: US Energy Information Administration (2018b), Drilling Productivity Report, www.eia.gov/petroleum/drilling/

Consumption

Domestic consumption of natural gas in the United States is estimated to have reached a historic peak in 2018 at around 850 bcm, largely due to increasingly affordable domestic gas supplies. In line with strong domestic production, gas consumption recorded an 18% increase from 2007 to 2017, mainly driven by growth in the two largest gas-consuming sectors: transformation (heat and power generation), which accounted for 37% of the total US gas consumption of 773.7 bcm in 2017, and industry, which accounted for 23% of consumption (Figure 8.5). The remaining consumption shares were residential (16%), commercial and other (11%), energy (9%), and transport (3%). The transformation sector, mostly power generation, saw a notable 35% surge in natural gas consumption, with important increases in all the other sectors as well: industry (27%), transport (19%), energy (11%), and commercial and others (3%). Only the residential sector had a decline in gas consumption, falling by 7% due to mild weather conditions in 2017 and lower demand for heating and air conditioning.

Within the industry sector, gas consumption in the chemicals sector (including petrochemicals) increased by 129% from 2007 to 2017 and accounted for 52% of total industry gas consumption in 2017. Two key sectors of US natural gas consumption, power generation and petrochemicals (e.g. ethane feedstock), have benefited the most from low gas prices. The competitiveness of natural gas accelerated coal-to-gas switching in power generation and incentivised industry – particularly the chemicals sector – to use more abundant and affordable natural gas as a fuel and feedstock.

The five states that consumed the most natural gas in 2017 were: Texas (14%), California (8%), Louisiana (6%), Florida (5%) and Pennsylvania (5%) (EIA, 2018a).

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