CoBank forecasts a wild ride for natural gas prices, mainly because of new export capacity and rising demand, including nations switching away from from Russian supplies.
In the next five years, upwards of 90 per cent of gas demand growth could come from liquid natural gas (LNG) exports, with as much as one-third of U.S. production possibly reserved for international trade, CoBank analysts said.
When Russia cut off natural gas to most of Europe last year, it created a supply vacuum that enabled U.S. LNG terminals to form the market equivalent of a land bridge to Europe. That laid the groundwork for greater competition between foreign and North American markets.
“It is unclear if U.S. natural gas production can ramp up fast enough to meet the simultaneous acceleration of export growth and domestic electricity generation,” CoBank said.
Until recently, fracking has simply not proved a great investment. Many shale operators consistently outspent cash flows, burning through hundreds of billions of dollars to fund the past two decades of growth, it said.
Production rose, but lack of returns sparked an investor exodus that has yet to meaningfully reverse.
“The global supply and demand imbalance that caused last year’s natural gas price run up will be revisited several times this decade and play an outsized role in setting domestic prices,” said CoBank market analyst Teri Viswanath who is advising wholesale customers to lock in prices with supply contracts.
