Production of natural gas grows at a faster rate than consumption in most cases after 2020, leading to an increase in exports. Continued development of tight oil and shale gas resources in the East and Southwest regions, U.S. crude oil production is seen to set annual records through the mid-2020s while natural gas production will keep growth through 2050.
However, dry gas production is seen grow just 1.9 percent from through 2025, which is considerably slower than the 5.1 percent growth rate in the five years running up to 2020.
Shut-in of US LNG production on the cards
Rampant US gas supply has been outpacing demand growth for the past year, slashing prices in Europe and Asia. Some US exporters are considering shutting in production as record low gas prices at the Dutch TTF hub challenge the profitability of liquefying and shipping gas to Europe.
Prices at the Dutch TTF gas trading have averaged $4.5/ MMBtu in 2019 but would have to drop below an average of $3.8/ MMBtu through 2020 to balance the market. “Our forecast touches back down to the low US$3/million Btu range during the summer. The risks to price remain heavily weighted to the downside,” said Wood Mackenzie’s director, European Gas, Murray Douglas.
Yet, shut-ins of US gas production is still unlikely at this point - given the political clout surrounding American gas exports as well as the importance and competitiveness of Henry Hub-indexed supply for global markets. American LNG supply is gearing up to make up 46% of Atlantic Basin trade by 2022.
Over the summer, the British and European LNG marketplace is expected to become “increasingly congested. Hence, some infrastructure constraints will likely surface and place further downward pressure on hub prices. This will become particularly acute in the UK during summer where regas utilisation will be capped at 75%, assuming Norwegian pipeline deliveries follow historical trends.