Natural Gas Production Going Up, Prices Down As Producers Eye Increased Investments In LNG

U.S. natural gas production maintains a steady level of output of near highs for the year, despite lower prices as producers look at increasing international demand for American energy resources.

Production is forecasted to average 100.9 billion cubic feet per day (bcf/d) – a 3 percent increase from 2022 – even as gas futures decreased 50 percent in the first quarter of 2023, largely because of rising investment in LNG export capacity.

Price and Production Disconnect

Lower natural gas prices have benefitted American residents over the first few months of 2023 and are the result of lower-than-average withdrawals of natural gas storage because of mild weather, according to the Energy Information Agency’s Short-Term Energy Outlook. The surplus and reduced-price signals haven’t stopped producers from increasing energy production, which is expected to remain near record highs throughout the year.

Source: Energy Information Administration

While residential prices will depend on the weather and gas storage this summer and coming fall, domestic producers aren’t showing signs of slowing production. According to analysts interviewed by Reuters, while gas futures are down, they are not low enough to forestall output gains and natural gas rig counts are up 16 percent from a year ago.

LNG A Contributor To High Production

The increase in production is partially because of the country’s second largest export facility – Freeport LNG – coming back online and healthy interest in increased LNG export capacity. With Freeport LNG operational again, LNG shipments hit a record 7.73 million tons in March.

The increase in production shows no signs of stopping as more LNG facilities are predicted to come online. The United States currently has seven operational LNG export plants, with three more expected within the next few years to handle the growing rates of production. The EIA expects LNG to drive growth in U.S. natural gas exports over the next two years.

Source: Energy Information Administration

Two projects, one from Sempra Energy and another from Venture Global LNG Inc., have been recently approved, providing 10.5 and 20 million metric tons per year of additional LNG capacity, respectively, with a combined $21 billion investment. These projects place the United States well on its way to the 169 million metric tons of LNG growth estimated to occur by 2027.

According to Reuters estimates, other facilities that have likely found enough customers to receive financial approvals this year include the QatarEnergy-Exxon joint venture at Golden Pass in Texas planned for late 2024 and Cheniere Energy Inc’s expansion at its Corpus Christi plant in Texas in 2025.

A new wave of projects could add anywhere between 70-190 mmtpa of capacity by 2030 and could see investments of more than $100 billion within five years, according to recent research from Wood Mackenzie. This would solidify the United States’ position as the largest LNG supplier in the world.

Bottomline: Natural gas production is near a record high and shows no immediate sign of slowing down, despite decreased prices – a win-win for consumers across the globe. The long-term production trend of natural gas will likely stay high as investment from increased LNG capacity increases export capacity to supply a growing international demand.

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