Exports and the industrial sector are driving U.S. natural gas demand this winter

A growing industrial sector and record export activity will be the main drivers of increased demand for natural gas in the U.S. this winter, according to a leading trade group.

Liquefied natural gas (LNG) exports are expected to increase 16% over last winter, while pipeline exports to Mexico are expected to increase 18%, the Natural Gas Supply Association (NGSA) said in its annual winter forecast released Thursday. Collectively, these increases are expected to increase exports by 2.7 Bcf/d compared to last winter.

Energy Venture Analysis (EVA), which prepared the report for NGSA, said LNG exports will remain the main driver of growth in domestic natural gas demand this decade. The company expects LNG feed gas deliveries to average 12.0 Bcf/d this winter, an increase of 1.7 Bcf/d from last year.

Meanwhile, industrial growth is expected to increase by 1 Bcf/d from a year ago this winter, as new facilities come online and production capacity increases in natural gas-intensive sectors such as petrochemicals. According to NGSA, 22 large gas-intensive projects are planned for 2021-2024.

Exports and the industrial sector are driving demand for natural gas in the U.S. this winter photo 1

“NGSA’s baseline forecasts indicate strong domestic and global demand for natural gas,” said NGSAA President David Attwood, who is a vice president at ExxonMobil.

Adjusted for exports, customer demand for U.S. natural gas is expected to increase to 111.9 Bcf/d, up from 110.9 Bcf/d last winter. However, the domestic market is expected to shrink by 1.4 Bcf/d from last winter due to declining electricity demand. NGSA expects this natural gas market to shrink by 2 Bcf due to “less temporary ‘economic transition’ to natural gas-fired power.”

Meanwhile, weather is not expected to be a huge factor this year. The authors of the report predict that this year’s winter will be 1% colder than last year, which means that the demand for apartments and commercial facilities will probably remain the same.

Is the supply of natural gas increasing?

On the supply side, production is expected to increase by a modest 4%, reflecting increased drilling and well completion rates. NGSA projects natural gas production to increase by 3.7 Bcf/d over last winter. Total supply, which also includes storage and LNG and Canadian pipeline imports, is expected to average just over 99 Bcf/d this winter.

NGSA also anticipates higher Henry Hub prices this winter compared to last year’s average of $3.09/MMBtu. The trade group attributes its forecast to “a combination of strong economic growth, rising demand for natural gas, a resurgence in manufacturing and tighter storage inventories.”