Recent Study shows U.S. End-Users have saved $1.1 trillion over the past ten years on Natural Gas

Natural Gas Savings to End Users: 2008-2018 A Technical Briefing Paper by Kleinhenz & Associates shows U.S. end-users of natural gas have saved $1.1 trillion over the past ten years due to reduced prices from increased natural gas production. Virtually all of the growth in natural gas production from 2008-2018 has come from the Shale Crescent USA (Ohio, Pennsylvania and West Virginia).

$1.1 Trillion

Recent study shows U.S. end-users have saved $1.1 Trillion over the past ten years in natural gas savings.

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The savings came from lower natural gas prices.

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The lower natural gas prices are a result of a significant increase in U.S. natural gas production.

Small outline showing Crescent on Ohio, Pennsylvania, and West Virginia indicating the Shale Crescent Area

A majority of the increased production has come from the Shale Crescent USA (Ohio, Pennsylvania and West Virginia).

Natural Gas Savings to End-users:2008-2018 A Technical Briefing Paper prepared by Kleinhenz & Associates for Shale Crescent USA and the Ohio Oil and Gas Energy Education Program (OOGEEP).

$1.1 TRILLION DOLLARS IN SAVINGS

These savings were spread out across residential, commercial, industrial, and electric power sectors. Over the ten year period, households saved approximately $4,000. Household savings were analyzed both by region and income quintile. A breakdown of costs savings by region indicated households in the cooler regions of the country experienced greater savings than warmer regions. Natural gas savings per household based on percent of income showed the lowest 20% percent realized savings of 2.7% of annual income. Stated differently, this would be similar to a 2.7% boost in income.1

Natural gas costs have a direct impact on almost all goods and services and can be considered as a master resource. When allocating the entire $1.1 trillion savings from lower natural gas costs over the last ten years from every sector to each household in America (roughly 125 million households), average annual savings equate to $900 per household per year or $9,000 of savings over the ten year period.

Bar graphing showing increased production of natural gas and the cumulative savings in trillions vs years.

Lower Natural Gas Prices

The dramatic increase in natural gas production over the past ten years has had a significant impact on energy markets, causing natural gas prices to fall. Natural gas prices using the annual average Henry Hub price have declined from $8.86 in 2008 to $3.08 in 2018,1 a 65% decrease. During the 10 years prior to 2008, natural gas prices were on a steep rise. If natural gas production had not increased, prices would have continued to rise.

Graph showing Shale Crescent USA Producers are responsible for 85% of the growth of natural gas production

NATURAL GAS PRODUCTION INCREASES FROM 2008 TO 2018

In the past 10 years, United States natural gas production has risen to record levels due to horizontal drilling. The U.S. has become the number one natural gas producing country in the world and now exceeds its previous peak of natural gas production set in the early 1970’s by 50%.2 In addition, the U.S. has transitioned from a net importer of natural gas to a net exporter of natural gas. Furthermore, U.S. natural gas production is projected to continue to increase.2

Graph showing Natural Gas Production in the US by Year

A RECENT IHS MARKIT STUDY FORECASTS THAT THE REGION WILL SUPPLY 45% OF THE U.S. NATURAL GAS PRODUCTION BY 2040.

Historically, the majority of increases in natural gas supplies has occurred in areas such as the Gulf of Mexico, Louisiana, Texas, and the Rockies. However, since 2008, that has changed. Nearly all the growth of natural gas production has come from the three states of Ohio, Pennsylvania and West Virginia (Shale Crescent USA).

In 2008, these three states produced a combined 1.5 bcf/d of natural gas production accounting for 3 percent of the U.S.’s total.2

Over the past ten years, the same three states have increased production nearly 20-fold. In 2018, Ohio, Pennsylvania, and West Virginia produced 28.0 bcf/d, of marketed natural gas production accounting for nearly one third of all U.S. natural gas production.2 A recent IHS Markit study forecasts that the region will supply 45 percent of the United States' natural gas production by 2040.3

2008 to 2018 production increases from the three states totaled 26.5 bcf/d. Pennsylvania increased 16.2 bcf/d, Ohio increased 6.1 bcf/d, and West Virginia increased 4.2 bcf/d.2 During the same ten-year period, the entire U.S. production increased roughly 31.0 bcf/d2. Shale Crescent USA is responsible for 85% of the natural gas production growth in the U.S. over the past ten years.

Shale Crescent USA extrapolated from the report titled ‘Natural Gas Savings to End-Users: 2008-2018 A Technical Briefing Paper’ a natural gas cost savings of $4,000 per residential natural gas consumer for the ten-year period. The methodology employed was as follows: When comparing 2017 to 2008, there is an average U.S. residential savings of $429 (Figure 13. Natural Gas Savings by Census Region, page 25 of full report). The total for all U.S residential savings in the year 2017 is comparable to the other nine years of the study (Table 9. Savings Based on Henry Hub Counterfactual, 2018$, page 20 of full report). The total extrapolated savings for the ten year period is therefore estimated at approximately $4,000.

VIRTUALLY ALL OF THE GROWTH IN NATURAL GAS PRODUCTION FROM 2008–2018 IS FROM SHALE CRESCENT USA

Shale Cresccent USA

  • If Ohio, Pennsylvania and West Virginia were a country, it would be the 3rd Largest natural gas producer in the world (behind only the rest of the U.S. and Russia)
  • Now produces more natural gas than Texas

The growth of natural gas production in the Shale Crescent USA region has been dramatic. The significance of this increase stands in sharp contrast to the production growth experienced in other natural gas producing states. The historically dominant natural gas producing state of Texas, increased production by 2.3 BCF/D over the last 10 years.2 The Shale Crescent USA region added 11 times that amount during the same period.

While Ohio, Pennsylvania and West Virginia are half the land mass of Texas, these three states now produce more natural gas than Texas. In fact, if Ohio, Pennsylvania and West Virginia were their own country they would be the third largest natural gas producing country in the world.4

TAKING ADVANTAGE OF THE SAVINGS

End-users have experienced $1.1 trillion in savings over the past ten years due to lower natural gas prices because of increased natural gas production. Nearly all the natural gas production increase has come from Ohio, Pennsylvania, and West Virginia (Shale Crescent USA). This increase has allowed end-users in these three states to realize a combined savings of over $90 billion in natural gas savings over the past ten years.

The natural gas production increases over the past 10 years have come primarily from the Shale Crescent USA region. In addition, a majority of the growth in natural gas production for the United States is projected to come from the Shale Crescent USA region.

Studies of the region by IHS Markit, (2018 - Benefits, Risks, and Estimated Project Cash Flows) and (2019 - Estimated Logistics Benefits of the Shale Crescent USA Region Versus the U.S. Gulf Coast for Natural Gas and LPG) conclude the 70% on north American polyethylene demand and 77% of north American polypropylene demand is within a day’s drive of the Shale Crescent USA. The IHS Markit studies forecast energy intensive industries that locate in Shale Crescent USA should experience significantly higher profits than other regions of the country due to lower natural gas and natural gas liquids prices within Shale Crescent USA.

1Kleinhenz & Associates: Natural Gas Savings to End –users: 2008-2018 A Technical Briefing Paper

2www.eia.gov/dnav/ng/hist/n9050us2a.htm

3IHS Markit: ‘Estimated Logistics Benefits of the Shale Crescent USA Region Versus the U.S. Gulf Coast for Natural Gas and LPG’

4www.shalecrescentusa.com