The New Dependency – Natural Gas, the July issue of TerraJoule.us, takes a look at the success of natural gas to embed itself in the global energy system, at a time when LNG exports are rising, leading to a world pricing system. In particular, recent data shows that the United States is developing natural gas capabilities along two fronts: increasing exports not only by ship but by pipeline, while at the same time becoming more reliant itself on the resource. From this month’s issue:
US exports of natural gas in LNG form have only just begun. And yet, 2016 NG exports on annualized basis are taking off more strongly than expected, in part, from the next leg of NG pipeline exports to gas-hungry Mexico. This quieter, more incremental growth of NG exports has been building more slowly the past 2-3 years. But when we add pipeline exports to the unfolding wave of new LNG capacity, it now seems likely that total NG exports from the US will exceed all forecasts, including TerraJoule.us’, by the year 2020.
For example, the US last year was exporting, on a daily basis, 4.88 bcf/d (1718 bcf/365). This year, 2016, the US is on pace to export 5.80 bcf/d (2124/366). TerraJoule.us has been forecasting that the US will be exporting at minimum 12.82 bcf/d by the years 2020-2022. This is based on the simple calculation of approved LNG projects. But given the strong growth in natural gas by pipeline, it now seems likely the US will be exporting at least 15 bcf/d by 2020-2022 (Or, 5465 bcf annually).
The more intriguing question to ask, however, is whether natural gas prices can really stay at current levels through that time. TerraJoule.us has been wrong, since late 2014, in asserting that the buildout of new US LNG capacity would take US NG prices higher.
What does seem clear, however, is that barring a new global recession, US NG prices have certainly seen the price lows. In the years 2016-2020 therefore, there will be a continual tug-of-war between the rollout of new global dependency on natural gas, operational expenses of the LNG infrastructure required to serve this demand growth, and the geological realities of NG supply. …
If you accept the proposition that natural gas prices have finally bottomed, then you might be more likely to agree with the following proposition: the production growth required between now and 2020 to serve both domestic demand and exports is large enough to finally move the price of NG higher… This risk in no way conflicts with the TerraJoule.us view that recoverable NG resources in North America are vast. Rather, it’s the pace of demand that poses such risk.
In the continuously updating TerraJoule.us Global Grid Decarb Monitor, the forecsast for power generation growth from solar is revised upward, due to better than expected deployment in the world’s solar leader: China..
Finally, The TerraJoule.us Transition Index, composed of 70% ETFs and 30% individual equities, fell to 98.30, having started the new year at a notional value of 100. The Index plays a favored super-theme of TerraJoule.us: that the global economy is transitioning away from liquid fossil fuels, to the powergrid. And, that the costs of fossil fuel extraction and combustion increasingly place the energy-capture technologies of wind and solar power in a favorable position. Industrial names in the index continue to perform well in 2016, while the basket of solar equities continues to underperform.
–Gregor Macdonald, Editor of TerraJoule.us – A Journal of Energy Transition.