Industrial Heating readers live and work in the most energy-consumptive manufacturing sector of the U.S. economy, so it is useful to examine the worlds of energy price and supply. But let us first look at natural gas and a business opportunity you may have missed.
The U.S. is now the world’s largest producer of gas, and world demand is predicted to grow 1.8% a year to 2030. But America only has two LNG export facilities (Sabine Pass and Cove Point), which shipped 2 BCF/d total in 2017. More than 15 other LNG export facilities are awaiting building approvals as permitted by the Federal Energy Regulatory Commission (FERC), where approvals are taking five to six years to be granted.
There is an enormous market for U.S. gas exports because foreign consumers are paying four to six times U.S. production costs. Maybe you could help by calling your elected representatives and urge them to lean on federal bureaucrats to do their job – authorize LNG export terminal constructions. Then go help build LNG make-and-store facilities at new export terminals – U.S. exports are projected to be 8 BCF/d by 2020 and 12 BCF/d by 2025.
There is another driver for worldwide use of LNG – ship fuel. In 2020, maritime laws eliminate the use of high-sulfur liquid (bunker) fuels, which must contain less than 0.5% sulfur. Couple this with the fact that U.S. extraction costs for offshore oil and gas have dropped 50-70% since 2014, and we see an additional driver for those oceanside export terminals. Further, the net gas price for all U.S.-produced supplies is predicted to increase only $0.23 per thousand cubic feet until the end of this decade as strong gas demand grows through 2040 and is expected to sustain a 7.2% annual growth rate through 2030.
In the cost-of-energy equations, for comparison, world crude-oil prices have fluctuated significantly more than gas, ranging from $145/barrel in 2008 to $100/barrel in 2014, and are projected to be as high as $270/barrel by 2020. Know also that crude-oil demand, currently at 85 Mbpd and projected to grow to 106 Mbpd by 2030, is a reduction of 10 Mbpd due to this surge in gas supply at lowering costs. Understand that while $200 a barrel seems high by U.S. standards, people in European Union countries have been paying about $250/barrel for years due to high taxes. Now you can understand a driving reason for Brexit.
As a sidelight, while China has imposed retaliatory tariffs on over 500 U.S. products, LNG is not on the list. A general consensus is that, while China is the fastest-growing LNG market worldwide, it is not signing long-term delivery contracts with American suppliers in spite of its need to reduce coal use with gas replacements. So, China remains the third-largest U.S. gas export market behind Mexico and South Korea and is the world’s second-largest LNG importer.
Major crude-oil producers are boosting their share of gas production to 40-45% of total energy output. The LNG share will rise to 40% of all producers’ output by 2023, according to the International Energy Agency (IEA), and can meet any country’s energy needs. U.S. gas prices have averaged $2.98 over the past year and $3.82 over the last 10 years. It should be $3.09 in November 2018; $2.70 in November 2019; and $2.96 in November 2020. Over the past 25 years, the average was $4.10, with the highest price of $13.42 in October 2005 and lowest of $1.44 in July 1995.
In spite of the blathering by many “enviromotionalists” about how use of renewable energy sources such as wind and solar could have a significant impact on Earth’s climate, these are great ideas for very narrow applications and are not practical or affordable today compared to oil and, especially, natural gas. The IEA estimates that an additional $4.1 trillion of energy-efficient investments is needed over the next two decades to stabilize greenhouse-gas emissions at 550 ppm plus an added $2.7 trillion for energy-efficient equipment. This amounts to half the GDP of America.
With some common sense and efficient use of natural gas, our problems are greatly mitigated if not solved.