Full Title: There Will Be Gas: An Assessment of US Natural Gas Supply in a Low Oil Price Environment
Author(s): Max Pyziur
Publisher(s): Energy Policy Research Foundation Inc.
Publication Date: June 15, 2020
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Description (excerpt):
The North American petroleum renaissance has yielded a rapid and massive expansion of crude oil and natural gas output from unconventional petroleum resources throughout the United States. This swift growth in crude oil production, especially from the Permian Basin, has been accompanied by substantial volumes of associated gas, a by-product of oil production. These large volumes of associated gas have contributed to an expansion of U.S. natural gas output that has risen from 60 billion cubic feet per day (BCF/d) in 2008 to over 100 BCF/d currently. As a result, the U.S. has become the largest natural gas producer in the world. These large supplies of natural gas were accompanied by very low prices placing the U.S. in a highly competitive position for exports of several value-added commodities, including natural gas liquids (NGLs), petrochemicals, and liquefied natural gas (LNG).
With the advent of the COVID-19 pandemic in early 2020, world and U.S. crude oil prices collapsed. Price recovery is underway but it will take time before prices recover to $40-$50/bbl. These low prices are resulting in large reductions in U.S. crude oil production and its associated gas output. However, the U.S. resource base for natural gas, both dedicated (non-associated) and associated, remains vast. Companies may go bankrupt, but the geologic formations remain. A central question for policy makers and the U.S. petroleum industry is whether the current downturn in crude oil prices, particularly if it persists for a considerable period of time, will substantially alter the outlook for large and competitively priced natural gas supplies as a feedstock for LNG. This EPRINC report evaluates the potential for the U.S. to remain competitive as a major provider of LNG to the world market in a low oil price environment and what policies, if any, should be implemented to sustain the competitive outlook for the U.S.