8. NATURAL GAS

Biogas

Biogas is a proven source of energy used in the United States; since 2014, the country has built over 2 000 sites producing biogas including 239 anaerobic digesters on farms, 1 241 wastewater treatment plants using an anaerobic digester and 636 landfill gas projects. The potential for growth is significant, with approximately 11 000 sites ready for development today: 8 002 dairy and swine farms and 2 440 wastewater treatment plants that could support a digester and 450 untapped landfill gas projects. If fully realised, these biogas systems could produce enough energy to power and heat 3.5 million American homes (USDA et al., 2014).

Unlike variable renewables, such as wind and solar power, biogas delivers a continuous source of renewable energy with a very high capacity factor. The flexibility and reliability of biogas systems are important assets. In 2014, 37 states recognised biogas in their state renewable energy goals. For instance, the Los Angeles County Sanitation District in California has operated a 50 megawatt (MW) gas project at its Puente Hills Landfill since 1985, producing electricity for customers throughout Los Angeles.

Supply and demand outlook

Conventional offshore gas production in the Gulf of Mexico will continue to decline in the near future, but this drop will be largely offset by growth in shale gas production. LTO development will be accompanied by an increase in associated natural gas production, mainly from the Permian basin and Eagle Ford shale plays. Dry shale gas production increased by 14% in 2018 compared with 2017, thanks to continuous growth from the Appalachian and Haynesville plays. By 2024, gas production from the Appalachian basin is expected to grow further, while gas production from the Haynesville play will stabilise.

Today, shale gas accounts for more than 70% of total US gas production and within five years, this share is expected to surpass 80%. The United States will account for over 40% of global gas production growth until 2024, after which growth in US shale gas production will decline compared with the rapid increases seen since 2007.

Between 2018 and 2024, US gas production will increase from 860 bcm to 1 016 bcm, and will reach 1 074 bcm in 2040. Low-cost US production will keep Henry Hub prices relatively low until the mid-2020s at around USD 3.5 per million British thermal units (MBtu).

The United States is the second-largest individual contributor to growth in natural gas consumption after the People’s Republic of China (hereafter “China”), with an average growth rate of 0.8% per annum from 2017 to 2024, accounting for 10% of global demand growth by 2024.

Abundant gas supply will continue to support growth in the industry sector (including petrochemicals and agrochemicals) for the foreseeable future. In the next five years, industry and power generation will have the strongest demand growth, with around 20 bcm from each of these two sectors (Figure 8.6). US natural gas consumption will reach almost 900 bcm in 2024. Gas demand for the energy industry’s own use will grow by over 20 bcm partly driven by the build-up of LNG liquefaction plants as well as the fuel needed to support continuously increasing oil and natural gas production. Natural gas consumption in the residential and commercial sectors grew by 12% in 2018 compared with 2017, driven by lower temperatures during the heating season. For these sectors,

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extreme weather events, such as cold snaps or heat waves, will be the biggest drivers of seasonal peak demand. Gas consumption in the transport sector is expected to remain limited.

Figure 8.6 US natural gas consumption outlook, 2012-24

IEA (2019). All rights reserved.

US natural gas consumption will increase and reach around 900 bcm in 2024.

*Transport includes pipelines.

Source: IEA (2019c), Gas 2019: Analysis and Forecast to 2024, www.iea.org/gas2019/.

Trade: Imports and exports

Total gas imports increased to reach a peak of 130 bcm in 2007, followed by a sharp decline down to 82 bcm in 2018. Gas exports started to pick up with the domestic shale gas production boom in the mid-2000s, both through pipelines and as LNG. The United States became a net exporter of natural gas in 2017 for the first time in nearly 60 years and significantly increased those net exports in 2018.

Canada remains the only notable source of natural gas imports, accounting for 97% of the total in 2018, followed by 2% from Trinidad and Tobago. Reliance on LNG imports has become a rather ad hoc measure in case of a temporary supply shortage against high demand, such as heating against cold snaps in the Northeastern region,1 in particular New England.2 Meanwhile, western pipeline gas imports from Canada have remained relatively steady, while the eastern gas trade has, at times, reversed, with US shale gas now flowing upwards to eastern Canada (though flows vary by state and seasonally).

1The Northeast region comprises three states: New York, New Jersey and Pennsylvania.

2New England comprises six states: Maine, Vermont, New Hampshire, Massachusetts, Rhode Island and Connecticut.

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Figure 8.7 US natural gas imports, 2000-18

IEA (2019). All rights reserved.

US dependence on natural gas imports has significantly decreased; Canada remains a key partner.

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

Figure 8.8 US natural gas exports, 2000-18

140 bcm

120

Other

100

Japan

80

Korea

Canada

60

Mexico

40

20

IEA (2019). All rights reserved.

The US became a net exporter of natural gas in 2017, with LNG exports reaching destinations in Asia.

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

The shale revolution has significantly changed the gas market dynamics in the United States and beyond. US gas exports reached a historical high in 2018 at 102 bcm, nearly four times as high as in 2008.

By country shares, Mexico accounted for 52% of 2018 exports, followed by Canada (23%). The rest mostly went to Asia, including Korea (7%), China (3%) and Japan (3%).

In 2016-17 alone, US gas exports increased by 35%. Of this 24 bcm increase, 40% was delivered through pipelines and the remaining 60% in the form of LNG. Over this period, the volume of US LNG exports quadrupled, mainly due to capacity increases at the Sabine Pass terminal on the US Gulf Coast, the only commercially operating liquefaction terminal at the time (see Natural Gas Infrastructure section).

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