US Natural Gas Supply -- A Balancing Act

The outlook for the US is a strong growing dependence on natural gas. Electricity generation is now fueled by 18 bcfd of natural gas, a usage that could double by 2020. Ultimate reserves have doubled to 2 quadrillion cubic feet in the last 25 years, thanks to tax incentives to stimulate the development of unconventionals: tight sands gas, CBMs & shale gas. However, we are well past the half-life of the reserves – more than 1 trillion cubic feet have already been produced – so increases in demand will progressively have to come from overseas sources via LNG carriers which now account for one-fifth of net gas imports of 10 bcfd. The US produced 53 bcfd and consumed 63 bcfd in 2007.

Production of conventional gas in the US peaked at 60 bcfd in the early 1970s and had dropped to 43 bcfd by the early 1980s. Tax incentives for unconventionals kicked-in in the mid 1980s and they have risen to the cause, their output increasing from 8 bcfd in 1990 to 30 bcfd or little more than half of today’s production of 56 bcfd (see Table). Conventionals continue their decline and will drop to 13 bcfd by 2020 according to our model. Production decline can have very insidious effects. While production of unconventionals increased 12 bcfd from 2000 to 2008, conventionals declined by 10 bcfd over the same period allowing a net increase of only 2 bcfd. Today unconventionals are the backbone of the US gas industry and shale gas is particularly on a strong growth path. Production of CBMs has remained flat since the early 2000s when interest shifted to shale gas; that of tight sands gas is also leveling off according to EIA’s projections. The US is the only country with a large-scale shale gas industry.

US Natural Gas Production – Conventional & Unconventional
(Bcfd)

Year Shale Gas CBM Tight Gas Unconventionals Conventionals Total
1990 - 1.5 6.5 8 41 49
1996 0.8 2.9 9.9 14 38 52
2000 1.7 4.3 12.2 18 35 53
2008 8.5 5 17 30 25 56
2020 20 * 5 * 19 * 44 13 ** 57

Sources: *EIA08; **our production model

Over the next decade, within a high-growth scenario based on a major switch towards power generation and NGVs, US gas demand will require a 9-fold increase in LNG imports. At the same time shale gas output is expected to more than double to 20 bcfd in order to maintain US production at its current level. Any shortfall would call for additional imports. The time frame is short for any significant impact from renewables such as wind and solar. An exceptional policy is needed to juggle the many variables in the equation, including the geopolitics of the overseas sources. 

For more of Dr Rafael Sandrea’s work on global oil and gas resources see: An In-Depth View of Future World Oil & Gas Supply - A Quantitative Model which is available online through PennEnergy.com.


Click here for Dr. Sandrea's full bio.

 

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