Natural gas production is expected to increase in 2017, after seeing its first decline in over a decade in 2016
Natural gas production is expected to increase during the course of 2017, according to the Energy Information Administration (EIA). The agency expects the U.S. to produce 73.7 Bcf/d this year, up approximately 2% from last year.
The increase in production marks a turn for natural gas production in the U.S. following the most recent downcycle. Lower oil prices and unseasonably warm weather during 2016 saw production decline for the first time since 2005, according to the EIA. Warmer weather continues to affect the price of natural gas, with Henry Hub prices down $0.45 in February compared to January averaging $2.85 per MMBtu during the second month of the year.
The EIA expects that Henry Hub prices will average $3.03 per MMBtu over the course of 2017. The agency said new natural gas export capabilities and growing domestic natural gas consumption are the main drivers behind the improved prices. NYMEX contract values for May 2017 delivery traded during the five-day period ending March 2 suggest that a range of $2.15 per MMBtu to $3.82 per MMBtu encompasses the market expectation for Henry Hub natural gas prices in May 2017, according to the EIA.
Both production and prices are expected to continue increasing in 2018 as well, the EIA said in its Short-Term Energy Outlook (STEO) today. Natural gas production is expected to increase by an average of 4.1 Bcf/d to 77.8 Bcf/d, while prices are projected to average $3.45 per MMBtu over the same period.
Liquids production expected to rise as well
Along with production estimates for natural gas, the EIA also released its forecast for crude oil in the March STEO. The agency said U.S. crude oil production averaged an estimated 8.9 MMBOEPD in 2016, and it believes production will grow to 9.2 MMBOPD this year and another 0.5 MMBOPED to 9.7 MMBOEPD in 2018.
The EIA believes that international benchmark Brent crude will average $55 per barrel over the course of this year, matching the February average, before climbing to $57 per barrel in 2018. WTI crude is expected to trade at a $1 discount to Brent over the same periods.
Implied global petroleum and liquid fuels inventories increased by an estimated 0.5 MMBOPD in 2016. EIA expects a relatively balanced oil market in the next two years, with inventory builds averaging 0.1 MMBOPD in 2017 and 0.2 MMBOPD in 2018.
Renewables make up a growing share of electricity generation, but gas-fired generation is 32% of mix in 2017, 33% in 2018
The EIA expects electricity generation from utility-scale plants to decline this year by 0.7% from 11.1-gigawatt hours per day in 2016 before growing 1.9% in 2018. Natural gas is expected to make up 32% of that generation in 2017 and 33% in 2018, while coal generates 31% and 30% for the same periods.
Non-hydropower renewables are forecast to provide 9% of generation in 2017 and 10% in 2018, according to the agency. Hydropower is expected to make up 7% of utility-scale generation for both this year and next.
On a percentage basis, solar power is expected to be the fastest-growing renewable energy source in the forecast period, with total utility-scale capacity increasing by 44% from the end of 2016 to 31 GW at the end of 2018. With that level of growth, solar is expected to account for 1.4% of total utility-scale electricity generation in 2018.
