dominant position as an industrial fuel and the most economical
means of heating homes, by the 1990s, it had fallen to less than
24% of the U.S. energy supply. Modest demand growth in the
1990s and early 2000s was met by Canadian imports.
The 1990s were marked by relatively low and steady gas prices
as U.S. and Canadian suppliers easily kept up with demand
growth. But soaring oil prices, together with sinking reserves of
conventional natural gas, drove gas prices from just over $2 per
million BTU in 2002 to as high as $13 per million BTU in 2008,
making many potential users reluctant to invest in the fuel. Since
then, gas prices have moderated somewhat—ranging between
$2.50 and $6 per million BTU in 2009 and 2010. Still, price
volatility remains as the Achilles’ heel of natural gas, particularly
when compared with coal (BP Statistical review of world energy,
2008).
However, in spite of uncertainty in gas prices, the Central and
South America’s natural gas use surges at a rate that is next only
to the rate of increase in nuclear energy use. Natural gas demand
increases on average by 2.3% per year, from 4.6 trillion cubic feet
in 2007 to 8.6 trillion cubic feet in 2035. Although parts of Central
and South America have well-developed natural gas pipeline
infrastructure, supply disturbances and political differences in
recent years have raised concerns about security of supply and
have encouraged several countries to look to imported LNG as a
long-term supply solution. Brazil is developing its own domestic
resources and also imports large amounts of natural gas from
Bolivia via pipeline. It has not been able to meet its soaring
demand, however, and in 2008 it inaugurated an LNG import
terminal (Brazil, 2008).
Argentina also initiated LNG imports in 2008 (LNG Project
Inventory: South America, 2009). Chile, faced with disruptions of
natural gas supply from Argentina as a result of Argentina’s own
natural gas supply shortages, commissioned its first LNG receiving
terminal in July 2009 and has another terminal under
construction (America to see LNG terminals commissioned in
June 2009). Also, a proposed new re-gasification terminal in
Uruguay could be operational as early as 2012 (Crooks’s, 2009).
By the end of 2002 U.S. total natural gas consumption was 22.6
Trillion Cubic Feet (Tcf), presently which is 26.2 Tcf, and is
projected to grow up to 34.4 Tcf by 2025 and 34.6 Tcf by 2030,
and so on (EIA). While, domestic gas production is estimated to
increase more slowly than consumption over the forecasted
period, rising from 20.5 Tcf in 2010 to 24.0 Tcf by 2025 and then
up to 2035 it is predicted to grow speedily as shown in Fig. 5.
The difference between consumption and production will be
filled up by imports, while U.S. net imports of natural gas are
expected to decline, with reference to annual energy outlook
(AEO) 2009 report, from 13% of total supply in 2008 to 6% in
2035(as shown in Fig. 6).
The reduction consists primarily of lower imports from Canada
and higher exports to Mexico, as a result of demand growth in
both countries that beats the growth in their production, as well
as increased U.S. production.
With reference to AEO 2009 report, imports from Canada may
decline rapidly through 2014 (Fig. 6), as increased production
from growing sources, such as shale gas, is not yet sufficient to
offset the decline in other sources. After 2014, U.S. imports from
Canada stabilize at 1.7–1.9 trillion cubic feet (Tcf) per year
through 2035.
However, the size of Canada’s shale gas resource is ambiguous
at present. Hence, U.S. imports of LNG depends up on world’s
liquefaction capacity, world demand for LNG, and U.S. natural gas
prices. When there is excess natural gas supply in world markets
(for example, during years with warmer weather than normal),
more LNG becomes available for U.S. imports. The EIA (EIA, annual
energy outlook 2010), in high LNG case, assumes the availability
of more LNG imports to the U.S. as compared to AEO 2009
report—up to 5 times more in 2035 and cumulatively 2.9 times
more from 2009 to 2035 (as shown in Fig. 7) while, over past
5 years, EIA has considerably lowered its overall projections of
LNG imports into the U.S. (as shown in Fig. 7) due to its domestic
gas production.
The increase in LNG imports results in lower wellhead prices,
with annual wellhead prices lower in the high LNG case than AEO
2009 by 7–18% ($0.55–$1.42 per thousand cubic feet) during the
period from 2020 to 2035. A major influence of the increase in
LNG imports in the high LNG case is on the timing of the Alaska
pipeline, which is opened in 2023 but delayed until 2033 in the
high LNG case. In the lower 48 States, a major impact of increased
LNG imports is reduced production of onshore natural gas and an
even larger percentage reduction in offshore production, because
lower prices imply that fewer U.S. natural gas resources are
economical to produce.
Effects on U.S. natural gas consumption in the high LNG case
are mainly in the price-responsive electricity generation sector,
Fig. 5. U.S. Primary energy consumption, 1990–2035 (Tcf). where natural gas competes with coal and renewable energy.