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FORESIGHT 2020

What’s ahead for North America gas?

by Mason McLean, Senior Research Analyst, North-America Gas

2019 was another stellar year of US gas production growth pushing to new record highs aided by productivity gains, power demand growth and LNG exports. With producer spending only coming into sharper focus and competition for demand growing both domestically and globally, will the North America gas market experience pivotal changes in 2020 or continue on the same path set by 2019?

What will our analysts be watching in the year ahead? We highlight our top five themes.

  1. Little growth in non-associated gas production
  2. LNG exports exceed 10 bcfd by end of 2020
  3. Another record year for power demand
  4. Stronger AECO basis
  5. Further downside to Henry Hub

This article features key points from the report, North America gas: what to look for in 2020. Fill in the form on this page to get our full analysis, with charts and predictions for the year ahead.

1. Little growth in non-associated gas production

2019 brought about a new phenomenon that has not been observed since 2015 whereby US associated gas growth outpaced non-associated (dry gas) growth. Total US production in 2019 grew about 8.3 bcfd on the year with 4.5 bcfd coming from associated gas and 3.8 bcfd from dry gas production.The rising total production is anticipated to continue into 2020, it is expected to be at a much lower level, increasing just 3 bcfd over the next 12 months. For reference, US annual production growth from 2017 to 2018 was 8.9 bcfd and then 8.3 bcfd from 2018 to 2019.

While rising total production is anticipated to continue into 2020, it is expected to be at a much lower level, increasing just 3 bcfd over the next 12 months. For reference, US annual production growth from 2017 to 2018 was 8.9 bcfd and then 8.3 bcfd from 2018 to 2019.

Download our complimentary Insight to find out where the primary driver of the 2020 growth will come from.

2.LNG exports exceed 10 bcfd by end of 2020

Just prior to the new year, Cameron received approval from FERC to introduce feed gas flows to Cameron Train 2 in 2019 December. With capacity additions from Trains 2 and 3 at Cameron LNG as well as Trains 2 and 3 at Freeport LNG, LNG exports will reach 10.8 bcfd by December 2020. While high utilization of these trains throughout the year is anticipated for our base case, global oversupply presents downside risk, particularly in shoulder months.

LNG exports are anticipated to average 8.8 bcfd over the course of 2020, marking a year-on-year increase of 3.2 bcfd.

3. Another record year for power demand before easing in 2021

Continued low gas prices set the stage for another record year for power demand, averaging 32 bcfd in 2020, even when challenged by renewable penetration. Currently, our price forecast for summer 2020 calls for prices to come in slightly lower. By 2021, more renewables and higher prices limit the continued record setting with an average 31.5 bcfd for the year.

4. Stronger AECO basis – a relief for Canadian gas producers

After years of depressed AECO prices and concerns for takeaway capacity out of western Canada, 2020 looks to be a pivotal year for the Canadian gas market as AECO basis is expected to average less than $1.00/mmbtu – a drastic change from the basis blowouts seen in 2018 and 2019.

Download the full report to read what fundamental chamges in the market underpin our view.

5. Further downside to Henry Hub

The combination of sustained associated gas production and relatively limited domestic demand growth create a bearish scenario for Henry Hub natural gas prices over the next year, keeping prices just below 2019 levels.

The shoulder seasons or demand lulls may yield even lower intermittent prices; however, these instances are not anticipated to last long term. 

Fill in the form to get our complimentary report 'North America gas and LNG: 5 things to look for in 2020'