According to the recently-released BP Statistical Review of World Energy 2014, global natural gas production rose last year by 1.1% to a new all-time high of 328 billion cubic feet per day (Bcfd). World consumption of natural gas is about 24% of all primary energy consumed, behind oil's 33% share and coal's 30%.
Over the past five years, natural gas production in the US has grown by more than 20%. No other country has come close to matching US production gains, and the US leap-frogged Russia in 2009 to become the world's largest natural gas producer.
US production expanded once again in 2013 to a new record of 66.5 Bcfd — 20.5% of the global natural gas supply. The US production gains weren't as great in 2013 as they had been in recent years, and Russia gained some ground on the US in 2013, reaching 58.5 Bcfd. Far behind in third place was Iran at 16.1 Bcfd — good for 4.9% of global gas supplies. Rounding out the top five were Qatar at 15.3 Bcfd and Canada at 15 Bcfd.
The US, Russia, and Iran were also first, second and third, respectively, in natural gas consumption. They consumed, respectively, 71.3 Bcfd, 40 Bcfd, and 15.7 Bcfd. The US and Iran consumed approximately as much gas as they produced (or a bit more), while Russia produced nearly 50% more than it consumed internally. The rest of Russia's gas is piped primarily to Europe, but China is also slated to become an important consumer. The Russian gas monopoly Gazprom recently signed a $400 billion deal that will have Russia supplying China with natural gas for the next 30 years. In 2013 China was the world's fourth-largest consumer of natural gas at 15.6 Bcfd. Rounding out the top five among consumers was Japan at 11.3 Bcfd.
While t! he US was tops in both production and consumption, we are in fifth place for proved global natural gas reserves. (From BP's definitions: "Proved reserves of natural gas are generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions.")
Iran holds the top spot for proved reserves with 1,193 trillion cubic feet (Tcf) — 18.2% of the world's total proved natural gas reserves. Russia's 1,104 Tcf is good for 16.8% of global proved reserves, followed by Qatar (872 Tcf), Turkmenistan (617 Tcf) and the US (330 Tcf). At 2013 production rates, the US has 13.6 years of proved reserves, while Russia's reserves could allow 52 years of production. Because of Iran's much lower production rate and higher reserves, its proved reserves could theoretically be pumped at the 2013 rate for more than 200 years.
Despite the surge in US natural gas production, US proved reserves have increased substantially over the years. Proved gas reserves in the US reached an all-time high of 334 Tcf in 2011, fell in 2012, but surged in 2013 back to 330 Tcf. The increase in reserves is primarily a function of the pairing of hydraulic fracturing with horizontal drilling, which turned a big volume of natural gas resources into natural gas reserves for the first time. After two decades of declining to flat natural gas reserves, US reserves have now risen 86% since 2000.
Global proved natural gas reserves have grown more consistently than US reserves over the years, albeit not as sharply. Over the past decade global gas reserves are up 33%, and just eked out a new record in 2013 of 6,558 Tcf. This record is a fraction of a percent higher than the previous record in! 2011, bu! t global reserves have been effectively flat for the last two years.
The surge in US gas production has had a dampening impact on domestic gas prices, but internationally prices remain high:
With the enormous differentials that have developed over the past five years between US natural gas prices and liquefied natural gas (LNG) prices in Europe and northeast Asia, it is understandable why there is a rush to build LNG export terminals in the US.
As I pointed out in last week's Energy Letter, US natural gas production is up 11.4 Bcfd in just the past five years. Presently there are 13 pending proposals awaiting approval from the Federal Energy Regulatory Commission (FERC), with a total proposed export capacity of 17.9 Bcfd. Two projects have been approved by FERC. Cheniere Energy (NYSE: LNG) and Sempra Energy (NYSE: SRE) have had projects approved with a combined proposed capacity of 4.46 Bcfd.
Unless US natural gas production continues expanding at the pace of the past five years, it is almost a certainty that these export facilities (among other drivers) will lead to higher US natural gas prices. Higher natural gas prices will create opportunities for natural gas providers as well as companies and partnerships focused on logistics and transport of natural gas — opportunities we regularly focus on in depth in The Energy Strategist.
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