Most energy analysts saw North American imports of natural gas rising dramatically and considerable investment in LNG terminals being part of future American energy plans, however, shale gas has changed that. The biggest questions now are what volumes of exploitable shale gas are available and if it can be exploited economically.
In the Reference case1, total domestic natural gas production grows from 20.6 trillion ft3 in 2008 to 23.3 trillion ft3 in 2035. With technology improvements and rising natural gas prices, natural gas production from shale formations grows to 6 trillion ft3 in 2035, more than offsetting declines in other production. In 2035, shale gas provides 24% of the natural gas consumed in the United States, up from 6% in 2008. Alternative cases in AEO2010 examine the potential impacts of more limited shale gas development and of more extensive development of a larger resource base. In those cases, overall domestic natural gas production varies from 17.4 trillion ft3 to 25.9 trillion ft3 in 2035, compared with 23.3 trillion ft3 in the Reference case. The wellhead price of natural gas in 2035 ranges from US$ 6.92 per thousand ft3 to US$ 9.87 per thousand ft3 in the alternative cases, compared with US$ 8.06 per thousand ft3 in the Reference case.
There are uncertainties about the potential role of natural gas in various sectors of the economy. In recent years, total natural gas use has been increasing, with a decline in the industrial sector offset by growing use for electricity generation. In the long-term, the use of natural gas for electricity generation is likely to continue to grow.
However, the increased use of natural gas for electrical generation is likely to be limited by slow growth in energy demand, increasing investment in renewable energy and the completion of coal-fired plants currently under construction.
The near to mid-term downturn could be offset, of course, if policies were enacted that made the use of coal for electricity generation less attractive, if the recent growth in renewable electricity slowed, or if policies were enacted to make the use of natural gas in other sectors, such as transportation, more attractive.
1. The projections in AEO2010 focus on the factors that shape US energy markets in the long term. Under the assumption that current laws and regulations remain unchanged throughout the projections.
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