trending Market Intelligence /marketintelligence/en/news-insights/trending/qaP4lIQLYLWviDwqqLXV1g2 content esgSubNav
In This List

Natural gas industry deemed healthy but needs to be proactive


The Big Picture: 2024 Energy Transition Industry Outlook

Case Study

An Oil and Gas Company's Roadmap for Strategic Insights in a Quickly Evolving Regulatory Landscape


Essential IR Insights Newsletter Fall - 2023


Cleantech Edge: Five is the new zero for energy transition debt

Natural gas industry deemed healthy but needs to be proactive

Naturalgas production growth has surpassed most predictions made in the last five to10 years, but the industry needs to continue its outreach to skeptics in orderto show the value and importance it has to the country.

Shale has created abundance

Productionof dry natural gas in the U.S. will rise from a level of 55.08 Bcf/d in 2008 toa projected 76.14 Bcf/d in 2017, according to data in the U.S. EnergyInformation Administration's "Short-Term Energy Outlook."

Thearrival of massive quantities of shale natural gas starting around 2008 causedprices to crater and put the market in abundance ever since, according to RickSmead, managing director at RBN Energy LLC.

In2008, the EIA projected that the U.S. would be importing 7.8 Bcf/d, but theyare now suggesting that the U.S. will export 13.9 Bcf/d by 2030, Smead said atthe LDC Gas Forum in Chicago on Sept. 12.

Rick Smead, managing director at RBN Energy

Source: SNL Energy, an offering of S&P Global Market Intelligence

"Theswing between those two is 21.7 Bcf/d, which is more than two Qatars,"Smead said. "So we have added effectively more than two Qatars to the LNGmarkets because of this abundance. Abundance came on so suddenly that theindustry is still kind of in shock."

Theextra gas that has been produced since the late 2000s is also seen in the EIA's"Annual Energy Outlook," in which Smead said that productionexpectations through 2030 were revised up nearly 55 Bcf/d between the 2010 and2016 reports.

Extragas was also assisted by the development of wet gas production, which helpedtotal natural gas output rise above 70 Bcf/d.

"Ifwet gas and associated production had stayed flat from 2010, then we would beat least 10 Bcf/d short from where we are now," Smead said. "So ifoil production and development recovers, you start getting a lot of freeassociated gas coming to the market, which holds prices way down and bolsterseverybody's supply balance."

Smeadprojected power plant generation demand for natural gas rising toward 29 Bcf/dby 2020 and industrial demand to reach 23 Bcf/d. The two categories were 26.50Bcf/d and 20.52 Bcf/d, respectively, in 2015, according to the EIA.

Exportsof liquefied natural gas are projected by Smead to rise to around 7 Bcf/d by2020 and eventually grow to between 9 Bcf/d and 12 Bcf/d.

Messaging important forlong-term health

Whileprojections for production and consumption of natural gas continue to pointupward in the future, such growth is not assured given the increased role thatenvironmentalists have played in protesting industry development.

"Protestersare chaining themselves to water pipes in order to stop pipelines. They'repopping up in open commission meetings and going to commissioners' homes,"Smead said. "There are plenty of very noisy and well-organized people whowould like this whole industry to disappear, so it is a challenge."

Smeadsaid that it is difficult to hire people in the natural gas industry nowbecause the atmosphere is demoralizing and they do not want to tell theirrelatives who they work for. He said that popularity is a challenge and thatthe industry has not necessarily done itself any favors.

Properoutreach is important and can help the industry maintain its long-term vitality.

"Numberone is perfect execution. Supply development has come a long way with singlepad drilling, on-site recycling of water, zero methane emissions and reducedtruck traffic," Smead said. "Number two is messaging, because peoplethat are not in this industry don't believe a word that we say."

Theindustry has to get a lot more people to understand just what the resource isworth and what it does for the country; not what it does for some producer'sbottom line, Smead said.

"Bottomline is to be happy and sell the stuff. Demand is the key to everything becausethat will pull the supply forward, and as prices start going up, lots of peoplewill suddenly think it would be great to have more supply," he said.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.