20-11-02 With natural gas demand projected to grow 54 % by 2025, US natural gas supplies will increasingly depend on large, new domestic and imported supply projects, according to the Energy Information Administration (EIA), which released the reference case forecast from its "Annual energy outlook 2003" (AEO2003).

Growth in domestic natural gas supplies will primarily depend on two sources: Increased unconventional natural gas production (e.g., tight sands, coalbed methane, shale), much of it out of the Rocky Mountain region, and construction of an Alaskan natural gas pipeline that delivers gas supplies to the lower-48 States starting in 2021. Total non-associated unconventional natural gas production is projected to grow from 5.4 tcf in 2001 to 9.5 tcf by 2025. Total Alaskan production is projected to increase from 0.4 tcf in 2001 to 2.6 tcf by 2025.
Growth in imported natural gas supplies will depend on expansion of LNG imports and pipeline imports from Canada. Including both pipeline imports and LNG, total net natural gas imports are projected to increase from 3.6 tcf in 2001 to 7.8 tcf by 2025, meeting 22 % of total natural gas demand in 2025.

The "AEO2003" forecasts that the 4 existing US LNG terminals (Everett, Massachusetts; Cove Point, Maryland; Elba Island, Georgia; and Lake Charles, Louisiana) will expand and 3 additional facilities will be built in the lower-48 States serving Florida and the Gulf states. "AEO2003" forecasts that another facility will be built in Baja California, Mexico, predominantly serving the California market. Total net LNG imports are projected to increase from 0.2 tcf in 2001 to 2.1 tcf by 2025.
Growth in pipeline imports from Canada is, in part, dependent on the projected completion of the MacKenzie Delta pipeline. "AEO2003" forecasts that the MacKenzie Delta pipeline will be completed in 2016 and expanded in 2023. The initial full flow rate into Alberta is assumed to be 1.5 bn cfpd.

Natural gas prices are projected to increase in an uneven fashion due to thecompletion of new natural gas projects such as the Alaskan pipeline and LNG facilities. For example, at full capacity, flow from the Alaskan pipeline is expected to be 4.5 bn cfpd (about 1.6 tcf per year).
This sharp increase in supply is expected to drive prices down. However, the impact should be short-lived as markets adjust and demand increases. Despite the short-term impact, average natural gas prices are projected to move higher as technology improvements and new supply sources prove unable to completely offset the effects of resource depletion and increased demand. Annual average Lower-48 natural gas wellhead prices are initially projected to decline from the high levels of 2001, falling to $ 2.75 per thousand cf (mcf) in 2002 ($ 2001). After 2002, gas prices are projected to move higher reaching $ 3.90 per mcf by 2025. In nominal $, this is equivalent to $ 7.06 per mcf.

Other forecast highlights include:
-- The US economy, as measured by gross domestic product (GDP), is projected to grow atan average annual rate of 3.0 % from 2001 to 2025. Total energy demand is projected to increase from 97.3 to 139.1 quadrillion Btu between 2001 and 2025, an average annual increase of 1.5 %.

-- The energy intensity of the US economy, measured as energy used per dollar of GDP, is projected to decline at an average annual rate of 1.5 % through 2025, as continued efficiency gains and structural shifts in the economy offset growth in the demand for energy services. Per capita energy use is projected to increase in the forecast, with growth in demand for energy services only partially offset by efficiency gains. Per capita energy use increases by 0.7 % per year between 2001 and 2025.

-- The average world oil price is projected to increase from $ 22.01 per barrel ($ 2001) in 2001 to $ 26.57 per barrel by 2025, largely due to the impact of higher projected world oil demand. In nominal dollars, the average world oil price reaches $ 48.11 per barrel in 2025.

-- US petroleum demand is expected to become increasingly dependent on imports. Net petroleum imports, including both crude oil and refined products, are expected to account for 68 % of total petroleum demand by 2025, up from 55 % in 2001. Further, despite an expected increase in domestic petroleum refinery distillation capacity of 3 mm bpd by 2025, the "AEO2003" also forecasts a strong growth in net refined petroleum product imports due to constraints on expanding the capacity of US refineries. Refined product imports are expected to account for a growing portion of total net petroleum imports, increasing from 15 % in 2001 to 34 % by 2025.

-- While the share of electricity generated with natural gas is projected to increase from 17 % in 2001 to 29 % in 2025, coal remains the primary fuel for electricity generation through 2025. The coal share is projected to decline from 52 % in 2001 to a still dominant 48 % in 2025. Seventy-four GW of new coal-fired generating capacity are expected to be constructed between 2001 and 2025.

-- While no new nuclearplants have been built in many years in the US, the existing facilities have substantially improved their performance and reduced operating costs. Further, it has become common practice to request extension of the operating licenses of nuclear plants from the Nuclear Regulatory Commission (NRC).
A more recent phenomenon has been uprating of nuclear plant capacity. The "AEO2003" includes consideration of these trends, which help to reverse the decline in nuclear capacity and generation shown in previous forecasts. Total nuclear capacity is projected to increase from 98.2 GW in 2001 to a peak of 100.4 GW by 2006 as a result of uprates before declining to 99.6 GW by 2025.

-- Total renewable electricity generation, including combined heat and power (CHP), is projected to increase from 298 bn kWh in 2001 to 495 bn kWh by 2025, an increase of 2.1 % per year. Renewable technologies are projected to grow slowly because of the relatively low costs of fossil-fired generation and because competitive electricity markets favour less capital-intensive natural gas technologies over coal and baseload renewables in the competition for new capacity. State renewable portfolio standards, which specify a minimum share of generation or sales from renewable sources, are considered in the forecast as are extension of the Federal Production Tax Credit for wind and biomass.

-- Average real (2001 dollars) electricity prices are projected to decline from 7.3 cents per kWh in 2001 to a low of 6.3 cents per kWh by 2007 due to cost reductions in an increasingly competitive market faced with excess generating capacity resulting from the recent boom in construction and the continued decline in coal prices. After 2007, average real electricity prices are projected to increase by 0.4 % per year as a result of rising natural gas prices and a growing need for new generating capacity to meet electricity demand growth. Real electricity prices reach 6.7 cents per kWh by 2025.

-- The projection does not include future policy actions that might be taken to reduce carbon dioxide emissions. Thus, carbon dioxide emissions from energy use are projected to increase from 1,559 to 2,237 mm tons between 2001 and 2025, an average annual increase of 1.5 %. The carbon intensity of the economy, measured as energy-related carbon dioxide emissions per dollar of gross domestic product, declines at an average annual rate of 1.5 % per year through 2025.