U.S. natural gas production will top 70 billion cubic feet per day for the very first time in 2013, the EIA has estimated, on reports that both increased onshore reserves and higher prices will be seen this year.
The Energy Information Administration stated Tuesday that daily output for domestic natural gas will reach 70.01 billion cubic feet per day (bcfd), up from its estimate in May of 69.9 billion.
This will be a record high in U.S. natural gas production. The EIA reported that it expects output to be up a total of 1.2 percent from the record-breaking levels of 2012.
2013 gas demand will also rise from 2012 levels. The EIA lowered its estimate slightly but still states that consumption should go up 0.36 bcfd, or 0.5 percent, in 2013. Tuesday marks the second straight month that the EIA has lowered its consumption estimates for the year. This number is directly related to rising gas prices that affect the amount of gas used to generate electricity.
U.S. Factors
There are many determining factors that contribute to the EIA’s stringent analysis of these estimates; everything is analyzed.
2013 had a colder winter than the unusually warm weather that was experienced in 2012. 2014 is supposed to bring colder temperatures, too. When this happens, the amount of natural gas used for residential and commercial heating increases.
Also, onshore production is supposed to be higher than usual as new wells come online at shale formations in reserves like the Marcellus in the Northeast and North Dakota’s Bakken. At the same time, federal Gulf of Mexico output will decline.
The Gulf is affected by a stronger than normal hurricane season, but with a growing share of production coming from onshore, the Gulf has less pressure to produce, and production is left less vulnerable to the conditions.
Domestic output overall will set a record for the sixth straight year in onshore production.
Production in the lower 48 states will average 64.96 bcfd, according to Bloomberg, up from May’s estimate of 64.77 billion. But the EIA reports that outlook for total gas consumption, despite these rising numbers, will still fall to 70.04 bcfd from 70.17 billion as electricity generation from gas declines.
The amount of gas the U.S. is moving through pipelines to Mexico is also breaking records, so much so that its usage of fuel is rising faster than domestic production. U.S. exports are jumping off the shores in record numbers compared to 2012.
But there is still a need for imports of liquefied natural gas (LNG). These levels should fall right around 0.4 bcfd in 2013 and 2014.
Natural gas imports in general have been falling over the past five years. Most of these coming from Canada have been on a slight and steady decline, but levels should still remain near what they were in 2012 – little more than 8 bcfd.
And rising prices will play a huge role in U.S. gas production. Gas prices at the benchmark Henry Hub will average $3.92 per million British thermal units, up from $3.80 in May, according to Bloomberg, and the third quarter average will go up 7.4 percent from $3.77 to $4.05.
In 2014, EIA expectations see gas prices continuing to rise.
The Shale Factor
For a while now, the U.S. has been leading the world in shale exploration with its pioneering techniques like hydraulic fracturing.
But it was only a matter of time before the rest of the world caught on – now it looks like Russia, China, and developing countries like Argentina and Algeria could produce big in the future.
Russia is already the second-biggest producer of conventional oil, with 75 billion barrels lodged beneath the Siberian tundra.
The U.S. is behind Russia with roughly 58 billion barrels. But what the U.S. has been able to do is exploit its shale resources – something that others lag behind in.
Russia hasn’t even begun to reach its potential, and it is still determining whether or not it would even be economically possible.
And just like oil, the U.S. has an enormous amount of natural gas in its shale reserves, making it the king of the mountain.
While the U.S. is ahead of everyone in technology, it is behind in total shale gas reserves. It looks like China, Argentina, and Algeria all hold more, giving them the greatest potential for the future.
And like Russia, these countries are eager to tap into deposits that have been deemed “technically feasible” by geologists. Now the question is, is it economically feasible?
Until those factors are determined in countries rich with shale gas reserves, and until they begin to use modern technology, the U.S. will continue its torrent pace of production. For now, nothing can stand in its way.
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Global Shale Deposits
In the world, there are at least 137 promising shale deposits in 41 different countries. The earth’s potential gas reserves seem to grow every day, and it becomes more vital to our everyday lives, as it becomes an integral part of running factories, powering trucks, and heating our homes.
Still, it is only the U.S. that thus far has been able to reap the rewards from shale reserves. And because fracking is still so premature in much of the world, there is a lot of apprehension and resistance to using it. Countries like France have banned the drilling practice for environmental reasons.
But there is no doubt about the potential that the rest of the world holds for natural gas production in its shale reserves. And with each passing day, and with proper due diligence, production will get stronger and stronger.
The U.S. may be the first to break ground, but they will in no way be the last.
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