Shepstone Management Company, Inc.
Despite (or because of) low prices, the year 2019 was absolutely incredible for natural gas in the U.S. as it became the big energy gorilla.
Natural gas, as I have been oft to remark here, is a commodity business where low prices represent the solution to low prices and vice-versa. The ups and downs of any commodity industry are inextricably liked to prices that ultimately control how much is produced, who prospers and where that industry goes. Low prices are painful for producers but a bonanza for consumers. They sort the wheat from the chaff and serve to constantly reinvent the industry. Each cycle of low prices generates a new era of boundless opportunity as they attract consumers and that’s exactly what happened with gas in this country last year, painful as it was for some.
It’s all in the data published by the Energy Information Administration a few days ago (emphasis added):
The U.S. Energy Information Administration’s (EIA) Natural Gas Annual shows that the United States set new records in natural gas production, consumption, and gross exports in 2019. In 2019, dry gas production increased by 10%, reaching a record-high average of 93.1 billion cubic feet per day (Bcf/d). U.S. natural gas consumption increased by 3%, led by greater use of gas in the electric power sector. Natural gas gross exports increased 29% to 12.8 Bcf/d.
Increased use of gas by the electric power sector drove U.S. natural gas consumption growth. The electric power sector consumed 7% more natural gas in 2019 than in 2018. Electric power sector consumption grew largely because of favorable gas prices and ongoing coal plant retirements. Natural gas consumption in all other sectors were relatively unchanged.
As U.S. gas production increased, the volume of natural gas exports—both through pipelines and as LNG—increased for the fifth consecutive year to an annual average of 12.8 Bcf/d. U.S. LNG exports accounted for most of this increase.
The United States continued to export more gas than it imported in 2019, and net gas exports averaged 5.2 Bcf/d. In 2019, the United States also exported more gas by pipeline than it imported for the first time since at least 1985 (the earliest year in EIA’s gas pipeline trade data), mainly because of increased pipeline capacity to send gas to Canada and Mexico.
In 2019, dry natural gas production increased by 10%, or 8.7 Bcf/d, reaching a record high of 93.1 Bcf/d for the year. This increase was the second-largest volumetric increase since at least 1930 and second only to last year’s increase.
The two largest gas-producing states, Texas and Pennsylvania, also had the two largest increases in gas production in 2019. Texas annual average dry gas production increased 15%, from 19.3 Bcf/d in 2018 to 22.2 Bcf/d in 2019. Pennsylvania’s gas production increased 10%, from 16.9 Bcf/d in 2018 to 18.6 Bcf/d in 2019.
The gas industry is, as the EIA data shows, extraordinarily well positioned for further growth. This is the way it’s supposed to work; low prices stimulate demand and demand makes the world go around, which is why gas prices are now trending up again but not so much as to destroy the consumer bargain. Such great news! The socialistic government-rent-dependent pinkish renewables industry doesn’t have a chance against the big gas gorilla. He eats pink stuff.
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