Panel, Conference Presentation
The Natural Gas Economy
- The natural gas industry is projected to need to expand 25% in size over the next decade, requiring an annual growth rate of 5% to 7% to support LNG exports, vehicle substitution, and coal replacement, with the first large-scale U.S. LNG deliveries to Europe anticipated for late 2015 or 2016 and additional projects online by 2017.
- To sustain development and justify new drilling, industry participants anticipate a stable natural gas price averaging $5.00 to $5.50 over the next decade, a level that is expected to make natural gas vehicles competitive with gasoline and potentially raise prices by $1 to $2 globally.
- Market dynamics are predicted to shift toward increased drilling of wet gas wells due to the value of associated liquids, while dry gas well drilling is expected to decline unless prices rise to support specific production needs, with the risk that a drop in natural gas liquids prices could reduce associated liquid drilling.
- Significant infrastructure challenges, particularly in China, are expected to drive demand for LNG imports rather than immediate domestic shale exploitation, with approximately 15 new LNG import terminals planned in China that could roughly double global LNG consumption.
- Environmental and regulatory expectations include the necessity of solving methane leak rates, with projections that short-lived climate forcers like methane will account for half of global warming over the next 20 years, requiring technologies and cost alignments to reduce fugitive emissions.
- Regulatory frameworks are expected to evolve toward a stable "regulatory compact" with transparent, non-patchwork rules, with specific estimated costs for compliance such as $50 million to $60 million annually for state-level methane regulations and one cent per thousand cubic feet for emission reductions.
- Risks to the outlook include historical industry frenzies that may lead to market busts, the potential instability of oil prices which could have reached $150 per barrel without shale discoveries, and the threat of environmental issues undermining the social license to operate if safety standards are not met.
- Economic implications of expanded natural gas use include lowering energy costs to attract manufacturing back to the U.S., enabling renewables like wind and solar to become more competitive through price stabilization, and maintaining global economic competitiveness for good-paying jobs.
- Technological and operational expectations involve the continued rapid evolution of recovery technologies, which have seen a 30% increase in average recovery per well over the last three years, alongside large-scale carbon capture and reinjection projects such as those in Australia's Gorgon project.