US natural gas prices could exceed $8/MMBtu by 2022 and the country's LNG imports could rise by almost 3.5 Bcf/d by 2030, consultant Deloitte said in a report Wednesday.
The study puts prices substantially higher than NYMEX futures prices and raises questions about the recent rush by US LNG import terminals to begin exporting domestic shale gas.
"Exporting LNG from North America to Europe and Asia, while tempting now, may not prove to be profitable over the long term, especially if future technological advancements do not continue to significantly drive down the cost of producing shale gas," the report said.
The study looked at prices, supply and demand in three different scenarios.
In its reference case scenario, Deloitte assumed current market trajectories without major regulatory intervention. It assumed new rules for emissions of mercury, nitrogen oxides and sulfur oxides, but no policy restricting carbon dioxide emissions. It also predicted world gas demand will grow 1.9%/year and US demand for gas for generation will increase 50% over the next decade.
Under this scenario, gas prices in current dollars will rise about 50% by 2020, the study said. When adjusted for inflation, prices will rise to $8.67 in 2022, compared to the June 23, 2011, NYMEX futures price of $7.66 for the same year, the study said.
At the same time, annual US LNG imports will increase from less than 0.5 Bcf/d in 2011 to almost 4 Bcf/d in 2030, due to shifting worldwide gas prices. US prices will likely rise and new supplies and pipelines will apply competitive pressure on European and Asian markets, the report said.
Basis relationships will also change drastically, the report said. Gas prices in the eastern US, historically the highest in North America, will drop due to shale gas production, the study said. And prices in the West will rise due to the region's smaller supply, declining Canadian gas production and a lack of LNG import terminals, the report said. "Over the long term, California prices are projected to be higher than Mid-Atlantic prices, a dramatic reversal from historical relationships."
Deloitte also modeled a second scenario it dubbed "grand slam for gas" in which world gas demand rapidly escalates and countries like Japan, Germany and the US shut or scale back nuclear power. It modeled a "lower shale cost" scenario in which the cost to produce shale gas dropped 50%.
The study found that the lower shale gas scenario had a bigger price impact than the higher gas demand scenario. The grand slam scenario raised prices by $0.63/MMBtu by 2025 to 2030, compared with the reference case. In contrast, the low-cost scenario dropped Henry Hub prices by almost $2 from 2016 to 2030.
