American natural gas producers are taking the fight to OPEC
Shale oil producers have turned the U.S. from a net importer into a net exporter of natural gas in November, according to S&P Global Platts. Even in September, the U.S. emerged as a net exporter for a few days. However, annually, the U.S. natural gas exports haven’t yet overtaken imports in the past 60 years.
The U.S. surpassed Russia as the largest producer of natural gas in 2011, according to the U.S. Energy Information Administration. At 80 billion cubic feet of production per day, the U.S. produces 25% of the world’s total, and the EIA forecasts U.S. gas production to increase to 84 Bcf/day by 2020 and to skyrocket to 104 Bcf/day by 2030. The U.S. is also the largest consumer of natural gas in the world, followed by the European Union and Russia.
Though natural gas is used internationally and is a preferred fuel over coal, it is not traded at uniform prices globally. Every region has its own price depending on its demand and supply metrics, as can be seen from the chart below, sourced from British Petroleum.
However, in the last few years, the consumption pattern has changed. Demand from the global leaders in import such as Korea and Japan is falling, whereas demand is likely to increase from the likes of China, India and the ASEAN countries. Europe, however, will continue to invite competition among suppliers to gain market share.
“We see massive quantities of LNG exports coming on line while, despite lower gas prices, demand continues to soften in traditional markets,” said IEA Executive Director Fatih Birol. “These contradictory trends will both impact trade and keep spot gas prices under pressure,” as quoted in the IEA website.
Between 2015 and 2021, the liquefaction capacity will increase by 45%, according to the IEA, and most of this will be from the U.S. and Australia, according to the Medium-Term Gas Market Report released by the IEA back in June of this year.
While Australia will rival Qatar for the top spot as the world’s largest LNG producer for export, the U.S. is likely to follow close behind in the third position. Citigroup estimates that the U.S. will export gas equal to 20% of its annual consumption by 2020.
Some signs of a pickup in exports can be seen as Bloomberg reports that nine LNG tankers are scheduled to leave Sabine Pass, the most for any month since exports were allowed.
“It’s indicative of things to come,” said Sid Perkins, managing partner at the brokerage Ion Energy Group. Natural gas is “going to be taking on the characteristics of a global-macro market, like crude, where global factors will influence what happens to gas,” reports The Wall Street Journal.
While the shale oil producers have already taken the fight to the OPEC nations for crude oil production, natural gas producers are also out to assert their supremacy. “Gas is just one of the first signs of the growing strength of U.S. production power,” said Anthony Yuen, global energy strategist at Citigroup, quoted in the WSJ.