The North American natural gas situation

North America's demand for natural gas is increasing, yet production in the lower 48 states of the United States is decreasing. The resulting gap between demand and supply can be met through a combination of Canadian imports, gas from Alaska and liquefied natural gas (LNG). Currently, Canadian imports nearly fill the entire gap between U.S. supply and demand (15 percent of total consumption).

But now, Canada's gas production rate also appears to be declining. U.S. imports of Canadian gas will decrease as production declines and Canadians use more of their gas resources to satisfy their own increasing domestic demand requirements.

According to the U.S. Energy Information Administration's (EIA) "2007 Annual Energy Outlook" demand for natural gas is expected to increase by 30 percent during the next 10 years. Both the EIA and the National Petroleum Council have recognized that LNG, along with the development of other domestic resources, will be necessary to meet future demand. The graph above reflects Sempra LNG's perspective on the future ranges of disparity between U.S. production and consumption of natural gas.

Currently, the gap is being met by Canadian imports (8.6 billion cubic feet per day) and a modest level of LNG imports (<2 billion cubic feet per day); however, with the predicted growth rate for U.S. demand, additional sources of supply, such as LNG, will be essential to replace declining domestic production.