North American natural gas demand is likely to grow by roughly 25% over the next 10 years and stay resilient through 2050 as the world shifts to lower-carbon energy, according to new projections from Wood Mackenzie.
LNG exports are expected to drive the incremental demand, which will largely be supplied through continued growth in associated gas from the oily Permian Basin and gas-directed drilling in the Haynesville Shale, researchers said in the new report.
Liquefied natural gas exports “will drive the market for many years but will slow substantially in the 2030s, with domestic gas demand peaking in the mid-2030s, as power sector demand gives way to greater renewables penetration, albeit at a more gradual pace compared to our prior outlook, due to power transmission constraints and gas market resiliency,” said Wood Mackenzie’s Dulles Wang, director, Americas Gas and LNG Research.
“As the gas industry continues to innovate and transform, these low carbon alternatives will help both sustain natural gas demand and support emission reduction goals in North America.”
Wang expects North America’s gas market to stabilize at around 150 Bcf/d in the 2040s, a 2 Bcf/d increase from Wood Mackenzie’s update in October.
Beyond 2035, “decarbonization initiatives could create a pathway for the continued momentum of gas demand, particularly in the industrial sector, driven by carbon capture and underground storage (CCUS), blue hydrogen, renewable natural gas (RNG) and certified gas programs,” researchers found.
A proposed rule change announced earlier this month by the Environmental Protection Agency would require base load natural gas-fired power plants to begin either capturing the bulk of emissions or co-firing low-greenhouse gas hydrogen starting next decade in order to curb emissions.
Meanwhile, the Lower 48’s largest producers are increasingly looking to certify their production as independently sourced, in order to compete in the global LNG market.
RNG production continues to grow steadily as well, though its share of the overall gas market remains negligible.
“When it comes to the energy transition, resilient gas demand and emissions reduction may not be mutually exclusive,” said Wang. “Our outlook shows that natural gas will play a pivotal role in the North America energy transition with the rise of blue hydrogen production, low-carbon industrial projects and back-up for renewable generation.
“Tax credits and policy support through the Inflation Reduction Act (IRA) and various state and local initiatives in the industrial and transport sectors are carving a pathway for natural gas utility beyond its traditional form.”
The IRA expanded and extended the Internal Revenue Service Section 45Q tax credit for CCUS, and created new tax incentives for production of clean hydrogen and RNG.
