McKinsey Energy Insights, the global market intelligence and analytics arm of McKinsey & Company focused on the energy sector, has launched its 2019 North American Gas Outlook, highlighting various changes in gas demand and supply through 2030. The report reveals US gas economics will reach below $3/mmbtu in the next 10 years due to ample supply, which will support North American gas exports and unlock further demand growth domestically.
North American gas demand will reach 125 bcfd by 2030 from 95 bcfd today, with 20 bcfd of growth coming from gas and LNG exports. The share of gas in the power mix will grow by 5 bcfd – driven by coal retirements – but renewables will start to displace gas post-2025 as part of the power sector’s decarbonisation.
“North America is endowed with abundant gas resources, which will play a major role in the energy mix domestically and provide security of supply through LNG exports to Europe and Asia,” says Dumitru Dediu, Partner at McKinsey. “We see over 1,000 TCF of gas resources – which is sufficient to meet demand for the next 2 decades—at cost economics well below $3/mmbtu.”
In terms of supply, Appalachia will increase production to about 55 bcfd and will supply approximately 40% of the North American market by 2030. As a result, Appalachian gas production is expected to displace the Western Canadian Sedimentary Basin and Rockies in the Midwest and will supply the southern Mid-Atlantic region. The building of pipeline infrastructure post-2023 will ensure Appalachian supply will continue to grow and limit price fly-up potential.
Associated gas, primarily from the Permian basin, is expected to increase production by approximately 12 bcfd and supply 25% of the North American market by 2030. Permian production will limit Appalachian flows South and will help meet US Gulf Coast demand for global LNG exports.
The 2019 North American Gas Outlook discusses gas exports to Mexico, renewables, storage, and power generation, and provides a detailed look at supply and prices until 2030. To read the summary, download a copy here.