Natural Gas: A Key Part of the Global Energy Mix

Congressional research reportJul 26, 2016

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Natural Gas:

A Key Part of the Global Energy Mix

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Specialist in Energy Policy

July 26, 2016

Congressional Research Service

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www.crs.gov

R41543

Natural Gas: A Key Part of the Global Energy Mix

Summary

The role of natural gas in the U.S. economy has been a major part of the energy policy debate in

the 114th Congress. This report briefly explains key aspects of global natural gas markets,

including supply and demand, and major U.S. developments.

Natural gas is considered by some as a potential bridge fuel to a lower-carbon economy, because

it is cleaner burning than its hydrocarbon alternatives coal and oil. Natural gas combustion emits

about one-half less carbon dioxide than coal and one-quarter less than oil when consumed in a

typical electric power plant, although fugitive gas emissions offset some of the advantages.

Natural gas combustion also emits less particulate matter, sulfur dioxide, and nitrogen oxides than

coal or oil. Additionally, improved methods to extract natural gas from shale formations have

significantly increased the resource profile of the United States, which has spurred other countries

to try to develop shale gas. If the United States and other countries can bring large new volumes

of natural gas to market, particularly unconventional natural gas, then natural gas could play a

larger role in the world’s economy. Several key factors will determine whether this happens,

including price, technical capability, environmental concerns, and political considerations. Many

countries, both producing and consuming, are watching how the development of U.S.

unconventional natural gas resources evolves.

Key Points



Natural gas is likely to play a greater role in the world energy mix given its

growing resource base and its relatively low carbon emissions compared to other

fossil fuels.

The world used 122,442 billion cubic feet (bcf) of natural gas in 2015, of which

the United States consumed 27,463 bcf (the most of any country).

World natural gas consumption in 2015 grew by 1.7%, which was below the 10year average of 2.3% but above the 0.6% increase in 2014; U.S. consumption

grew by 3%.

U.S. unconventional natural gas reserves and production, particularly shale gas,

have grown rapidly in recent years. The United States accounts for 89% of global

shale gas production.

The new shale gas resources have changed the United States’ natural gas position

from a net importer to a potential net exporter. Other countries are now exploring

their own shale gas resources.

Global trade in natural gas is increasing and new players are entering on both the

supply side and the import side, making the global gas market more integrated.

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Natural Gas: A Key Part of the Global Energy Mix

Contents

Introduction ..................................................................................................................................... 1

Key Points ................................................................................................................................. 1

Natural Gas Consumption ............................................................................................................... 2

Key Global Consumers ............................................................................................................. 2

U.S. Consumption ..................................................................................................................... 3

Natural Gas Supply and Trade ......................................................................................................... 4

Natural Gas Reserves Growing ................................................................................................. 4

Production ................................................................................................................................. 6

Liquefied Natural Gas ............................................................................................................... 7

U.S. Development and Growth ................................................................................................. 8

Global Gas Market Becoming More Integrated ............................................................................. 11

U.S. LNG Exports ................................................................................................................... 12

Future Developments and Trends, Global and Domestic ........................................................ 13

Gas Exporting Countries Forum Still Ineffective.................................................................... 14

Production Widespread ........................................................................................................... 15

Natural Gas Prices Remain Low ............................................................................................. 15

Looking Forward ........................................................................................................................... 16

Figures

Figure 1. Global Natural Gas Consumption .................................................................................... 3

Figure 2. Global Natural Gas Reserves ........................................................................................... 5

Figure 3. Annual Global Reserves and Production.......................................................................... 6

Figure 4. Global Natural Gas Production ........................................................................................ 7

Figure 5. U.S. Natural Gas Network ............................................................................................. 10

Figure 6. Global Natural Gas Trade, 2015..................................................................................... 12

Figure 7. Global Natural Gas Prices .............................................................................................. 16

Tables

Table 1. GECF Natural Gas Statistics 2015 .................................................................................. 14

Table D-1. U.S. Imports of Natural Gas ........................................................................................ 21

Table D-2. U.S. Exports of Natural Gas ........................................................................................ 21

Appendixes

Appendix A. Global Natural Gas Consumption (2015) ................................................................ 18

Appendix B. Global Natural Gas Reserves (2015)........................................................................ 19

Appendix C. Global Natural Gas Production (2015) .................................................................... 20

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Natural Gas: A Key Part of the Global Energy Mix

Appendix D. U.S. Natural Gas Imports and Exports..................................................................... 21

Appendix E. Global Natural Gas Exporters (2015) ....................................................................... 22

Appendix F. Major Global Gas Companies (2014) ....................................................................... 23

Appendix G. Select U.S. Statutes Related to Natural Gas ............................................................ 24

Contacts

Author Contact Information .......................................................................................................... 25

Acknowledgments ......................................................................................................................... 25

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Natural Gas: A Key Part of the Global Energy Mix

Introduction

The role of natural gas in the U.S. economy has been a major part of the energy policy debate in

the 114th Congress. Both the House and the Senate have held multiple hearings related to natural

gas. Numerous bills have been introduced in both houses. This report highlights key aspects of

global natural gas markets, including supply and demand, and major U.S. developments.1 Select

statutes of U.S. law related to natural gas can be found in Appendix G.

Some consider natural gas a potential bridge fuel to a lower-carbon economy, because it is

cleaner burning than coal and oil. Natural gas combustion emits about one-half less carbon

dioxide than coal and one-quarter less than oil when consumed in a typical electric power plant,

offset somewhat by fugitive emissions.2 Fugitive emissions, which can be intentional (i.e.,

vented) or unintentional (i.e., leaked), are natural gas that is released to the atmosphere during

industry operations.3 Natural gas combustion also emits less particulate matter, sulfur dioxide,

and nitrogen oxides than coal or oil.

In recent years, the United States has become the home to the shale gas revolution,4 as improved

methods to extract natural gas from certain shale formations have significantly increased the

resource profile of the United States. This has spurred other countries to try to develop shale gas,

but progress is slow outside of North America.

If the United States continues to and other countries can bring large new volumes of natural gas

to market at a competitive price, then natural gas could play a larger role in the world’s economy.

In 2016, the United States started exporting liquefied natural gas (LNG) from the lower 48 states.

Several key factors will determine whether significant new quantities of natural gas come to

market, particularly unconventional natural gas resources.5 These factors include price, technical

capability, environmental concerns, and political considerations. Many countries, both producing

and consuming, are watching how the development of U.S. unconventional natural gas resources

evolves.

Key Points



Natural gas is likely to play a greater role in the world energy mix given its

growing resource base6 and its relatively low carbon emissions compared to other

fossil fuels.

Data in this report are 2015 figures from the BP Statistical Review of World Energy 2016 unless otherwise noted. For

global data, BP’s Statistical Review is considered an industry standard, http://www.bp.com/content/dam/bp/pdf/energyeconomics/statistical-review-2016/bp-statistical-review-of-world-energy-2016-full-report.pdf.

International Finance Corporation, Environmental, Health, and Safety Guidelines for Thermal Power Plants,

December 19, 2008, p. 8.

For additional information on emissions issues in natural gas systems, see CRS Report R42986, An Overview of Air

Quality Issues in Natural Gas Systems, by (name redacted)

International Energy Agency, World Energy Outlook 2015, 2015, p. 5.

Unconventional natural gas refers to natural gas that is not held in traditional porous rock reservoirs like limestone or

sandstone, but is trapped in other types of formations. The three most common forms of unconventional natural gas are

coalbed methane, shale gas, and tight gas. Coalbed methane refers to natural gas associated with coal seams. Shale gas

refers to natural gas trapped in shale rock, which tends to be fine-grained sedimentary rock. Tight gas refers to natural

gas trapped in impermeable and non-porous formations.

Resources (or resource base) is a broad term that include reserves (see below) and natural gas less likely to be

produced. Resources are not subject to today’s technology or price constraints as reserves are and may be produced

sometime in the future.

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Natural Gas: A Key Part of the Global Energy Mix



The world used 122,442 billion cubic feet (bcf) of natural gas in 2015, of which

the United States consumed over 27,463 bcf,7 or about 23% (the most of any

country).

World natural gas consumption grew by 1.7% in 2015, which was below the 10year average of 2.3%; U.S. consumption grew by 3%.8

U.S. unconventional natural gas reserves9 and production, particularly shale gas,

have grown rapidly in recent years. According to the latest data, shale gas made

up 51% of proved U.S. natural gas reserves10 and accounts for 56% of dry natural

gas production.11

The new shale gas resources have changed the U.S. natural gas position from a

net importer to a potential net exporter.

Global trade in natural gas is increasing and new players are entering on both the

supply side and the import side, making the global gas market more integrated.

Natural Gas Consumption

Key Global Consumers

In 2015, the world consumed about 122,442 bcf of natural gas12—23.8% of total global primary

energy consumption, placing it third behind oil and coal. The United States was the world’s

largest consumer of natural gas, accounting for 27,463 bcf, or 22.8%, of global consumption (see

Figure 1).13

Russia is the second-largest consumer of natural gas, using 13,820 bcf in 2015.14 Natural gas

accounted for 53% of Russia’s total primary energy consumption, ranking it above oil and coal.15

However, natural gas consumption has declined overall in Russia, decreasing 8% between 2011

and 2015,16 due to a weak economic environment.17

Global consumption of natural gas grew at 1.7%, which was below the 10-year average of 2.3%.

The United States was one of three countries with the largest consumption growth, at 3%, while

also contributing the largest growth in absolute terms and accounting for almost 40% of the total

BP Statistical Review of World Energy 2016, p. 23.

BP Statistical Review of World Energy 2016, p. 4.

Reserves is an industry term used to define the likelihood that natural gas resources can be produced using current

technology and at today’s prices, according to the Society of Petroleum Engineers and the World Petroleum Congress’s

definition.

U.S. Energy Information Administration, “U.S. Crude Oil and Natural Gas Proved Reserves, 2014,” November 2015,

p. 15.

U.S. Energy Information Administration, “Marcellus, Utica Provide 85% of U.S. Shale Gas Production Growth

Since Start of 2012,” July 28, 2015, https://www.eia.gov/todayinenergy/detail.cfm?id=22252.

BP Statistical Review of World Energy 2016, p. 23.

Ibid.

“BP Statistical Review 2016—Russia’s Energy Market in 2015,” 2016.

BP Statistical Review of World Energy 2016, p. 23.

“BP Statistical Review 2016—Russia’s Energy Market in 2015,” 2016.

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Natural Gas: A Key Part of the Global Energy Mix

growth. Iran and China also experienced increased natural gas consumption, at 6.2% and 4.7%,

respectively.

China is the most populated country in the world and has a growing economy, resulting in the

country being one of the largest global energy consumers. China accounts for almost half of the

world’s total coal consumption, and while the use of natural gas has increased over the past 10

years it remains a small percentage of China’s energy consumption, at about 5%.18 China

continues to seek increased energy security by expanding natural gas imports through pipelines

and as LNG.

Iran holds the world’s second-largest natural gas reserves; however, its energy sector has

stagnated in the past few years due to international sanctions and a lack of foreign investment and

financing. Iran has a thriving domestic energy demand that has increased 50% since 2004.19 The

majority of Iran’s natural gas production is consumed domestically, with natural gas comprising

60% of its total primary energy consumption in 2014. The lifting of international sanctions began

in early 2016 following the implementation of the Joint Comprehensive Plan of Action. Major

discussion points for policymakers in light of the lifting of sanctions may be Iran’s capacity for

natural gas production and its role in the global energy market.

Figure 1. Global Natural Gas Consumption

Source: BP Statistical Review of World Energy 2016, p. 23.

Note: Units = billion cubic feet (bcf).

U.S. Consumption

In 2015, the United States consumed 27,463 bcf of natural gas, making up nearly 23% of total

global consumption. The United States is the largest consumer overall of natural gas, and the

second-largest consumer overall of energy in the world.

For additional information on China’s natural gas use, see CRS Report R44483, China’s Natural Gas: Uncertainty

for Markets, by (name redacted), (name redacted), and (name redacted)

U.S. Energy Information Administration, “Iran,” June 19, 2015, http://www.eia.gov/beta/international/

analysis_includes/countries_long/Iran/iran.pdf.

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Electric power generation made up 35% of U.S. natural gas consumption in 2015; industrial use

accounted for 27%, residential use for 17%, and commercial use for 12%.20 There is a noted rise

in the use of natural gas for electric power generation, which can be attributed to low natural gas

prices due to the abundance of domestic gas resources, and to policies that promote the use of

fuels with lower emissions. Demand for natural gas for power generation has more than doubled

since 200021 and is expected to grow by 40% by 2040.22

The U.S. industrial sector increased its consumption of natural gas by 10% between 2010 and

2015.23 As the United States continues to expand its growing resource base, the industrial sector

will see a wider array of fuel and feedstock choices, and manufacturing industries such as bulk or

primary metals could also experience further growth.24

Natural Gas Supply and Trade

Natural Gas Reserves Growing

Global proved natural gas reserves—natural gas that has been discovered and can be expected to

be technically and economically produced—amounted to 6,599,400 bcf (or 6,599 trillion cubic

feet (tcf)) in 2015, which correlates to a 53-year supply at current production levels (see Figure

2).25 New reserves are developed every year as existing reserves are consumed. Global natural

gas reserves have grown about 19% since 2005, demonstrating the success of exploration and

improved recovery techniques.26 Of the top 10 reserve holding companies all are majority owned

by their respective governments (see Appendix F).

U.S. Energy Information Administration, “How Much Natural Gas Is Consumed in the United States?,” April 26,

2016, https://www.eia.gov/tools/faqs/faq.cfm?id=50&t=8.

U.S. Energy Information Administration, Annual Energy Outlook 2015, 2015, p. 24.

Ibid., p. 25.

U.S. Energy Information Administration, “Natural Gas Consumption by End Use,” May 31, 2016,

https://www.eia.gov/dnav/ng/ng_cons_sum_dcu_nus_a.htm.

U.S. Energy Information Administration, Annual Energy Outlook 2015, 2015, p. ES-6.

BP Statistical Review of World Energy 2016, p. 21.

Production has increased along with the addition to reserves, which is why the reserves-to-production ratio has

stayed constant.

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Natural Gas: A Key Part of the Global Energy Mix

Figure 2. Global Natural Gas Reserves

Source: BP Statistical Review of World Energy 2016, p. 20.

Note: Units = billion cubic feet (bcf).

Globally, over half of the world’s proven natural gas reserves are controlled by the top 10

government-owned companies, with all but one being 100% state-owned. Russia’s Gazprom is

majority-owned by the state and acts as an arm of the government. Iran’s National Iranian Oil

Company is the single largest reserve holder of natural gas.

In 2015, U.S. natural gas reserves were 368,700 bcf, about 5.6% of total world reserves.27 The

development of shale gas has been a huge driver behind the increase in U.S. natural gas resources

(see Figure 3); in 2014, shale made up 51% of proven natural gas reserves.28

BP Statistical Review of World Energy 2016, p. 20.

U.S. Energy Information Administration, “U.S. Crude Oil and Natural Gas Proved Reserves, 2014,” November 2015,

p.15.

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Figure 3. Annual Global Reserves and Production

Source: BP Statistical Review of World Energy 2016.

Note: Units = billion cubic feet (bcf)

Production

Global natural gas production in 2015 grew by 2.2%, which was below the 10-year average of

2.4%. Growth was below average in all regions except North America, Africa, and Asia Pacific.

U.S. natural gas production accounted for 22% of total global production in 2015.

Between 2005 and 2015, total natural gas production in the United States increased 50%.29 In

2015, the United States produced 27,086 bcf of natural gas, an increase from 25,716 bcf in 2014.

The United States had the world’s largest production increase, 5.4% (see Figure 4).30 The

increase in natural gas production can be attributed to the development of unconventional

resources, specifically in the Marcellus and Utica shale formations, which have accounted for

85% of the increase in natural gas production since 2012.31

Overall, U.S. natural gas production is continually rising despite low prices. Between 2005 and

2015, production increased over 65%.32

By 2040, shale gas production is projected to increase 73% to 19.6 tcf, leading to a 45% overall

increase in total U.S. natural gas production, from 24.4 tcf to 35.5 tcf.33

BP Statistical Review of World Energy 2016, p. 22.

Ibid.

U.S. Energy Information Administration, “Marcellus, Utica Provide 85% of U.S. Shale Gas Production Growth since

Start of 2012,” July 28, 2015, https://www.eia.gov/todayinenergy/detail.cfm?id=22252.

U.S. Energy Information Administration, “U.S. Dry Natural Gas Production,” May 31, 2016, https://www.eia.gov/

dnav/ng/hist/n9070us2A.htm.

U.S. Energy Information Administration, Annual Energy Outlook 2015, 2015, p. 20.

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Figure 4. Global Natural Gas Production

Source: BP Statistical Review of World Energy 2015, p. 22.

Note: Units = billion cubic feet (bcf).

Liquefied Natural Gas

Liquefied natural gas (LNG) is natural gas that has been cooled to a liquid state, making it 600

times smaller in volume.34 In its liquid form, natural gas can be shipped to global markets on

tankers and received at LNG import terminals. LNG is becoming more prevalent in the global gas

trade as new gas supplies are introduced to the market, further integrating regional gas markets. 35

In 2015, LNG trade increased 1.8%, and the share of LNG in the global gas trade was 33%. In

response to the increase in LNG trade, many countries are looking to expand their LNG export

capacity. In 2016, Australia (in January) and the United States (in February) from the lower 48

launched their first shipments of LNG.

In the past decade, the United States prepared to increase imports of LNG based on forecasts of

growing consumption, and began constructing LNG import terminals. However, the rise in prices

gave the industry incentives to bring more domestic gas to market, reducing the need to use

import terminals. Due to the abundance of domestic natural gas, there has been a push for

modification and expansion of existing LNG terminals in order to expand U.S. export capacity,

which requires authorization from the Department of Energy and the Federal Energy Regulatory

Commission (FERC).36

U.S. Energy Information Administration, “What Is LNG?,” May 10, 2016, https://www.eia.gov/energyexplained/

index.cfm?page=natural_gas_lng.

Bud Coote, “Surging Liquefied Natural Gas Trade,” Atlantic Council, January 2016, p. 4.

For additional information on U.S. LNG exports, see CRS Report R42074, U.S. Natural Gas Exports: New

Opportunities, Uncertain Outcomes, by (name redacted) et al., U.S. Natural Gas Exports: New Opportunities, Uncertain

Outcomes, by (name redacted) et al.

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U.S. Development and Growth

The U.S. natural gas market is in a period of transition. Technologies such as hydraulic fracturing

and horizontal drilling have expanded the domestic natural gas supply, making possible the

development of unconventional natural gas resources found in shale, coal seams, and tight lowerpermeability rock formations.37 Improved efficiency has lowered production costs, making shale

gas economically competitive at almost any price.

Production has shifted away from the Gulf of Mexico to regions where sources of conventional

natural gas are not traditionally found. (See Figure 5.) For instance, the Marcellus and Utica

Basins are expansive shale resources located in the East and Northeast (West Virginia,

Pennsylvania, New York, and Ohio). The location of these basins impacts the transportation of

natural gas, as there is a reduced need for natural gas from the Rockies or Gulf Coast. The

decrease in demand for gas from these areas and an increase in production from shale plays such

as Marcellus have reduced prices and the number of imports needed from Canada and

elsewhere.38 Increased production in the future is expected from the Marcellus, Eagle Ford,

Anadarko, Utica, and Haynesville Basins.39

Because of the development in supply, the United States has gone from being a net importer of

natural gas to being a projected net exporter by 2017.40 The first LNG shipments from the lower48 occurred in February 2016 from the Sabine Pass LNG Terminal in Louisiana to Brazil, India,

and the United Arab Emirates. On June 26, 2016, the Panama Canal reopened for commercial

business, after undergoing construction for an additional ship traffic lane. The newly expanded

canal eliminates about 10 days in transit time from the U.S. Gulf of Mexico to Asian markets,

thus offering a potential shipping route for U.S. LNG. However, only 10% of LNG carriers are

small enough to fit the canal; no LNG transits have been scheduled through the canal.41

The development in supply has placed the United States in a strategic position that may prove

advantageous in the global natural gas market. However, this also raises questions for

policymakers regarding the effects of the export of U.S. natural gas on domestic gas prices and

the overall economy. Furthermore, questions remain about the size of U.S. shale gas resources;

the price level required to sustain development; and whether there are technical, environmental,

or political factors that might limit development.

The use and disposition of water in the industry process of hydraulic fracturing42 is one of the

main issues facing companies and regulators. As U.S. natural gas production continues to grow,

this practice has raised concerns over the quality and quantity of drinking water in areas situated

near hydraulic fracturing, the competition for other water users, and the disposal of wastewater.

In 2010, the Environmental Protection Agency (EPA) announced that it would undertake a study

Federal Energy Regulatory Commission, “Energy Primer: A Handbook of Energy Market Basics,” July 2015, p. 10.

Ibid., p. 16.

The White House, The Quadrennial Energy Review, April 2015, pp. NG-6, http://energy.gov/sites/prod/files/2015/

09/f26/QER_AppendixB_NaturalGas.pdf.

U.S. Energy Information Administration, Annual Energy Outlook 2015, 2015, p. ES-1.

Jenny Mandel, “Panama Canal: They Built It. Will the LNG Tankers Come?” EnergyWire, June 23, 2016.

http://www.eenews.net/energywire/2016/06/23/stories/1060039295.

Hydraulic fracturing is an industry practice of pumping water and proppant, a granular material used to hold open

fractures, into wells to improve recovery of natural gas. For additional information on hydraulic fracturing, see

Appendix B of CRS Report R42032, The Bakken Formation: Leading Unconventional Oil Development, by (name re

dacted) et al.

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Natural Gas: A Key Part of the Global Energy Mix

to assess any impact hydraulic fracturing might have on drinking water.43 A final report has not

been released.44

There is concern over deep-well injection and human-caused earthquakes. The wastewater

produced from horizontal drilling and hydraulic fracturing is typically disposed through deepwell injection, in which the wastewater is injected into deep geologic strata. The concern is that

deep-well injection may be linked to human-induced earthquakes, as the number of earthquakes

of magnitude 3.0 or greater has increased.45

Emissions from the natural gas sector and the impact on human health is also a concern;

specifically, methane emissions. As the primary component of natural gas, methane is a precursor

to smog and a potent greenhouse gas.46 While state and local authorities regulate natural gas

systems, in 2012 the EPA established national minimum air standards, or New Source

Performance Standards (NSPS), to reduce methane and volatile organic compound (VOC)

emissions in the natural gas sector. In May 2016, the EPA updated the 2012 NSPS to include

additional equipment in the gas production chain.47 The NSPS include natural gas well sites,

natural gas processing plants, and natural gas compressor stations.48 Federal standards for

methane emissions do not cover all sources of methane, such as offshore sources or coalbed

methane production facilities. As the production of natural gas continues to expand in the United

States, the issue of methane as an air pollutant may be a significant one for policymakers.

In its FY2010 Appropriations Committee Conference Report, Congress directed the EPA to study the relationship

between hydraulic fracturing and drinking water, P.L. 111-88, H.Rept. 111-316, see Title II—Environmental Protection

Agency Science and Technology.

For additional information on hydraulic fracturing and drinking water issues, see CRS Report R41760, Hydraulic

Fracturing and Safe Drinking Water Act Regulatory Issues, by (name redacted) and (name redacted)

For additional information on human-induced earthquakes and deep-well injection, see CRS Report R43836, HumanInduced Earthquakes from Deep-Well Injection: A Brief Overview, by (name redacted) and (name redacted)

Environmental Protection Agency, “Fact Sheet: EPA’s Strategy for Reducing Methane and Ozone-Forming Pollution

from the Oil and Natural Gas Industry,” January 14, 2015, https://yosemite.epa.gov/opa/admpress.nsf/0/

BA7961BF631C87BF85257DCD00526FF7.

Environmental Protection Agency, “EPA’s Actions to Reduce Methane Emissions from the Oil and Natural Gas

Industry: Final Rules and Draft Information Collection Request,” 2016, https://www3.epa.gov/airquality/oilandgas/

may2016/nsps-overview-fs.pdf.

Environmental Protection Agency, “Sources Covered by the 2012 New Source Performance Standards (NSPS) for

VOCs and the 2016 NSPS for Methane and VOCs, by Site,” May 12, 2016, https://www3.epa.gov/airquality/oilandgas/

may2016/nsps-table.pdf.

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Figure 5. U.S. Natural Gas Network

Source: Created by CRS using data from Platt’s 2016 and Esri 2014.

Note: Hawaii is not included, as it does not produce natural gas or possess proved natural gas reserves.

CRS-10

Natural Gas: A Key Part of the Global Energy Mix

Global Gas Market Becoming More Integrated

Although most natural gas is consumed in the country where it is produced, global and regional

markets are becoming more integrated (see Figure 6). About 30% of natural gas is traded

internationally, mostly within regional markets, and the amount of natural gas traded is

increasing. Natural gas is transported primarily in two ways: by pipeline, and as a liquid in

tankers. Pipelines transport gas between two fixed points, while LNG provides flexibility in the

final destination. Global LNG trade increased by 1.8% in 2015, and LNG’s share of the global

gas trade was 33%.49

Traditionally, natural gas is sold under long-term contracts indexed to oil prices, except in the

United States and a few other places where natural gas prices are market-based.50 U.S. LNG

exports have placed pressure on other countries to delink their gas exports from oil-indexed

prices. Almost all natural gas that is traded internationally is under long-term contracts, usually

20 years in length, whether it is by pipeline or as LNG. This is primarily because natural gas

transportation is expensive and long-term contracts are needed to finance construction of the

transport facilities. Sometimes LNG consumers do not require the entire amount of natural gas in

their contracts. LNG producers can sell the excess to other consumers on a one-time or short-term

basis (e.g., sell it on “spot”). The spot market for natural gas is growing.

Russia is the world’s largest natural gas exporter, primarily through its massive pipeline network

to Europe. Russia opened its first LNG export terminal in 2009, primarily targeting the Asian

market, to give it flexibility in its exports. Qatar is the leading exporter of LNG, accounting for

31% of the world LNG trade in 2015, the majority of which goes to Asia and Europe. Europe is

the largest importing region of natural gas, receiving most of its imports by pipeline from Russia,

Norway, and Algeria; however, recent developments regarding Russia and the Ukraine have

pushed the European Union to consider more secure sources of natural gas.51 Asia, the most

import-dependent region, relies mostly on LNG; however, China has become more reliant on

imported gas via pipeline, from Kazakhstan, Myanmar, and Turkmenistan. China has been

Turkmenistan’s primary importer of natural gas, with more than 70% of Turkmenistan’s exports

going to China in 2015.

Currently, the United States and Canada have an extensively integrated pipeline system. Canada

and Mexico are the only recipients of U.S. natural gas by pipeline. Exports are expected to

increase to Mexico, from 1 tcf in 2015 to almost 1.5 tcf in 2040.52 Meanwhile, exports to Canada

are projected to slightly rise from 0.7 tcf to 0.75 tcf, over the same time period.

BP Statistical Review of World Energy 2016, p. 28.

“Step On It,” The Economist, January 30, 2016.

For additional information on Europe and natural gas, see CRS Report R42405, Europe’s Energy Security: Options

and Challenges to Natural Gas Supply Diversification, coordinated by (name redacted).

U.S. Energy Information Administration, Annual Energy Outlook 2015, 2015, p. 22.

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Figure 6. Global Natural Gas Trade, 2015

Source: BP Statistical Review of World Energy, 2016, p. 28.

U.S. LNG Exports

U.S. LNG prices are market-based, resulting in a price differential that may create an economic

incentive for the United States to export domestically produced natural gas. In February 2016, the

first cargo of U.S. LNG was shipped from the Sabine Pass Liquefaction export terminal in

Louisiana to Brazil.

The export of U.S. LNG has been the center of debate for policymakers, with questions focusing

on how U.S. natural gas may affect the global market and geopolitics, as well as domestic prices.

As of April 2016, there is one LNG export terminal in operation and several LNG export terminal

projects under construction in the lower-48 states:



Additional LNG “trains” at Sabine Pass Liquefaction in Sabine, LA;

Dominion-Cove Point LNG in Cove Point, MD;

Cameron LNG in Hackberry, LA;

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

Freeport LNG Expansion/FLNG Liquefaction in Freeport, TX; and

Cheniere Marketing-Corpus Christi LNG in Corpus Christi, TX.53

The Kenai LNG terminal, which began operations in 1969 in Alaska, continues to operate,

primarily supplying LNG to Japan.

Also, in February 2016, the United States began shipping quantities of LNG to Barbados from

Miami, FL. The LNG was shipped to Barbados in cryogenic containers instead of a specialized

tanker ship. Cryogenic containers are comparable to shipping containers and can be transported

over land and loaded onto ships. The natural gas from these shipments has been sold at a higher

price than the Sabine Pass exports, ranging from $10 per MBtus to almost $16 per MBtus. In

2014, a relatively small amount of LNG was shipped to Honolulu, HI, using this method, the first

time to the state.

Alaska has great potential to become a major source of natural gas. The United States Geological

Survey (USGS) estimates that conventional natural gas resources on Alaska’s North Slope may

potentially exceed 200,000 bcf,54 more than eight times the total amount of current U.S. gas

consumption. However, the majority of gas produced in Alaska is used for reinjection to boost oil

production and is not brought to market. Alaskan officials have pushed for a pipeline to be

constructed in order to sell natural gas internationally as LNG, but as of 2016 this is considered

commercially challenging.

Future Developments and Trends, Global and Domestic

In February 2016, the Trans-Pacific Partnership (TPP) free trade agreement (FTA) was signed

between the United States and Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam,

Malaysia, Mexico, Canada, and Japan.55 The TPP may have an impact on the U.S. natural gas

trade, as permits for natural gas exports to countries with which the United States has an FTA

receive expedited approval under the Natural Gas Act. Thus membership in the TPP would, in

effect, grant free trade status to key consumers of LNG. A trade agreement called the

Transatlantic Trade and Investment Partnership (TTIP) has been proposed between the United

States and the EU, with the aim of promoting trade and economic growth. The areas the TTIP

addresses include market access, regulation, and rules and principles for cooperation, and it

would, in effect, also give free trade status to signatories regarding natural gas. Neither TPP nor

TTIP has been ratified.

In December 2015, the United Nations Climate Change Conference, or COP-21, was held in

Paris; the objective of the conference was to address climate change and come to a universal

agreement on steps needed to mitigate it. The conference resulted in the Paris Agreement, which

establishes governing measures regarding emissions mitigations, adaptation, and finance. The

United States signed the agreement on April 22, 2016.

It is noteworthy that U.S. infrastructure expansion, maintenance, and construction may not be

able to keep up with its growing supplies; 50% of gas transmission and gathering pipelines were

built in the 1950s and 1960s. It is estimated that investment in natural gas interstate pipelines may

FERC, “North American LNG Import/Export Terminals Approved,” April 4, 2016, https://www.ferc.gov/industries/

gas/indus-act/lng/lng-approved.pdf.

Emil D. Attanasi and Philip A. Freeman, “Economics of Undiscovered Oil and Gas in the North Slope of Alaska:

Economic Update and Synthesis,” U.S Geological Survey, 2009.

For additional information on the Trans-Pacific Partnership, see CRS Report R44489, The Trans-Pacific Partnership

(TPP): Key Provisions and Issues for Congress, coordinated by (name redacted) and (name redacted) .

Congressional Research Service

Natural Gas: A Key Part of the Global Energy Mix

range from $2.6 billion to $3.5 billion annually between 2015 and 2030.56 This amount of

investment may prove difficult to raise given other infrastructure demands.

Other issues that may affect both the domestic and international markets will be oil prices; new

infrastructure; technological development; increased interdependence between the gas and

electric sectors; and climate and environmental policy.57

Gas Exporting Countries Forum Still Ineffective

The Gas Exporting Countries Forum (GECF), also referred to as gas OPEC (Organization of the

Petroleum Exporting Countries), is a nascent cartel organization based in Qatar comprising 11

natural gas producing countries (Table 1). The GECF was formed in 2001, signing an organizing

charter in 2008. Together, the countries account for 62% of global natural gas reserves, 57% of

the LNG trade, and 39% of the pipeline gas trade. Given the U.S. resource base of natural gas, it

is highly unlikely that the GECF could significantly affect U.S. natural gas consumption within

the next five years or, most likely, longer. Canada, by far the largest source of imported natural

gas to the United States, is not a member of the GECF. Europe is probably most vulnerable to

possible cartel control, as more than half its imports come from cartel members, particularly

Russia and Algeria. Nevertheless, the current structure of natural gas markets (i.e., long-term

contracts and pipelines connecting individual sellers to specific buyers) is not conducive to

supply or price manipulation, and significant changes would need to be made to how natural gas

is brought to market and sold before the GECF could have influence.

Table 1. GECF Natural Gas Statistics 2015

units = billion cubic feet

Reserves

Production

LNG Exports

Pipeline

Exports

Total Exports

Algeria*

159,100

2,930

571

881

1,452

Bolivia

9,900

736

571

♯

65,200

1,609

Equatorial

Guinea♯

2,121

217

176

1,201,400

6,794

295

53,100

450

228

Nigeria*

180,500

1,767

972

993

Qatar*

866,200

6,405

3,755

698

4,453

Russia

1,139,600

20,238

513

6,813

7,326

Trinidad &

Tobago

11,500

1,399

601

UAE*♯

215,100

1,968

270

132

402

Egypt

Iran*

Libya*

♯

Department of Energy, Quadrennial Energy Review: Energy Transmission, Storage, and Distribution Infrastructure,

April 2015, p.S-5.

Department of Energy, Quadrennial Energy Review: Appendix B, April 2015, p. NG-2.

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Pipeline

Exports

Reserves

Production

LNG Exports

Venezuela*

198,400

1,145

TOTAL GECF

4,102,121

45,659

6,858

9,651

16,509

62%

37%

57%

39%

45%

% of World

Total Exports

Sources: BP Statistical Review of World Energy 2016 and Cedigaz statistical databases.

Notes: * denotes a member of OPEC, ♯ denotes some data from 2014.

Production Widespread

Overall, global natural gas production in 2015 grew by 2.2%, which was below the 10-year

average of 2.4%. The United States surpassed Russia as the world’s largest natural gas producer

in 2009. The success of the United States to date and the potential for further shale gas

development has initiated an evaluation by most countries of their potential natural gas resources.

However, outside of Canada, whose shale gas industry is developing alongside that of the United

States, it is unlikely that significant commercial production will be achieved before the end of the

decade in another country. Most countries looking at shale gas currently do not have the data,

technology, or equipment required to evaluate their shale gas resources, let alone successfully

exploit them.

Natural Gas Prices Remain Low

The price of natural gas in the United States, Canada, and the United Kingdom is set by the

market, with centers or hubs providing buyers and sellers with competitive price data (see Figure

7). The most well-known hub in the United States is the Henry Hub in Erath, LA, where multiple

interstate and intrastate natural gas pipelines interconnect. There are various prices for natural gas

in the United States depending on the category of consumer. Residential consumers pay the

highest price, followed by various commercial users.58

By 2040, the Henry Hub natural gas spot price is projected by EIA to rise to $7.85 per million

British thermal units (MBtu) due to increased domestic and international demand. This would

require an increase in the number of well completions in order to meet higher production levels.59

EIA’s projection is based on existing information and does not account for significant changes in

the market, such as new technologies, regulations, or discoveries.

Outside the United States, Canada, and the United Kingdom, almost all wholesale natural gas is

sold under long-term contracts. The price of natural gas within these contracts is commonly

determined by a formula that links the natural gas price to the price of crude oil or some oil-based

product. Although in many markets natural gas no longer competes as a substitute against oilbased products, this vestige of the contracts has remained. Over the last several years, the

disparity between contract prices and spot prices has raised pressure on gas producers to do away

with this concept. However, the recent fall in world oil prices may suspend this debate.

Nevertheless, some producers have started incorporating a spot price for natural gas into their

pricing formulas. The price differences reflect the regional nature of the natural gas industry and

EIA tracks gas prices at the well (which is the lowest price), industrial prices for manufacturing and other uses,

commercial prices for nonmanufacturing activities, electric power, and residential use.

U.S. Energy Information Administration, Annual Energy Outlook 2015, 2015, p. 6.

Congressional Research Service

Natural Gas: A Key Part of the Global Energy Mix

the disparity between contract and spot prices. Asia, in particular, has been willing to pay high

prices to secure its natural gas supplies.

Figure 7. Global Natural Gas Prices

U.S. dollars per million British thermal unit (U.S.$/MBtu)

Source: BP Statistical Review of World Energy 2016, p. 27.

Note: Contract price is a long-term price between a specific buyer and a specific seller, while the spot price is a

short-term market price.

Two other contract concepts are worth highlighting: take-or-pay clauses and destination clauses.

With a take-or-pay clause, a buyer of natural gas must pay the seller regardless of whether it

actually receives the natural gas. Typically, in contracts, buyers must purchase at least 80% of the

total volume of natural gas contracted. For example, if a contract is for 100 bcf, but the buyer

only needs 80 bcf, then that is all it pays for; but if the buyer only needs 50 bcf, it still must pay

for an additional 30 bcf even if it cannot use it. A destination clause allows a cargo to be

redirected to a different destination and buyer. Such a clause was not common until recent years

and contributes to a more efficient market.

Looking Forward

Is it time for natural gas to take center stage as the world’s primary energy source? That is the

main question confronting the natural gas industry over the next decade. The International Energy

Agency (IEA) states that natural gas is one of the fastest growing fossil fuels, with an increase in

demand of approximately 60% in 2040 over 2013;60 natural gas is a major alternative for a world

that looks to gradually decarbonize its energy system. Most of the new demand for natural gas is

projected to come from non-OECD countries, primarily China and those in the Middle East.

Nonetheless, the global landscape for energy is shifting; as North America continues to produce

unconventional gas, the rest of the world’s exploration of unconventional resources is occurring

more gradually.

China is typically a driver in global energy trends. Recently, China has decided to change its

economic model, shifting away from an industry-heavy economy to a services-focused one. This

change will require 85% less energy to generate future Chinese growth;61 consequently,

International Energy Agency, World Energy Outlook 2015, November 10, 2015, p. 195.

International Energy Agency, World Energy Outlook 2015, p. 292.

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Natural Gas: A Key Part of the Global Energy Mix

predictions are uncertain regarding China’s future in energy consumption. India, on the other

hand, is projected to be a growing contributor to global energy demand, accounting for 25% of

the rise in global energy use to 2040.62 However, meeting India’s energy demand may prove to be

a huge financial commitment—nearly $2.8 trillion. Natural gas comprises about 6% of India’s

primary energy supply, and is projected to make up less than 10% of India’s energy mix in

2040.63

Sectorally, the U.S. electric power industry leads the growth in natural gas demand due to several

factors, including relatively low prices, lower capital costs, excess natural gas generation

capacity, and competitive financing of projects. Government policies, particularly in regard to

carbon dioxide emissions, will be a key factor in determining the rate of growth of natural gas

usage. Globally, natural gas is projected to account for 28% of total world electricity generation

in 2040,64 with non-OECD countries representing 61% of this.

Natural gas production would likely need to increase to meet the rise in demand and keep prices

from dramatically rising. Production and growth is projected in every region except Europe.

Unconventional gas resources65—coal bed methane, shale gas, and tight gas—account for about

60% of growth in the global gas supply. However, outside of North America unconventional

resource development is slower and uneven. China does have policies that encourage production,

but limited water availability, geology, and population density in resource-rich areas may hinder

any attempts to fully realize its capacity.

International Energy Agency, World Energy Outlook 2015, p. 547.

International Energy Agency, World Energy Outlook 2015, p. 465.

U.S. Energy Information Administration, “International Energy Outlook 2016,” 2016, p. 82, http://www.eia.gov/

forecasts/ieo/pdf/0484(2016).pdf.

For further information, see U.S. Energy Information Administration, “Technically Recoverable Shale Oil and Shale

Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States,” June 12, 2013.

Congressional Research Service

Natural Gas: A Key Part of the Global Energy Mix

Appendix A. Global Natural Gas Consumption

(2015)

Rank

Country

Consumption (bcf)

Share of World

United States

27,463

23%

Russia

13,820

11%

China

6,965

Iran

6,749

Japan

4,003

Saudi Arabia

3,756

Canada

3,618

Mexico

2,937

Germany

2,633

UAE

2,439

United Kingdom

2,411

Italy

2,167

Thailand

1,867

India

1,786

Uzbekistan

1,783

Egypt

1,776

Argentina

1,687

Qatar

1,677

South Korea

1,596

Turkey

1,539

Rest of World

29,769

25%

Global Total

122,442

100%

Source: BP Statistical Review of World Energy 2016, p. 23.

Note: Units = billion cubic feet (bcf).

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Appendix B. Global Natural Gas Reserves (2015)

Rank

Country

Reserves (bcf)

Share of World

Iran

1,201,400

18%

Russia

1,139,600

18%

Qatar

866,200

13%

Turkmenistan

617,300

United States

368,700

Saudi Arabia

294,000

UAE

215,100

Venezuela

198,400

Nigeria

180,500

Algeria

China

Iraq

159,100

135,700

130,500

Australia

122,600

Indonesia

100,300

Canada

70,200

Norway

65,600

Egypt

65,200

Kuwait

63,000

Libya

53,100

India

52,600

Rest of World

500,300

Global Total

6,599,400

100%

Source: BP Statistical Review of World Energy 2061, p. 20.

Notes: Italics indicate GECF member. Units = billion cubic feet (bcf).

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Natural Gas: A Key Part of the Global Energy Mix

Appendix C. Global Natural Gas Production (2015)

Rank

Country

Production (bcf)

Share of World

United States

27,086

22%

Russia

20,238

16%

Iran

6,794

Qatar

6,405

Canada

5,773

China

4,870

Norway

4,135

Saudi Arabia

3,757

Algeria

2,930

Indonesia

2,649

Turkmenistan

2,556

Malaysia

2,408

Australia

2,367

Uzbekistan

2,039

UAE

1,968

Mexico

1,878

Nigeria

1,767

Egypt

1,609

Netherlands

1,519

Pakistan

1,480

Rest of World

20,677

18%

Global Total

124,913

100%

Source: BP Statistical Review of World Energy 2016, p. 22.

Notes: Italics indicate GECF member. Units = billion cubic feet (bcf). Totals may not add due to rounding.

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Natural Gas: A Key Part of the Global Energy Mix

Appendix D. U.S. Natural Gas Imports and Exports

Table D-1. U.S. Imports of Natural Gas

billion cubic feet (bcf)

Rank

Country

2010-2015

Average

2015 Imports

Share of U.S.

Imports

2015 Imports

as a Share of

U.S.

Consumption

Canada

967

2,626

97%

10%

Trinidad &

Tobago

102

<0.5%

Norway

<0.5%

Yemen

<0.5%

Mexico

<0.5%

Egypt

Nigeria

Peru

Qatar

1,173

2,718

100%

10%

TOTAL

Source: EIA’s U.S. Natural Gas Imports by Country, https://www.eia.gov/dnav/ng/ng_move_impc_s1_m.htm.

Notes: Italics indicate GECF member. The United States had imported LNG from Australia, Brunei, Indonesia,

and UAE prior to the time period examined in this table. Totals may not add due to rounding.

Table D-2. U.S. Exports of Natural Gas

billion cubic feet (bcf)

Rank

Country

2010-2015

Average

2015 Exports

2015 Share of

U.S. Exports

2015 Exports as

a Share of U.S.

Production

Mexico

649

1,054

59%

Canada

597

701

39%

Japan

<0.5%

Taiwan

<0.5%

Other

262

1,522

1,784

100%

TOTAL

Source: EIA’s U.S. Natural Gas Exports by Country, https://www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm.

Notes: The United States has exported natural gas as LNG to both Canada and Mexico in addition to its more

traditional pipeline exports. The LNG exports are incorporated into the figures above, but are negligible. 2016

U.S. LNG exports not included. Totals may not add due to rounding.

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Natural Gas: A Key Part of the Global Energy Mix

Appendix E. Global Natural Gas Exporters (2015)

Rank

Country

Pipeline

LNG

Total

Share of World

Russian Federation

6,813

512

7,325

20%

Qatar

699

3,756

4,455

12%

Norway

3,865

212

4,077

11%

Canada

2,623

United States

1,754

1,761

Algeria

883

572

1,454

Netherlands

1,433

Australia

1,405

Turkmenistan

1,345

Malaysia

1,207

Rest of World

5,440

4,271

9,711

26%

Global Total

24,855

11,942

36,797

100%

Source: BP Statistical Review of World Energy 2016, p. 29.

Notes: Italics indicate GECF member. Units = billion cubic feet (bcf). Totals may not add due to rounding.

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Natural Gas: A Key Part of the Global Energy Mix

Appendix F. Major Global Gas Companies (2014)

Rank

Company

Country

Output

(MMcf/d)

Gazprom

Russia

45,130

NIOC

Iran

16,699

Qatar Petroleum

Qatar

11,670

Exxon Mobil

United States

11,145

CNPC

China

11,017

Saudi Aramco

Saudi Arabia

10,473

Royal Dutch Shell

Netherlands/UK

9,259

Sonatrach

Algeria

7,649

7,100

Petronas

Malaysia

6,310

Source: “Top 50 and Rankings in Six Operational Criteria,” Petroleum Intelligence Weekly 54, no. 46 (November

16, 2015): Special Supplement, pp. 2-3. Italics = majority state owned.

Rank

Company

Country

Reserves (bcf)

NIOC

Iran

1,201,405

Gazprom

Russia

667,268

Qatar Petroleum

Qatar

632,726

Saudi Aramco

Saudi Arabia

288,400

PDV

Venezuela

198,368

Sonatrach

Algeria

159,100

INOC

Iraq

126,700

Adnoc

UAE

121,260

CNPC

China

109,498

NNPC

Nigeria

106,262

Source: “Top 50 and Rankings in Six Operational Criteria,” Petroleum Intelligence Weekly 54, no. 46 (November

16, 2015): Special Supplement, pp. 2-3. Italics = majority state owned.

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Natural Gas: A Key Part of the Global Energy Mix

Appendix G. Select U.S. Statutes Related to

Natural Gas

Act

U.S. Code Citation

Purpose

Natural Gas Act

15 U.S.C. §717b et seq.

Governs siting of interstate natural gas pipelines

and interstate transmission of natural gas. Also

gives authority to DOE for imports and exports

of liquefied natural gas.

Natural Gas Wellhead Decontrol

Act of 1989

15 U.S.C. §3301 et seq.

Removed remaining price ceilings on natural gas

sales.

Mineral Leasing Act of 1920

30 U.S.C. §181 et seq.

Governs leasing activity on federal lands, including

leases for purposes of oil and natural gas

exploration and production.

Outer Continental Shelf Lands

Act

43 U.S.C. §1331 et seq.

Governs activities on Outer Continental Shelf,

including leasing for purposes of oil and natural

gas exploration and production.

Natural Gas Pipeline Safety Act of

1968

49 U.S.C. §60101 et seq.

Authorizes DOT to regulate pipeline

transportation of natural gas and other gases as

well as the transportation and storage of LNG.

Natural Gas Policy Act of 1978

15 U.S.C. §3301 et seq.

Gave FERC authority over intrastate and

interstate natural gas production. The act also set

price ceilings for natural gas.

Homeland Security Act of 2002

6 U.S.C. §101 et seq.

Incorporated the Transportation Security

Administration (TSA), which has jurisdiction for

natural gas pipeline security, into the Department

of Homeland Security.

The Clean Air Act of 1970

42 U.S.C. §7401 et seq.

Comprehensive federal law that regulates air

emissions from stationary and mobile sources.

Authorizes the EPA to establish National

Ambient Air Quality Standards (NAAQS) to

protect public health and welfare, and to regulate

emissions of hazardous air pollutants.

PIPES Act of 2016 (Protecting our

Infrastructure of Pipelines and

Enhancing Safety Act of 2016)

49 U.S.C. §60101 et seq.

Reauthorizes the Pipeline and Hazardous

Materials Safety Administration’s (PHMSA’s) oil

and gas pipeline programs through 2019. Gives

Secretary of Transportation the power to quickly

issue emergency orders for the pipeline industry.

Requires the PMHSA to develop national

regulations for the construction and operation of

underground natural gas storage facilities, and

ensures that the PMHSA completes directives set

in previous pipeline safety bill in 2011.

Source: Compiled by the Congressional Research Service (CRS).

Notes: The above list is not exhaustive, but highlights important statutes that relate to natural gas. Certain

sections of the acts referenced may be codified in other parts of the U.S. Code.

Congressional Research Service

Natural Gas: A Key Part of the Global Energy Mix

Author Contact Information

(name redacted)

Specialist in Energy Policy

r[ edacted]@crs.loc.gov, 7-....

Acknowledgments

Hannah Gagarin, an intern with the Energy and Minerals section of CRS, greatly contributed to the

research, drafting, and completion of this report.

Congressional Research Service

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