The recently released Annual Energy Outlook 2017 (AEO2017) from The Energy Information Administration (EIA) provides modeled projections of domestic energy markets through 2050. Projections in the Annual Energy Outlook 2017 are not predictions of what will happen, but rather modeled projections of what may happen given certain assumptions and methodologies. It considers various scenarios: where oil prices are higher than currently projected, where they are very low, and a “reference case” scenario. The reference case projection, which is being shared in this article, assumes trend improvement in known technologies and economic and demographic trends reflecting the current central views of leading economic forecasters and demographers.
U.S. Likely to Become Net Energy Exporter
According to the AEO 2017, as long as strong domestic production continues and domestic demand remains relatively flat, the United States is likely to become a net energy exporter in the next decade. This is due in part to the relatively low rate of increase in U.S. energy consumption, which is expected to be only 5% between 2016 and 2040, while total energy production is expected to increase by more than 20% in the same time period. Crude oil and natural gas production will lead these increases.
Projections of tight oil and shale gas are uncertain because large portions of the known formations have relatively little or no production history, and extraction technologies and practices continue to evolve rapidly. However, continued high rates of drilling technology improvement could increase well productivity and reduce drilling, completion and production costs. The report anticipates that natural gas production will account for nearly 40% of U.S. energy production by 2040 in the Reference case.
While there is concern that there is a surplus of natural gas worldwide, keeping prices low, the report projects that new liquefied natural gas (LNG) export projects and increased consumption in the electric power and industrial sectors will lead to increases in natural gas production.
A comprehensive list of approved and pending LNG export terminal projects from Federal Energy Regulatory Commission (FERC) demonstrates the likelihood that America’s move toward being a net exporter of energy will be spurred mainly by LNG exports. This is confirmed in the AEO 2017 report (a reference case scenario) where LNG is projected to dominate U.S. natural gas exports by the early 2020s. Thus, there will be increasing demand for pipelines to move natural gas to markets within North America and to the numerous export terminals that have already been approved, as well as those that are pending.
The first LNG export facility in the U.S. mainland, Cheniere Energy’s Sabine Pass in Cameron Parish, LA, began operations in 2016 and data shows more than $126 billion (USD) in active U.S. LNG export terminal-related projects.
Among them is the Golden Pass Products’ LNG export terminal and associated pipeline near Sabine Pass, TX. The company plans to build a three-train LNG facility at its existing import terminal, with a combined capacity of 15.6 million tons per year, at a project price tag of more than $1 billion. Construction on the first train of the export facility is expected to begin mid-2017, with completion in late 2019.
Magnolia LNG received approval from the FERC and the U.S. Department of Energy (DOE), to export to countries that do not have a free trade agreement (FTA) with the U.S. While a final investment decision hasn’t been made yet, the site in Lake Charles, LA would produce and export 4 million metric tons per year of LNG, utilizing two production trains.
While these facilities will provide jobs and produce demand for materials including pipes, valves and attendant equipment, the AIE’s outlook projects that, after 2020, U.S. exports of LNG will grow at a more modest rate. U.S. natural gas exports to Mexico will continue to rise in the short term as pipeline infrastructure currently under development allows for rising exports to meet Mexico’s increased demand for natural gas to fuel electric power generation.
Recent approvals by the Canadian government are creating opportunities for growth in areas that have been devastated economically by low hydrocarbon prices.
In the fall of 2016, the federal government approved the Pacific NorthWest LNG project. The consortium involved in the project estimates the total cost at $27.3 billion USD ($36 billion CAD) by its completion in 2021. This figure includes construction of the liquefaction terminal and pipelines that would connect it with natural gas supplies, Petronas’s acquisition of Progress Energy Canada in 2012 and cost of drilling and natural gas production in northeastern British Columbia (BC) needed to feed the plant. The overall price also includes TransCanada Corp.’s commitment to build two related pipelines at a cost of $5.09 billion USD ($6.7 billion CAD).
A second Canadian project, Prince Rupert LNG, is a proposed liquefied natural gas (LNG) project on Ridley Island near Prince Rupert, BC. The facility, which was approved by the federal government in the fall of 2016, would receive natural gas from northeastern BC transported through a pipeline to be built by Spectra Energy. Though approval has been given, a final investment decision has not yet been made by project owner, Petronas.
As the fortunes of many North American companies are deeply connected to the health of natural gas markets, the VMA has invited Angelina LaRose, director of the Office of Integrated and International Energy Analysis, to give the keynote address at the the 2017 VMA Technical Seminar, March 2-3 in Nashville, TN. For more in-depth information on the report referenced here, and to review the entire seminar program, which is focused on Engineering Valves in the Extreme, go to www.VMA.org/TechSeminar2017.