Forecast For Compression — Uncertainty Abounds

Data from the US Energy Information Administration (EIA) show that in 2018, more than 90% of the natural gas consumed in the United States was produced domestically. US natural gas production has increased in the past decade thanks to the continued development of the nation’s shale gas. In fact, shale gas now makes up a higher percentage of total US natural gas production than natural gas produced from both traditional natural gas wells and crude oil wells as associated natural gas, according to the EIA. As US natural gas production has increased, exports of natural gas have increased. In 2018, the United States exported a record of nearly 4 Tcf (1.1 x 1011 m3) of natural gas, either by pipeline to Mexico and Canada or shipped overseas as liquefied natural gas (LNG). EIA data show that natural gas imports were 3 Tcf (8.4 x 1010 m3) last year, the lowest since 2015.

The EIA forecasts that US dry natural gas production will average 91 Bcfd (2.5 x 109 m3/d) in 2019, up 7.6 Bcfd (215 x 106 m3/d) from 2018. The EIA expects monthly average natural gas production to grow in late 2019 and then decline slightly during the first quarter of as the lagged effect of low prices in the second half of 2019 reduces natural gas-directed drilling. However, the EIA forecasts that growth will resume in the second quarter of 2020, and natural gas production in 2020 will average 92.5 Bcfd (2.6 x 109 m3/d).

While this is good news for those doing business in gas compression, geopolitical factors are beginning to take their toll. Companies are feeling the effects of an ongoing trade war, a volatile US economy, and an increase in overall anxiety.

Cummins has changed its outlook. During the company’s second quarter earnings call, Tom Linebarger, chair and CEO of Cummins, said, “We now anticipate sales in North America will decline by 75%, compared to our 60% down expectation three months ago, with lower demand for new equipment in the US Permian Basin and reduced demand for engine rebuilds.”

The Columbus, Indiana, USA, engine manufacturer isn’t alone.

“The outlook in North America remains difficult to predict. While we expect our production-oriented product lines to grow, we expect overall revenues in North America to be down slightly in the second half,” said Brian Worrell, chief financial officer at Baker Hughes, a GE Company BHGE. North America and the US land market specifically are very transactional and remain hard to predict even six to nine months out. We share the view that capital expenditure across North American operators will be down in 2019.”


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This article appears in the September 2019 issue of Gas Compression Magazine. You can read the entire article right now by clicking the link above.


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