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Robert Rapier: The US and Russia are Gas Giants
This is the 2nd installment in a series that examines data from the recently released Statistical Review of World Energy 2014. The previous post – World Sets New Oil Production and Consumption Records – delved into world oil production and consumption figures. Today’s post looks at the global natural gas picture.
In 2013 global natural gas production advanced 1.1% to a new all-time high of 328 billion cubic feet per day (Bcfd). Except for a one-year decline in 2008-2009, global gas production has risen fairly steadily for about three decades, and production has more than doubled during that time span:
The US is Still Gas King
The US continues to dominate both natural gas production (and consumption). In 2013, the US set a new all-time high production record for the third straight year, with gas production rising to 66.5 Bcfd to lead all countries. In fact this was once again more natural gas than any country has ever produced in one year.
Natural gas production in Russia reached 58.5 Bcfd, good for 2nd place globally. The US and Russia cumulatively produce 38% of the world’s natural gas. Far behind in third place was Iran at 16.1 Bcfd — good for 4.9% of global gas supplies. Rounding out the top five were Qatar at 15.3 Bcfd and Canada at 15 Bcfd.
However, US natural gas consumption was still greater than consumption, rising to 71.3 Bcfd as utilities continued to look to natural gas as a cleaner alternative to coal. Despite an increase in the past 8 years of 17 Bcfd — an increase of nearly 35% — the US remains a net importer (and the largest consumer) of natural gas.
Russia and Iran were second and third in natural gas consumption. They consumed, respectively, 40 Bcfd, and 15.7 Bcfd. The US and Iran consumed at least as much gas as they produced, while Russia produced nearly 50% more than it consumed internally. The rest of Russia’s gas is piped primarily to Europe, but China recently signed a $400 billion deal with Gazprom that will supply China with Russian gas for the next 30 years. In 2013 China was the world’s fourth-largest consumer of natural gas at 15.6 Bcfd. Rounding out the top five among consumers was Japan at 11.3 Bcfd.
Natural Gas Reserves
Despite the surge in US natural gas production, US proved reserves have increased substantially over the years. Proved gas reserves in the US reached an all-time high of 334 Tcf in 2011, fell in 2012, but surged in 2013 back to 330 Tcf. The increase in reserves is primarily a function of the pairing of hydraulic fracturing with horizontal drilling, which turned a big volume of natural gas resources into natural gas reserves for the first time (i.e., the “shale gas boom”). After two decades of declining to flat natural gas reserves, US reserves have now risen 86% since 2000.
Global proved natural gas reserves have grown more consistently than US reserves over the years, albeit not as sharply. Over the past decade global gas reserves are up 33%, and just eked out a new record in 2013 of 6,558 Tcf. While this record is a fraction of a percent higher than the previous record in 2011, global reserves have been effectively flat for the last two years.
Price and Differentials
The surge in US gas production has had a dampening impact on domestic gas prices, but internationally prices have risen substantially over the past decade:
This combination has resulted in enormous differentials that have developed between US natural gas prices and liquefied natural gas (LNG) prices in Europe and northeast Asia. These high differentials have resulted in a rush to build LNG export terminals in the US.
US natural gas production is up 11.4 Bcfd in just the past five years. However, there are presently 13 pending proposals awaiting approval from the Federal Energy Regulatory Commission (FERC), with a total proposed export capacity of 17.9 Bcfd. Two projects have already been approved by FERC. Cheniere Energy (NYSE: LNG) and Sempra Energy (NYSE: SRE) have had projects approved with a combined proposed capacity of 4.46 Bcfd.
Conclusions
The global natural gas picture is dominated by the US and Russia, and this will likely continue to be the case for the foreseeable future. But the US is in 5th place globally in natural gas reserves, far behind countries like Iran and Russia. Ultimately the US will probably yield its position as the top gas producer back to Russia.
Nevertheless, the shale gas boom in the US has expanded natural gas production rapidly, which has led to a number of LNG export terminal proposals. But unless US natural gas production continues expanding at the pace of the past five years, it is almost a certainty that these export facilities (among other drivers) will lead to higher US natural gas prices.
Consumer Energy Report » R-Squared Energy Blog by Robert Rapier
56 Comments on "Robert Rapier: The US and Russia are Gas Giants"
Nony on Wed, 30th Jul 2014 7:10 am
I thought your JAN predictions were timid and imprecise. In any case, if you had written the article in FEB and said, “hey I just reiterate my prediction that we will be a shade over last year’s (very low) gas price” that would be one thing. But you didn’t do that.
I may be flippant, buddy. But I don’t lie. I honestly think your hiding behind not having given a number, etc. shows you to be evasive.
I would have a lot more respect if you had said, “yes, I didn’t give a number, but March averaging less than FEB price” is inconsistent with ‘inventory heading to zero and price stopping it’ and then the prices this summer is broadly inconsistent with my article written when gas had just hit 6 and there were lots of worries about the inventory.
Oh, and you just dismiss it as a troll, but the point remains. What’s the insight from your FEB columns. We had a close call on the inventory but so what? How can you make a systemic insight from that? How has that played out? If you dismiss this mild summer, you should dismiss the cold winter. And production volume is above optimistic projections even as prices are below where futures predicted them to be. That’s the real story. Marcellus VOLUME outperformance. Not, “need price to get people to drill…not in Susquehanna county, you don’t”.
When I say, you don’t stack up as square…I mean it. That’s my honest assessment. If you want to crab or weasel about it, feel fine.
See ya…got a billable day.
RobertRapier on Wed, 30th Jul 2014 9:51 am
I don’t want to keep this going, but there was a story in the Wall Street Journal yesterday that’s relevant. Here are the relevant excerpts:
“After prices quickly hit an intraday high of $3.85/mmBtu, traders began to sell, likely focused on how cool weather is likely to limit demand in the weeks to come, said Aaron Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston.
The unseasonably cool summer has allowed consumers to use less air conditioning and the gas-fired electricity that fuels it. Producers put a record string of surpluses into storage, and gas prices have fallen about 20% since mid-June.
“If the weather stays mild and we don’t have any power demand, as it has been, then I don’t think we’ve hit a bottom,” Mr. Calder said.”
So what is the guy saying? Did he predict that we haven’t yet hit a bottom? Based on your reasoning with my post, we would have to say that indeed he predicted that. But based on my reasoning, he is identifying the reasons for the price drop, and flagging what could cause it to drop more. If the weather suddenly turns hot and demand spikes, do we say “Wow, that guy predicted prices were going to fall more, and they didn’t?”
I can’t put it any simpler than that.
JuanP on Wed, 30th Jul 2014 10:03 am
Hi Robert, Since I noticed you kept coming back to read the comments here because of the argument you got into with Nony, I wanted to use this opportunity to thank you for the work you’ve done so well for so long. I have read many of your writings and comments at TOD, here, and other places and have learned much from you. Muchas gracias!
P.S. Forget Nony. I am afraid he is not seeking to learn, but sometimes he makes sense, like the rest of us. 😉
RobertRapier on Wed, 30th Jul 2014 10:32 am
“I thought your JAN predictions were timid and imprecise.”
Imprecise? I would be glad to see yours for comparison. Could you direct me to them? I gave predictions for the direction on pricing for oil, natural gas, a prediction on legislation, a prediction on a bankruptcy, and a prediction on oil production. At the end of the year, you won’t have to interpret what I meant. I didn’t say “Natural gas prices will be higher”, in which case if they went up and then down I could declare victory. I gave a specific prediction that the average Henry Hub for the year would be higher. That’s specific, and based on what you have written here, probably the opposite of what you would have predicted. But mine is out there for the world to judge. Put your own neck out there, with your real name, and make some yourself.
“We had a close call on the inventory but so what? How can you make a systemic insight from that? How has that played out?”
Again, I wrote numerous articles on this looking at what happened historically when inventories were pulled low; how that generally had a lingering impact on price. And, it has impacted prices for the past six months. Those are insights that made people money. That’s how it played out. If you want to play dumb because you have dug your hole and don’t feel like you can retreat at this point, continue to be my guest. But when you say “You offered up no insights from that” — you are dishonest, plain and simple.
“When I say, you don’t stack up as square…I mean it. That’s my honest assessment.”
That’s OK, since my honest assessment of you at this point is that you are dishonest. But when you are dishonest and spread misinformation, I am going to call you on it. If you had simply said “Robert predicted inventories would bottom out at the lowest level on record, and he was wrong” — I wouldn’t have said a word. But you went into unsupportable territory, and doubled-down when I called you on it.
RobertRapier on Wed, 30th Jul 2014 10:44 am
“I wanted to use this opportunity to thank you for the work you’ve done so well for so long. I have read many of your writings and comments at TOD, here, and other places and have learned much from you. Muchas gracias!”
Thank you Juan. Much appreciated. I tend to read a lot of comments here, but am usually only compelled to comment myself when I feel someone is misrepresenting something I wrote. Nony has been doing that, and ignoring everything I wrote that doesn’t support this narrative he created in his head. I suppose after repeating this narrative here many times (“Rapier predicted a gas squeeze that never happened”), it’s easier for him to dig in than to man up and say “OK, I can see where I could be wrong about the way I spun it.”
JuanP on Wed, 30th Jul 2014 10:53 am
Robert, OK. I’ve been a lurker all my life. My comments here at PO lately are the first time commenting anywhere. I feel like I’ve read too much for too long, trying to give something back.
I understand your wanting to defend your work from attacks, not an easy task in today’s world.