The US Energy Information Administration (EIA) updated its website on January 7 to report that, once all its data is finalized, natural gas prices, production, consumption, and exports will reflect record increases in 2018. According to the preliminary release, the average annual Henry Hub natural gas spot price in 2018 went up 15 cents from the 2017 average. Simultaneously, consumption, production, and exports all saw a rise in 2018.
The EIA found that the rise in consumption was “largely driven by natural gas-fired plants replacing coal-fired plants in the electricity fuel mix, with consumption 17% higher than 2017 levels through the first 10 months of the year.” The rise in consumption also resulted from increased industrial sector investment and the need for space heating and air conditioning throughout 2018.
Production saw a rise due in part to increases in dry natural gas production in the Appalachian Basin (Northeast United States), Permian Basin (western Texas and New Mexico), and the Haynesville Shale (Texas and Louisiana).
A further increase of US natural gas exports, particularly to Mexico, occurred last year, in addition to more liquefied natural gas (LNG) export capacity coming online more generally in 2018. For example, increased export capacity from the Sabine Pass LNG export facility in Louisiana and the Cove Point LNG facility in Maryland contributed to the expansion of LNG exports. Dominion Energy Cove Point’s LNG facility began commercial export operations last year, when it exported its first LNG cargo in early March. Sabine Pass in Louisiana began commercial operations in 2016 and has since continued to expand those operations. Overall, for a second year in a row, the United States exported more natural gas than it has imported.
Investors and market participants will look to statistics such as these to forecast how and whether the mix of bullish and bearish factors will encourage or detract from future business ventures and opportunities as we move into the first quarter of 2019.