Released January 29, 2020 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Efficiency gains by U.S. Oil & Gas producers will continue to drive up crude oil and natural gas production this year, albeit at a slower pace than earlier years due to investors' pressure that producers practice capital discipline, Shane Mullins, Industrial Info's vice president of product development for energy markets, told about 1,500 attendees at Industrial Info's 2020 Industrial Market Outlook on January 23.
Mullins' comments followed a report from the U.S. Energy Information Administration (EIA) that U.S. crude oil production set a record of 13 million barrels per day (BBL/d) for the week ended January 10.
But in his talk at the Outlook event, held in Houston, Texas, Mullins focused on natural gas, including rising domestic production of gas and natural gas liquids (NGLs), exports of liquefied natural gas (LNG) and NGLs, and investments in processing and transport capacity.
Producers' dramatic efficiency gains are shown by "fantastic" growth in onshore gas production, about 8.5 billion cubic feet per day (Bcf/d) in 2019, despite a 27% drop in rig counts, Mullins noted. Prolonged low gas prices -- they were below $2 per million British thermal units (MMBtu) earlier this month -- means most production growth this year likely will be associated gas, which is gas found while drilling for oil.
Gas production growth this year likely will be around 3 billion Bcf/d, bringing overall production in the "Lower 48" states to about 95 Bcf/d, Mullins said. By 2025, Lower 48 production is expected to reach about 105 Bcf/d, he added.
Click on the image at right to see projected gas production totals from the Lower 48 states.
Investors are expecting gas prices to stay low, below $4 per MMBtu for a decade or more, Mullins said. Overall gas supply is expected to rise by about 12% between 2019 and 2025. Low gas prices will support increased exports of LNG and pipeline gas exports to Mexico through 2025. He added: "In one decade, gas exports are expected to go from nothing in 2015 to 20 Bcf/d in 2025, when LNG exports and gas pipeline exports to Mexico are combined." Those two markets are expected to absorb up to 16% of overall production in 2025.
Operating domestic LNG export terminals have a combined processing capacity of about 9 Bcf/d. U.S. energy regulators approved several new LNG export terminal projects last year, which, when constructed, are expected to push processing capacity above 14 Bcf/d by 2026, Mullins said.
Click on the image at right to see the projected in-service dates and cumulative LNG export capacity of U.S. LNG export terminals.
"Globally, 2019 was a record approval year for LNG, with projects collectively valued at $67 billion given the green light to move forward," he continued. This year likely will be another record year of approvals, with Mozambique and Qatar taking the lead. If those projects receive financial backing, and Chinese tariffs remain on U.S. LNG, Mullins predicted U.S. developers seeking investment decisions for their LNG projects will face "major headwinds."
Getting all of that U.S. gas from where it is produced to where it is needed will require a lot of infrastructure investments. "Right now, we are tracking about $60 billion in midstream capital projects across North America," Mullins said. "These projects are still under construction and have not yet reached commercial startup. Once those projects are up and running, they should largely accommodate projected gains in gas production for the next few years."
Mullins said there are 80 unique gas pipeline projects under development. He said he expects 34 of those projects, valued at about $8.6 billion, to move forward this year. Overall, developers plan to begin building about $34 billion of proposed pipeline projects over the next 24 months.
In 2019, over 9.8 Bcf/d of gas processing capacity came online, Mullins said, and this year, another 13.5 Bcf/d valued at about $11 billion is scheduled to begin construction. "We don't expect to see all of those projects begin construction according to plan," he said, predicting that $1.6 billion of projects with a collective capacity of 2.6 Bcf/d will actually break ground.
Mullins said he expected U.S. NGL production to reach about 5.6 million BBL/d this year, a 33% increase over 2018 capacity, and future capacity is expected to increase another 16%, to 6.5 million BBL/d by 2025.
Click on the image at right to see projected growth of U.S. NGL production.
He said there was more than $11 billion in NGL pipeline projects being developed. Texas is an especially active market for NGL pipeline development, and more $4 billion of pipeline projects are being developed in the Lone Star State. He said capital expenditures this year on NGL pipelines are expected to drop 60% compared with 2019 spending, to roughly $2.3 billion, but he felt that was still a "healthy" amount.
Mullins concluded by noting that construction is scheduled to begin in 2020 for about $148 billion of midstream oil and gas capital projects across the U.S. and Canada. Of that sum, Industrial Info believes about $48 billion worth of projects will actually begin turning dirt this year. "Our projection of $48 billion in project starts in 2020 includes the full value of multi-year projects that begin construction this year," he said. "This is a healthy level of spending, and the number of multi-year projects ensures there will be plenty of work after 2020. These infrastructure projects are expected to help bring production gains and processing and takeaway capacity into a better balance."
Click on the image at right to see Industrial Info's projection of North American gas midstream capital projects that are likely to begin construction in 2020.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Mullins' comments followed a report from the U.S. Energy Information Administration (EIA) that U.S. crude oil production set a record of 13 million barrels per day (BBL/d) for the week ended January 10.
But in his talk at the Outlook event, held in Houston, Texas, Mullins focused on natural gas, including rising domestic production of gas and natural gas liquids (NGLs), exports of liquefied natural gas (LNG) and NGLs, and investments in processing and transport capacity.
Producers' dramatic efficiency gains are shown by "fantastic" growth in onshore gas production, about 8.5 billion cubic feet per day (Bcf/d) in 2019, despite a 27% drop in rig counts, Mullins noted. Prolonged low gas prices -- they were below $2 per million British thermal units (MMBtu) earlier this month -- means most production growth this year likely will be associated gas, which is gas found while drilling for oil.
Gas production growth this year likely will be around 3 billion Bcf/d, bringing overall production in the "Lower 48" states to about 95 Bcf/d, Mullins said. By 2025, Lower 48 production is expected to reach about 105 Bcf/d, he added.
Investors are expecting gas prices to stay low, below $4 per MMBtu for a decade or more, Mullins said. Overall gas supply is expected to rise by about 12% between 2019 and 2025. Low gas prices will support increased exports of LNG and pipeline gas exports to Mexico through 2025. He added: "In one decade, gas exports are expected to go from nothing in 2015 to 20 Bcf/d in 2025, when LNG exports and gas pipeline exports to Mexico are combined." Those two markets are expected to absorb up to 16% of overall production in 2025.
Operating domestic LNG export terminals have a combined processing capacity of about 9 Bcf/d. U.S. energy regulators approved several new LNG export terminal projects last year, which, when constructed, are expected to push processing capacity above 14 Bcf/d by 2026, Mullins said.
"Globally, 2019 was a record approval year for LNG, with projects collectively valued at $67 billion given the green light to move forward," he continued. This year likely will be another record year of approvals, with Mozambique and Qatar taking the lead. If those projects receive financial backing, and Chinese tariffs remain on U.S. LNG, Mullins predicted U.S. developers seeking investment decisions for their LNG projects will face "major headwinds."
Getting all of that U.S. gas from where it is produced to where it is needed will require a lot of infrastructure investments. "Right now, we are tracking about $60 billion in midstream capital projects across North America," Mullins said. "These projects are still under construction and have not yet reached commercial startup. Once those projects are up and running, they should largely accommodate projected gains in gas production for the next few years."
Mullins said there are 80 unique gas pipeline projects under development. He said he expects 34 of those projects, valued at about $8.6 billion, to move forward this year. Overall, developers plan to begin building about $34 billion of proposed pipeline projects over the next 24 months.
In 2019, over 9.8 Bcf/d of gas processing capacity came online, Mullins said, and this year, another 13.5 Bcf/d valued at about $11 billion is scheduled to begin construction. "We don't expect to see all of those projects begin construction according to plan," he said, predicting that $1.6 billion of projects with a collective capacity of 2.6 Bcf/d will actually break ground.
Mullins said he expected U.S. NGL production to reach about 5.6 million BBL/d this year, a 33% increase over 2018 capacity, and future capacity is expected to increase another 16%, to 6.5 million BBL/d by 2025.
He said there was more than $11 billion in NGL pipeline projects being developed. Texas is an especially active market for NGL pipeline development, and more $4 billion of pipeline projects are being developed in the Lone Star State. He said capital expenditures this year on NGL pipelines are expected to drop 60% compared with 2019 spending, to roughly $2.3 billion, but he felt that was still a "healthy" amount.
Mullins concluded by noting that construction is scheduled to begin in 2020 for about $148 billion of midstream oil and gas capital projects across the U.S. and Canada. Of that sum, Industrial Info believes about $48 billion worth of projects will actually begin turning dirt this year. "Our projection of $48 billion in project starts in 2020 includes the full value of multi-year projects that begin construction this year," he said. "This is a healthy level of spending, and the number of multi-year projects ensures there will be plenty of work after 2020. These infrastructure projects are expected to help bring production gains and processing and takeaway capacity into a better balance."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
