Shale Boom

For more than 30 years, Henry Hub in Louisiana has anchored natural gas pricing in the Lower 48. But in the past 10 years, its role has shifted in profound ways. It has gone from a domestic benchmark pricing location for a vibrant Gulf Coast producing region to a demand-driven market and an index for U.S. LNG exports. In today’s RBN blog, we look at how Henry Hub became so integral to the workings of the emerging LNG market, both in the U.S. and globally. 

It’s well understood today that the U.S. natural gas market turned from potential domestic shortages to major LNG exports thanks to the Shale Revolution. What is not so well remembered is that the dramatic shift in the U.S. gas market wasn’t widely understood at the time and took several years to be accepted by the energy industry. In today’s RBN blog, we turn our attention to the beginnings of the Shale Revolution and how it allowed the U.S. to evolve into the world’s largest LNG exporter. 

Ten years ago, U.S. exports of natural gas in the form of LNG were a footnote in the market. But that all changed in 2016. In February of that year, the first shipment of LNG from the Lower 48 states set sail when the vessel Asia Vision departed from Cheniere Energy's Sabine Pass export terminal in Louisiana. This was the culmination of a remarkable turnaround, not only at Sabine Pass, but for the U.S. natural gas market as a whole. Eight years earlier, Sabine Pass had been completed as an import terminal, as it was projected that the U.S. would face significant shortages of natural gas supplies. Shale turned that business model on its head. 

The latest forecast from the Canadian Association of Petroleum Producers (CAPP) was published last week (June 9, 2015). This annual survey of Canadian crude production, transportation and market demand differs from many forecasts because it is based on surveys of producers and refiners rather than price projections and models. In spite of lower crude prices CAPP continue to forecast growth in Canadian crude output to 2030 – albeit at a slower pace than previously expected.  Today we review CAPP’s production and North American market demand forecasts.