Utilities Natural Gas US Industry Structure and Outlook

  • The US has an estimated natural gas reserve of more than 341 trillion cubic feet as of 2017 compared to 2016, with 307 trillion cubic feet, an expected rise of 11 percent compared to the reserves estimated in 2016
  • The rate of natural gas production has increased by 0.7 percent Y-o-Y in 2017, mainly during the last quarter with decreasing inventory level, rising natural gas demand, and increasing crude oil prices
  • Natural gas production is expected to grow at about 4.34 percent CAGR from 2017 to 2020, indicated by the EIA gas production forecast of 89.66 Bcf/day in 2019 compared to 78.93 Bcf/day in 2017
  • The US had became a net exporter of natural gas in 2017, with record 35 percent increase in overall export volume, with an increase in LNG exports to reach 707 Billion Cu. Feet


Supply and Demand

  • The main share of natural gas supply in the US is through domestic production, and the rest is met by imports from Canada and Mexico
  • Natural gas import to the US is highly seasonal and depends on seasonal demand fluctuation, which tends to be high during winter
  • Natural gas production increased by 1 percent, averaging 73.6 Bcf/day in 2017, with this increase in production, the US has exported more natural gas than it imported in 2017
  • With the increase in demand from Mexico, development in pipeline infrastructure, and the increase in LNG prices, the US is expected to become a net exporter of natural gas

Consumption Profile

Market Consumption Scenario and Outlook

  • In 2017, the major consumer of natural gas was the electrical power sector, which accounts for nearly 34 percent of the total consumption, followed by the industrial sector at 29 percent
  • Expected demand for 2018 is found to have decreased compared to 2017, with a decrease in consumption by about 1.1 percent compared to 2017, as a result of rise in natural gas prices
  • Demand in the commercial and residential sectors are highly seasonal, and rise drastically during winters, due to the increase in heating demand
  • Demand for natural gas from the industrial sector is expected to grow by more than 2.6 percent until 2019, as major energy intensive chemical and fertilizer projects are expected to come online during 2018 – 2019

Industry Structure

Infrastructural Developments

  • Natural gas storage has a significant role in maintaining the supply demand balance, and price adjustments
  • The US storage capacity has been flat during 2016 – 2018 at 4.6 trillion cu. Ft. This may cause a price surge during the winter months when gas demand increases to peaks
  • Capacity additions in the pipeline sector will be a crucial move. In order to expand the natural gas market by 2020, an additional 7144 miles of pipeline additions and renewals is projected
  • The rig count has been showing an increasing trend from 2016, due to the rise in price and demand in 2017 
  • The rig count is expected to decrease from 2018, as domestic gas production is expected to increase a record level, due to rising crude prices, expected rise in demand

Regulation Status

  • Federal Energy Regulatory Commission (FERC) overlooks the regulation in the natural gas sector in the US, and the market is divided into five geographical zones
  • Few states have full market deregulation, wherein the consumer has an option for natural gas procurement. The others have to procure energy through municipal utilities

 Price Trend and Forecast

Historical Price

  • The average industrial natural gas price in Q3 2018 decreased by 2.8 percent to $2.93/MMBtu Q-o-Q, compared to Q2 2018, and reached $3.28/MMBtu by Oct 2018 
  • The gradual increase in demand and a stable natural gas production had lead to rise in prices during Q3 2018

Price Forecast

  • The average industrial gas price in 2018 is expected
  • to be 1.6 percent higher compared to 2017 
  • Prices are expected to average about $3.0 – 3.2/MMBtu during 2018, which is 7 percent lower compared to October 2018
  • Marginal increase in 2018, even with the current surged prices, is due to the consistent increase in demand