Will Natural Gas Infrastructure Keep Up With Growing U.S. Gas Production?
by Bob Shively, Enerdynamics President and Lead Facilitator
Low Natural Gas Prices in the U.S.
Things are looking good for gas consumers. Gas prices have remained at historically low levels even through bouts of extremely cold weather. Prices through 2020 are expected to remain low, as demonstrated by the following forecast from the Energy Information Administration (EIA):

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2019
Growth in U.S. Gas Production
Even with low prices, U.S. gas production is expected to remain robust with EIA forecasting 23% growth between 2017 and 2020:

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2019
Increasing Demand for U.S. Gas Production
And, despite growth in industrial and electric power usage plus rapidly growing exports, it appears that for the next few years production will match growing gas demand.

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2019
Natural Gas Infrastructure to Keep Up With the Growth and Demand in U.S. Gas Production
A key question going forward is whether natural gas infrastructure — gathering pipelines, processing facilities, transport pipelines, storage facilities, and export terminals — will keep up with the potential growth in production and demand/exports. So far the answer is yes, 25.5 Bcf of new pipelines were added between 2016 to 2018, and another 11 Bcf are expected to come into service by the end of this winter. The bulk of these pipelines will move Appalachian shale gas to markets with one additional line moving Permian basin gas to the Gulf of Mexico where many LNG export projects are located.
Natural Gas Infrastructure Projects & New Construction
Additional proposed projects to move gas from the Permian basin and to LNG export facilities are under development, but growth of proposed projects in other regions appears to be slowing significantly. A recent report prepared by ICF for the INGAA Foundation titled “North America Midstream Infrastructure through 2035, Significant Development Continues”, projects that $417 billion in gas infrastructure spending will be required by between 2018 and 2035. Of this, $279 billion will need to be directed toward construction of gathering lines and transmission systems. New construction is forecasted at a rate of approximately 1,400 miles of natural gas pipeline each year.
Barriers of the Natural Gas Infrastructure Construction
Infrastructure construction faces numerous barriers. Ongoing low gas prices reduce the ability of producers to fund project development, while lack of growth in residential and commercial natural gas consumption makes it unlikely that gas utilities will gain regulatory approval to use ratepayer dollars to fund projects. And in competitive electric markets, we have mostly seen that power generators are unmotivated to fund pipelines even when capacity is constrained. This leads to significant uncertainty as to who will be willing to provide the necessary investment. And even for projects that have sponsors, regulatory and environmental approvals are getting harder and harder to obtain. So to determine whether or not the gas marketplace will continue to grow, we suggest not getting carried away with watching production numbers but to carefully observe whether or not natural gas infrastructure grows to match.
Want to learn more about the natural gas marketplace? Enerdynamics offers an online gas training course titled Gas Market Dynamics as well as a live seminar called North American Gas Markets. Browse all our other online natural gas industry trainings and sign your team up for advanced education today! Contact us at 866-765-5432 ext. 700 or info@enerdynamics.com for more information.