U.S. natural gas consumption is expected to reach a record this year, while natural gas producers operate more drilling rigs than at the start of the COVID-19 pandemic in early 2020, according to the U.S. Energy Information Administration (EIA).
In 2022, natural gas consumption in the United States is projected to rise by 3.6 billion cubic feet per day to an average of 86.6 billion cubic feet per day, the most annual consumption on record. The consumption is projected to rise in all end-use sectors.
In the electric power sector, it’s expected to rise by 4% to 32.1 billion cubic feet per day, exceeding the 2020 record by 1%, and will be the highest growth rate among all sectors this year. The sector uses more natural gas than any other in the United States.
Natural gas consumption in the sector is projected to fall in the fourth quarter and during 2023 when the EIA expects more renewable electricity generating capacity to start operating.
According to Baker Hughes Co., 166 natural gas rigs were operating in the United States as of Sept. 9. That’s 54 more than on Jan. 31, 2020, when 112 natural gas rigs were operating.
Before the pandemic, the number of operating rigs was falling. As natural gas drilling rises, production is expected to rise as well. According to the EIA, U.S. dry natural gas production is expected to rise from an average of 97.6 billion cubic feet per day in August to 100.5 billion cubic feet per day in December 2023.
The majority of the growth in natural gas-directed rigs in the United States has been in the Haynesville region, spanning Texas and Louisiana. Between January 2020 and August 2022, the rig count in the region increased by more than 50%. Producers have been drawn to the region because of its well productivity, proximity to the U.S. Gulf Coast liquefied natural gas (LNG) export terminals and major industrial natural gas consumers.
In the Permian region, spanning west Texas and New Mexico, most natural gas production is associated gas produced from oil wells. Producers there respond to fluctuations in the crude oil price when planning their rig use. The rig count in the Permian region remains 15% below the Jan. 31, 2020, pre-pandemic count of 406 rigs.
In the Appalachia region of Pennsylvania and West Virginia, rig activity has nearly returned to the pre-pandemic levels of 51 operating rigs as of Jan. 31, 2020.
Between January 2020 and August 2022, the Henry Hub natural gas spot price has risen by 335.6% from $2.02 per million British thermal units to $8.80 per million British thermal units. The price is projected to peak at $9.10 per million British thermal units in January 2023 before moderating to $5.53 per million British thermal units in December 2023.