Natural Gas

Natural gas consumption. Consumption of natural gas in the United States averaged 83.0 billion cubic feet per day (Bcf/d) in 2021, almost unchanged from 2020. We expect U.S. natural gas consumption will remain at nearly the same level in both 2022 and 2023.

The largest natural gas-consuming sector in the United States is the electric power sector. We forecast that the electric power sector will consume an average 28.8 Bcf/d in 2022, which is 6% less than in 2021. This decline is a result of rising electricity-generating capacity from renewable energy. We expect that the consumption of natural gas by the electric power sector will decline by 0.5 Bcf/d (2%) in 2023.

Industrial sector consumption of natural gas in our forecast increases by 3% during 2022, averaging 23.2 Bcf/d, and grows to 23.5 Bcf/d in 2023, as demand for industrial goods and economic activity increases.

We expect combined U.S. residential and commercial natural gas consumption will average 22.6 Bcf/d in 2022, up 4% from 2021. Based on National Oceanic and Atmospheric Administration forecasts, this STEO assumes colder temperatures this year, with 6% more heating degree days (HDDs) across the United States in 2022 compared with 2021. We expect natural gas consumption in the U.S. residential and commercial sectors to increase by 1% to 22.8 Bcf/d in 2023, driven by the assumption of slightly colder weather than 2022.

Natural gas production. U.S. production of dry natural gas averaged an estimated 93.5 Bcf/d in 2021, up 2.0 Bcf/d (2%) from 2020. Natural gas production fell in 2020 as a result of low natural gas and oil prices that reduced drilling activity. Production grew in 2021 as drilling activity came back online, especially in the Permian Basin, where associated gas production in that region contributed to the overall growth in natural gas production. We forecast dry natural gas production will increase by 2.5 Bcf/d (3%) in 2022. Recent increases in oil and domestic natural gas prices contribute to an overall increase in drilling activity in 2022 that will lead to production growth from 2Q22 onward. Growth in dry natural gas production in 2022 is led by the Haynesville region, where production tends to be sensitive to change in U.S. benchmark Henry Hub natural gas prices, and by the Permian Basin, where production tends to be more sensitive to oil prices. In 2023, we expect dry natural gas production to increase by 1.5 Bcf/d (2%) to reach 97.6 Bcf/d.

Natural gas trade. We forecast natural gas exports will reach record highs in 2022 and continue to grow in 2023. Net natural gas exports averaged 10.7 Bcf/d in 2021 and we forecast that they will increase to 13.4 Bcf/d in 2022 and 14.3 Bcf/d in 2023. A combination of both rising liquefied natural gas (LNG) exports and increases in pipeline exports to Mexico will drive this increase.

The United States exported an estimated 11.2 Bcf/d of LNG in December 2021, an increase of 0.7 Bcf/d over the previous record set in November. LNG export growth in 2021 was driven by rising natural gas demand and high LNG prices in Europe and Asia, reductions in global supply because of several unplanned outages at LNG export facilities worldwide, and cold weather in key LNG consumption markets, particularly in Asia.

Rising demand for LNG imports in Europe and Asia and the completion of planned projects that will bring new U.S. LNG export capacity online in 2022 supports growth in LNG exports in the forecast. We forecast that U.S. LNG exports will average 11.5 Bcf/d in 2022, up from 9.8 Bcf/d in 2021. In 2023, we forecast that U.S. LNG exports will average 12.1 Bcf/d. The completion of Train 6 at Sabine Pass, the optimization of operations at Sabine Pass and Corpus Christi LNG terminals, and the completion of a new LNG export facility—Calcasieu Pass LNG—are all expected in 2022; these expansions will increase total U.S. LNG export capacity in 2022 to become the world’s largest.

As of December 2021, existing U.S. LNG baseload liquefaction capacity was 10.1 Bcf/d, and peak capacity was 12.2 Bcf/d (including uprates to LNG production capacity at Sabine Pass and Corpus Christi). By the end of 2022, U.S. baseload capacity will increase to 11.4 Bcf/d, and peak capacity will increase to 13.8 Bcf/d, across seven LNG export facilities and 44 liquefaction trains, including 16 full-scale, 18 mid-scale, and 10 small-scale trains at Sabine Pass, Cove Point, Corpus Christi, Cameron, Elba Island, Freeport, and Calcasieu Pass.

Pipeline exports of U.S. natural gas have also increased as more infrastructure has been built to transport natural gas both to and within Mexico and as more natural gas-fired power plants come online in Mexico. Gross U.S. pipeline exports to Mexico and Canada in the forecast average 8.9 Bcf/d in 2022, up 0.4 Bcf/d (5.0%) from 2021, and 9.2 Bcf/d in 2023.

U.S. natural gas pipeline imports, almost all of which come from Canada, increased by 0.7 Bcf/d in 2021. We forecast natural gas pipeline imports to decrease 0.7 Bcf/d in 2022 because the United States will import less natural gas in response to increases in domestic production. Pipeline imports in the forecast remain relatively unchanged in 2023.

Natural gas inventories. U.S. working natural gas inventories ended December at 3,221 Bcf, 4% less than one year ago, but 3% more than the five-year (2016–20) average. We forecast close-to-average storage withdrawals in 1Q22, resulting in inventories that total 1,822 Bcf at the end of March, which would be 8% more than the five-year (2017–21) average for that time of year. For the 2022 April–October storage injection season, injections in our forecast do not keep pace with the five-year average rate. The lower-than-average injections reflect demand growth in the industrial sector and rising demand for U.S. exports. We expect that inventories will reach 3,668 Bcf at the end of October 2022, which would be within 1% of the five-year average for the end of October and nearly identical to inventory at the end of October 2021.

Natural gas prices. Henry Hub spot prices averaged $3.91/MMBtu in 2021. Natural gas prices were volatile throughout 2021. Early in 2021, volatility resulted from near record-high spot prices during the extreme winter weather in February. During the rest of the year, Henry Hub prices rose from $2.62/MMBtu in March to $5.51/MMBtu in October, before falling back to $3.76/MMBtu in December, amid a warmer-than-normal start to the heating season across most of the country.

We forecast the Henry Hub spot price will average $3.79/MMBtu in 2022. In 1Q22, we forecast the average Henry Hub spot price of natural gas will be $3.82/MMBtu. We expect prices will stay near current levels as natural gas inventory levels remain near the five-year average levels. Prices average $3.78/MMBtu for the remaining three quarters of 2022. We expect the Henry Hub spot price of natural gas to average $3.63/MMBtu in 2023.

Although we expect natural prices to decline in 2022 and 2023 compared with 2021, prices in the forecast stay relatively high compared with recent years. This dynamic is partly the result of reductions in coal-fired electricity-generating capacity and ongoing constraints in the coal market, which make increases in coal generation (and associated decreases in natural gas generation) less sensitive to rising natural gas prices than they have been in recent years. In addition, natural gas price volatility could result from weather-related increases or decreases in demand and uncertainties about the way in which rising levels of natural gas exports could affect the U.S. market.