U.S. gas production, consumption & exports jump in 2021

U.S. dry natural gas production averaged 93.4 billion cubic feet per day (Bcf/d) in 2021, surpassing the pre-pandemic high of 92.9 Bcf/d two years earlier, according to a recent survey from the U.S. Energy Information Administration.

Additional production from the Appalachian, Permian and Haynesville region led the growth in 2021. The additional gas production was the result of multiple factors: record U.S. LNG exports, stronger gas prices, increased takeaway capacity and reduced flaring, the agency reported.

The growth in production occurred despite an abrupt decline in mid February, when a sudden winter storm and a hurricane in August led to a decline in production. The freeze in February led to widespread well freeze-offs in many areas, particularly in Texas.

U.S. gas consumption increased in 2021 from the previous year, but it remained below the level from two years prior. Natural gas consumption averaged 83.5 Bcf/d in 2021, up from 83.3 Bcf/d in 2020 but below the 85.3 Bcf/d in 2019, the EIA reported.

The increase in consumption occurred primarily in residential and commercial sectors – both up 3.7% from 2020 -- caused by the lower than average temperatures in the second half of the 2020-2021 heating season.

Consumption in the industrial sector grew by 1.5% from the previous year because of increased industrial activity. Consumption of natural gas in the electrical power sector declined by 3.3% compared with 2020 as stronger gas prices pushed electrical producers to switch to coal.

The surge in consumption was one factor that led natural gas storage inventories to enter the 2021-2022 winter heating season at the lowest level since 2019. At the end of March, which is traditionally considered the end of the heating season, natural gas inventories in the U.S. were 11% lower than in the same period one year earlier. Strong demand in the 2020-2021 heating season and a reduction in production led to greater withdrawals from storage, the EIA reported.

As demand outstripped the growth in natural gas supply from April through October, were 4% below the five-year average and 3% below the previous year. Working natural gas stocks 3,19f Bcf, down 5% from a year ago, but 3% higher than the five-year average for this time of the year.

For the third consecutive year, natural gas gross exports reached a new high in 2021, led primarily by an ongoing growth in LNG exports. Pipeline exports rose as well and hit a record in June, led by increase in shipments to Mexico. U.S. LNG exports hit records in 2021, led by strong recovery for natural gas in Asia, low storage levels in Europe and high international gas prices.

“We expect that growth in LNG exports will continue this year with additional export capacity expansions being placed in service between December 2021 and fall 2022, and by the end of 2022 U.S. LNG export capacity will exceed that of Australia and Qatar, the two largest LNG exporters currently,” the EIA reported.

Spot prices for natural gas rose in early 2022 for most parts of the U.S. The spot price at Henry Hub rose from $3.40 per million British thermal units (MMBtu) to $3.79/MMBtu.

International natural gas prices fell from late 2021 according to Bloomberg Finance. Swap prices for LNG cargoes in East Asia fell $10.47 to $32.70/MMBtu after hitting a record high of $43.26/MMBtu.

At the Title Transfer Facility in the Netherlands, the day-ahead price fell for the second week to an average of $26.51/MMBtu. Weekly average prices at TTF set a record high in late 2021 at $51.18/MMBtu.