Regional Market Outlook on Natural Gas
The US natural gas market is consolidated with 34 percent major production by the top five suppliers, 32 percent transportation by major five players, and 78 percent natural gas distribution, owned by investor-owned utilities.
Natural Gas Production Top 5 Players (MMcf)
- 34 percent (2016) was the share of production by the top five producers (MMcf).
- More than 1,000 players operate in the production sector
Top 5 Players Transportation (Length–Miles)
- 32 percent (about 69,000 miles) of pipelines, across the nation, is owned by Kinder Morgan group.
- 77percent, owned by 30 large companies, operating in the transportation sector
Top Distribution Utility by Type (Volume)
- 78 percent (Bcf) of natural gas sales is owned by investor-owned utilities
- 12 percent is the share of sales by the pipeline companies, mostly to LDCs and power companies
Industry Structure and Outlook: Production and Reserves
Natural gas production is expected to grow about 1.40 percent CAGR by 2019, due to forecasted increase in LNG exports.
Natural Gas Production (Bcf)
- The US has a proven natural gas reserve of more than 324 trillion cubic feet as of 2015, a drop of 16 percent compared to the reserves estimated in 2014
- The rate of natural gas production has declined by 2 percent Y-o-Y in 2016, the main reason for the decline in price was drop in rig count and exploration activities, largely due to global decline in demand and the oversupplied domestic market
- Natural gas production is expected to grow at about 1.40 percent CAGR, from 2017 to 2019, due to forecasted price increase, followed by export increase in liquefied natural gas
- The expected rise in exports to the European and Asian markets, coupled with domestic demand and increase in pipeline capacity in the US as well as Mexico, are the major reasons for the forecast of increase in production
Consumption Profile: Market Consumption Scenario and Outlook
Major natural gas consumption of nearly 40 percent is used in electric power generation and the demand for natural gas is expected to grow by 2.1 percent from 2017.
- The electrical power sector is expected to decline in 2017 by 9–9.5 percent, mainly due to increasing use of renewable energy
- Demand in the commercial and residential sectors is highly seasonal and rise drastically during winter, due to the increase in heating demand
- Demand for natural gas from the industrial sector is expected to grow by more than 2.1 percent until 2018, as major energy-intensive chemical and fertilizer projects are expected to be online by 2017
Industry Structure and Outlook: Infrastructural Development
Natural gas planned storage capacity addition, as of 2020, is nearly 131 Bcf and an additional 7,144 miles of pipeline additions and renewals are projected to be added by 2020.
- Natural gas storage has a significant role in maintaining supply–demand balance and price adjustments
- As of 2014, 9233.35 Bcf was the underground gas storage capacity. By 2018, an additional 1.4 percent capacity will be added
- Capacity additions in the pipeline sector will be a crucial move. In order to expand the natural gas market by 2020, an additional 7,144 miles of pipeline additions and renewals are projected
- The rig count is expected to increase from 2017, as both domestic gas demand and LNG export demand are expected to be higher
Price Analysis: Price Trend and Forecast
- The average natural gas price on September 2017 increased by 2.7 percent compared to August 2017, due to increase in demand for natural gas to regain the electric power after the impact of hurricane
- The average industrial natural gas price in 2016 declined by 9.8 percent Y-o-Y, compared to 2015, and reached $3.5 per thousand cubic feet by December 2016
- The over supply situation and drop in seasonal demand from almost all the consumer sectors, owing to milder climate, were main reasons for the price hike
The average industrial gas price in 2017 is expected to increase from about 4 to 4.3 $/thousand cubic feet by December 2017
Prices are expected to be 20–25 percent higher by the end of 2017 than 2016, due to following reasons
–Normal winter temperature than the warmer winter in 2016 contribute to increase in residential and commercial consumption
–Impact of hurricane towards the exports of natural gas
–Slowing inventories result in increase in natural gas prices
Natural gas price in the US is mainly dependent on the environmental impacts and supply–demand factors, and the prices have significant variations when the balance in supply–demand is affected.
- Domestic production and imports play a major part in driving the prices high or low
- The rise in domestic production has resulted in drastic drop in prices in the US since the last two years
- Production is expected to grow in the future and will have a high impact on prices
- Natural gas storage during low demand season plays a significant role in controlling price hike, as it helps in meeting demand during the peak period, without increasing imports
- In the future, planned additions of storage facilities are expected to come up
CDD and HDD
- Seasonal demand during winter and summer, depending on the HDD and CDD, play a significant role in the natural gas consumption pattern, and thereby have a greater impact on the prices
Price of Competing Fuels
- The prices of competing fuels, like fuel oil, diesel, also pose a price risk for natural gas
- In the future, with technological advancement, cheaper renewable fuel, like biodiesel or biomass, is expected to have a significant impact on the natural gas price