Low Liquefied Natural Gas Case and AEO2004 Reference Case

In the low LNG case, net LNG imports are permitted to reach a level of 2.1 tcf in 2013, and then remain constant thereafter. In the reference case, net LNG imports reach 2.1 tcf by 2010, but LNG imports are permitted to grow throughout the remainder of the forecast, increasing to 4.8 tcf by 2025.

The low LNG case is a more severe gas supply constraint case than the no Alaska pipeline case, and the impact of the low LNG case begins earlier in the projection, after 2010 in the low LNG case, compared to after 2018 in the no Alaska pipeline case. Consequently, the impacts of this case are more pronounced with respect to changes in gas consumption, production, and prices.

In general, gas consumption in 2025 is 5 percent lower (1.4 tcf) in the low LNG case than in the reference case, while U.S. gas production is 4 percent higher (0.9 tcf) (Figure 6). Because of the constraints placed on new LNG facilities, net gas imports in 2025 are 32 percent lower, 4.9 tcf in the low LNG case compared to 7.2 tcf in the reference case.

The largest reductions in end-use consumption occur in the electric generation and industrial sectors, with gas consumption reductions in 2025 of 14 percent (1.1 tcf) and 2 percent (0.2 tcf), respectively.

The low LNG case assumes that two new LNG import facilities of 1 billion cubic feet per day each are built on the Gulf Coast and one 500-million-cubic-feet-per-day facility is built in the Bahamas to serve Florida. In the reference case, 9 to 12 new import terminals are built serving the Atlantic and Gulf Coasts. Construction of LNG terminals in Baja California, Mexico, is allowed in both cases.

The low LNG case causes net Canadian gas exports to the United States to increase, and Mexico becomes a net exporter of gas to the United States by the end of the forecast period, compared to being a net importer of gas in the reference case. In 2025, gas exports from Canada are projected to be 2.8 tcf in the low LNG case, compared to 2.6 tcf in the reference case (Figure 7). In 2025, the low LNG case projects 30 bcf of Mexican gas exports to the United States, compared to 120 bcf of Mexican gas imports from the United States in the reference case.

The low LNG case increases gas production for all major domestic gas supply sources, compared to the AEO2004 reference case.

With respect to Alaska, the higher gas prices projected for the low LNG case stimulate an earlier construction of the Alaska North Slope pipeline, so that it is projected to become operational in 2017, 1 year earlier than in the reference case.

In the lower 48 States, unconventional gas production is projected to reach 9.6 tcf in 2025, compared to 9.2 tcf in the reference case. Similarly, lower 48 conventional gas production is projected to be 12.5 tcf in 2025 in the low LNG case, compared to 12.1 tcf in the reference case (Figure 8).

Because the low LNG case limits future gas supply more than the no Alaska pipeline case and for a longer period of time, natural gas wellhead prices are higher in this case and for a more sustained period of time.

The wellhead price for the low LNG case starts to rise above reference case prices around 2010, and by 2025 the low LNG case projects wellhead gas prices of $4.74 per mcf (in 2002 dollars), compared to $4.40 per mcf for the reference case (Figure 9). The price pattern in the low LNG case is similar to that in the reference case.

In the low LNG case, the higher wellhead gas prices, which extend over a longer period of time, are projected to result in a larger difference in gas-fired electricity generation than the no Alaska pipeline case. In 2025, gas-fired electricity generation is projected to be 1,130 billion kilowatthours in the low LNG case, compared to 1,304 billion kilowatthours in the reference case (Figure 10).

In the low LNG case, the lower gas-fired electricity generation is partly offset by higher coal and renewable energy electricity generation. In 2025, the low LNG case projects 3,127 billion kilowatthours of coal-fired electricity generation, compared to 3,029 billion kilowatthours in the reference case. Similarly, renewable energy electricity generation is projected to be 542 billion kilowatthours in 2025, compared to 509 billion kilowatthours for the reference case. Cumulatively from 2002 through 2025, wind generation accounts for 82 percent of the increase in total renewable generation. Biomass generation comprises most of the remainder.

As in the no Alaska pipeline case, the higher wellhead gas price in the low LNG case does not translate into significantly higher busbar electricity prices, because the change in 2025 wellhead prices is limited to 34 cents per mcf and the fact that gas-fired electricity generation is only 20 percent of total U.S. generation. In 2025, the electricity price is projected to be 6.94 cents per kilowatthour in the low LNG case, compared to 6.91 cents per kilowatthour in the reference case. While this electricity price in 2025 is similar to the price in the previous case, electricity prices are higher earlier in this case due to the higher costs incurred earlier for constructing coal-fired and renewable technologies.