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    US Prices to Stay Low To 2030: Report


Shale gas expected to supply 65% of North American market by 2030

by: Dale Lunan

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US Prices to Stay Low To 2030: Report

US natural gas prices can be expected to remain under $3/mn Btu well into the next decade as shale gas supplies continue to drive exports and feed growing domestic demand, McKinsey Energy Insights says in its 2019 North American Gas Outlook, released July 23.

North American natural gas demand will reach 125bn ft3/day by 2030 from about 95bn ft3/day this year, with 20bn ft3/day of that growth coming from pipeline and LNG exports. The share of natural gas in the North American power mix will increase by 5bn ft3/day, driven largely by coal plant retirements, but renewables can be expected to start pushing gas out of the decarbonising power sector after 2025.

“North America is endowed with abundant gas resources, which will play a major role in the energy mix domestically and provide security of supply through LNG exports to Europe and Asia,” McKinsey partner Dumitru Dediu said. “We see over 1,000 trillion ft3 of gas resources – which is sufficient to meet demand for the next two decades – at cost economics well below $3/mn Btu.”

Over the medium term – between now and 2025 – the benchmark US price at Henry Hub can be expected to average between $2.50/mn Btu and $2.75/mn Btu, the McKinsey report forecasts, while over the longer term, post-2025, the benchmark will range between $2.25/mn Btu and $2.75/mn Btu.

On the supply side, production from the Appalachian basin in the US northeast will increase by about 55bn ft3/day and will supply about 40% of the North American market by 2030, displacing imports from Canada and domestic Rockies supply in Midwest markets.

Associated gas production, primarily from the Permian basin, is expected to increase by 12bn ft3/day by 2030, when it will be supplying 25% of the North American market. Permian production growth will limit flows south of Appalachian gas and support Gulf Coast LNG developments, the report says.