Higher LNG exports to drive up US natgas prices, EIA projects

By Reuters Staff  May 24, 2023

May 24 (Reuters) - Increasing exports of U.S. liquefied natural gas (LNG) through 2050 will raise domestic prices for natural gas, the Energy Information Administration (EIA) said on Wednesday.

In a supplement to its Annual Energy Outlook 2023, the EIA studied the impact on natural gas prices at the Henry Hub in three scenarios with varying levels of LNG exports.

The EIA said in the case of lower international prices, the U.S. may export 15.3 billion cubic feet per day (bcfd) of LNG in 2050, projecting Henry Hub prices at $3.30 per million British thermal units (mmBtu).

In the opposite case of higher international prices together with faster development of export facilities, the EIA saw 48.2 bcfd of LNG exports and Henry Hub prices at $4.30 in 2050.

U.S. natural gas futures were trading about $2.40 per mmBtu on Wednesday, while analysts forecast prices at the Henry Hub benchmark in Louisiana averaging $3.23 in 2023, their lowest since 2020, before rising to $3.71 in 2024.

The agency forecast that overall gas exports, both by pipeline or as LNG, will become the largest component of U.S. natural gas demand by the early 2030s.

U.S. LNG exports facilities currently have an operating capacity of 11.4 bcfd, with an additional 7.3 bcfd under construction and another 18.3 bcfd capacity approved but awaiting a final investment decision, the EIA said.

The U.S. became the world’s largest LNG exporter in the first half of 2022, averaging nearly 11.2 bcfd of exports that made up 12% of dry natural gas production, it added. (Reporting by Ananya Bajpai and Deep Vakil in Bengaluru Editing by Marguerita Choy)

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Not sure how the EIA came up with these future HH price projections. With a projected HH price range only between $3.30 and $4.30 over the next 30 years, that seems to indicate last year's price spike was anomaly that won't be repeated. I wouldn't want to be betting on that. 

I think differences in demand projections are largely dependent on the global economy.  If one thinks that the global economy will improve, with China returning to steady growth, then the price should rise and certainly could surpass $4.30.  If inflation is stubborn and the Ukraine/Russian war turns in to a long stalemate,  global demand may not snap back.  The EU is certainly investing to replace natural gas with other forms of energy.  The geopolitical equation is tough to call.

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