EIA Forecasts Rising LNG Exports

On Thursday, the U.S. Energy Information Administration (EIA) published its Annual Energy Outlook for 2017, one of the most closely watched long-term forecasts for the petroleum, gas, coal and renewables markets.

Among this year’s key predictions, EIA believes that American petroleum consumption will remain roughly flat for the next two decades, with rising fuel economy offsetting demand growth in transportation uses. On the supply side, crude production is expected to rise slightly through the mid-2020s, then remain flat – unless oil prices rise dramatically. EIA expects a price recovery to $80 per barrel within four years, followed by a gradual rise to more than $100 per barrel by 2040; if prices should rise much more sharply, the agency predicts that U.S. oil production will increase by about one third by the early 2020s, then decline to meet reference levels by 2040. Under most scenarios, the U.S. would remain a net importer of petroleum throughout the forecast period.

Tight oil is expected to make up the majority of new production. Offshore Gulf of Mexico oil output is expected to decline from 2020 through 2034 as existing fields mature, but offshore natural gas is expected to increase through 2040. 

In good news for petrochemical firms and for LNG, ethane and propane export ventures, EIA expects plentiful and growing gas supplies, especially on the Eastern seaboard. Total shale gas production is expected to hit 90 billion cubic feet per day by 2040, more than twice current levels. As production outpaces domestic consumption, LNG exports are expected to rise to 12 billion cubic feet per day by the end of the forecast period – or even higher, under favorable price, resource and technology assumptions. When factoring in cross-border pipeline trade with Canada and Mexico, the U.S. may well become a net exporter of natural gas by a margin of as much as 15 billion cubic feet per day. 

In electrical power generation, coal consumption is expected to decline, losing market share to natural gas and renewables. Of all energy sources, renewables are expected to grow fastest (on a percentage basis) due to increasing economies of scale and continued government support.