Commodity Market Report

Bigger wells, smaller markets: North America gas long-term outlook highlights H2 2016

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08 December 2016

Bigger wells, smaller markets: North America gas long-term outlook highlights H2 2016

Report summary

North American gas market fundamentals look stronger for 2017 than any year in the shale gas era: production is declining from both oil and gas plays, and pipeline bottlenecks mean that low-cost Northeast supply can grow only about 1.7 bcfd next year. Meanwhile, exports to Mexico, new industrial projects are coming online, coal-fired power plants are retiring, and US LNG export capacity is ramping up, leading to Henry Hub prices above US$3.50/mmbtu next year. In the medium term, new Northeast pipeline capacity—delayed and scaled back relative to developers’ plans but massive nonetheless—debottlenecks enormous amounts of low-cost supply. As well, Permian breakevens have continued to fall, so even a modest recovery in oil prices will again mean growth in associated gas production. North American demand growth remains strong, but these two low-cost supply sources push Henry Hub prices to less than US$3.25/mmbtu by year-end 2018 and an average of about US$2.85/mmbtu in the 2019-23 period.

Table of contents

    • After a short-term spike, US gas prices fall below $3/mmbtu until another round of pipeline investment is required
    • Costs continue to fall, but Northeast supply is constrained, so Haynesville and Eagle Ford ramp up
    • Fuel substitution drives gas growth in power across the US and Mexico
      • United States
        • Industry
        • Power
      • Mexico
      • Canada
    • Export capacity ramps up, but weak global markets mean some will be under-utilized through 2023
    • Short-term spike before mid-term doldrums
    • Pipeline: NE exit capacity continues to be delayed, but NE exports set to grow
      • US to Mexico
      • Canada to US
    • Regas: LNG imports continue to fall with infrastructure development
  • Policy

Tables and charts

This report includes 10 images and tables including:

  • Haynesville drilling locations vs economics
  • Bone Spring productivity and gas content over time
  • US LNG exports
  • Global gas price
  • North America supply growth (year-over-year)
  • Price outlook
  • New Northeast pipeline capacity
  • NA net flows
  • Industrial projects by sector
  • North America generation by fuel

What's included

This report contains:

  • Document

    North America Production-Demand-Prices H2 2016.xls

    XLS 1.06 MB

  • Document

    North America LNG - Imports Exports H2 2016.xls

    XLS 6.33 MB

  • Document

    Bigger wells, smaller markets: North America gas long-term outlook highlights H2 2016

    PDF 336.72 KB

  • Document

    Bigger wells, smaller markets: North America gas long-term outlook highlights H2 2016

    ZIP 6.11 MB

  • Document

    Executive Summary

    PDF 94.64 KB

  • Document

    Supply

    PDF 96.96 KB

  • Document

    Demand

    PDF 100.90 KB

  • Document

    LNG Exports

    PDF 92.32 KB

  • Document

    Price

    PDF 93.50 KB

  • Document

    Policy

    PDF 54.20 KB

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