The U.S. natural gas market in the past two years has undergone massive change, from breaking storage records and crossing long-held thresholds to flipping flow patterns and pricing relationships on their heads. This November, the market crossed yet another milestone: the U.S. became a net exporter of natural gas for the first time ever on September 1, 2016. That lasted only a few days. But net exports resumed again starting November 1 and have continued through the month, almost without interruption, with pipeline deliveries to Mexico and to the first two liquefaction “trains” at Cheniere Energy’s Sabine Pass LNG terminal exceeding imports from Canada and LNG import terminals by an average 0.6 Bcf/d. Today, we look into what’s really driving this shift and what that tells us about the trend going forward.
In many ways, the U.S. flip from net gas importer to net gas exporter has been years in the making. A look at historical import and export data from our daily NATGAS Billboard report shows that net imports of natural gas have been in decline since at least 2010 (Figure 1). This was largely a function of the meteoric rise of domestic natural gas supply, particularly in the Northeast region, but increasing exports have contributed as well. As production from the Marcellus and Utica plays permeated the market, import volumes that traditionally served the Northeast––namely, LNG and Canadian imports––ramped down. Meanwhile, growing gas demand for industrial and power plants in Mexico pulled more and more supply across the border. The net effect was declining net imports. Seven years ago, the U.S. was net importing an average of more than 7.0 Bcf/d, with as much as 13.5 Bcf/d in the dead of winter when U.S. consumption is highest due to heating demand for homes and businesses, and dropping to less than 5.0 Bcf/d in the fall “shoulder months” when demand tends to be in the doldrums due to mild weather.