NGA ISSUE BRIEF: Supply Outlook
U.S. Gas Resource Base Remains Extensive
A key reason for this strong production trend of recent years is the growing role of shale and unconventional gas production. Shale gas now accounts for 67% of total U.S. natural gas reserves (source: U.S. EIA, 1-22). In February 2022, the U.S. EIA reported that the Appalachian region "has provided the largest share of U.S. domestic natural gas output, accounting for one-third of Lower-48 production since 2016." In EIA's "Annual Energy Outlook 2022," it projects that "U.S. natural gas production will continue to increase through 2050...Much of this growth comes from the Appalachia Basin (East region) and the Mississippi-Louisiana salt basins (Gulf Coast region)." A comprehensive review of the U.S. supply resource base can be found in the Potential Gas Committee's 2020 biennial report: Potential Supply of Natural Gas in the United States, released in fall 2021. The updated assessment finds that the United States possesses a total technically recoverable natural gas resource base of 3,368 trillion cubic feet (Tcf). As can be seen in the chart image below, the U.S. domestic resource base has grown exponentially in the last 14 years due to the advancement of shale gas development. The PGC noted that shale gas accounts for 63% of the country's total potential resource, at 2,130 Tcf. Furthermore, "the Atlantic area ranks as the country's richest resource area with 39% of total U.S. gas resources," led by the Marcellus and Utica shale plays in the Appalachian basin.
Pivotal Role of Shale and Other "Unconventional" Resources
As noted, the rapidly-growing source of supply in the U.S. mix is the "unconventional" gas resource. "Unconventional" gas is defined as "Quantities of natural gas that occur in continuous, widespread accumulations in low quality reservoir rocks (including low permeability or tight gas, coalbed methane, and shale gas), that are produced through wellbores but require advanced technologies or procedures for economic production."
Shale gas is considered an "unconventional" resource. The gas is located generally deep underground within shale rock formations. Advances in drilling technology, such as horizontal drilling, have enabled natural gas producers to begin tapping this supply source in a significant way. For the Northeast and Mid-Atlantic, the major potential source of growth is the Appalachian Basin and its Marcellus Shale and Utica Shale basins. These shale gas formations extend from West Virginia into Ohio, Pennsylvania and New York. Drilling is focused in PA and WV; unconventional drilling is not permitted in NY. Production in the Appalachian region has grown steadily in the last decade, to 34 billion cubic feet per day as of early 2022. The Northeast, long accustomed to being "at the end of the pipeline," now finds itself located next to - and indeed on top of - one of the largest natural gas basins in the U.S. Potential environmental issues associated with shale development, from water usage to groundwater protection to local impacts from production, need to be - and are being - monitored and addressed. MIT's comprehensive study on natural gas in June 2011 found that "the environmental impacts of shale development are challenging but manageable." See NGA's separate Issue Brief on the Marcellus Shale for more information on this resource base.
Canadian Gas: Longstanding Part of U.S. Supply Mix, amid Changing Bilateral Trade Patterns
Regarding imports, Canada has been a valuable supplier of gas to the U.S. and the Northeast for decades. Canada will remain an important supplier for years to come but its share of the U.S. market is expected to decline over the long-term.
LNG Remains Valuable to Key Markets - Such as
New England & the Northeast
U.S. LNG exports are on track to grow further during this current decade in response to shifting global energy market dynamics. In March 2022, the U.S. government and the European Union announced an agreement to help Europe reduce its dependence on Russian energy in the wake of Russia's invasion of Ukraine. Among the actions, the U.S. said it "will work with international partners and strive to ensure additional LNG volumes for the EU market of at least 15 bcm in 2022, with expected increases going forward." Meanwhile, U.S. demand for imported LNG has been declining at the same time, reflecting the strong growth in domestic U.S. production. Nevertheless, LNG continues to be critical to the Northeast - and New England - natural gas supply mix. With the Northeast delivery system still constrained at certain points, LNG helps to ease bottlenecks and increase supply and delivery options, and is particularly valuable in the high-demand winter months. LNG remains an essential part of the Northeast natural gas supply portfolio. Overall, the supply outlook for natural gas in the U.S. remains strong, with more supply opportunities than foreseen just a few years ago. It requires prudent and responsible development, and infrastructure investments to link these new supplies to end-use markets. For Further Information U.S. EIA: U.S. Crude Oil and Natural Gas Reserves, 1-22 (with 2020 data) Potential Gas Committee, 2021 update (with 2020 data) Canada Energy Regulator (CER): Canada's Pipeline System, June 2021 U.S. Dept. of Energy: LNG Annual Reports |
