EBF 301
Global Finance for the Earth, Energy, and Materials Industries

Natural Gas

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Extracyed natural gas is mainly composed of methane with small amounts of hydrocarbon gas liquids (HGL) and nonhydrocarbon gases. After natural gas is produced, it has to be processed and impurities have to be removed to meet the pipeline standards and become marketable. The infrastructure of natural gas delivery (before distribution) can be divided into three main categories:

  1. Processing: removing and separating other hydrocarbons, contaminant, and impurities.
  2. Transportation: transporting the processed natural gas with the pipeline.  
  3. Storage: storing natural gas into underground storage sites (depleted natural gas or oil fields, salt caverns, and aquifers) for high demand periods.

In 2016, U.S. dry natural gas production was equal to about 97% of U.S. natural gas consumption. In this year five states produced about 65% of total U.S. dry natural gas:

  • Texas: 24%
  • Pennsylvania: 20%
  • Oklahoma: 9%
  • Louisiana: 6%
  • Wyoming: 5%


Natural gas is used in more than 50% of US homes for space heating and hot water. In addition, it is the first largest source of energy for electrical generation at the moment (2016), see figure 4, and is widely used in commercial and industrial sectors. Figure 5 illustrates the break-down by consuming sector. 

Figure 4: U.S. electricity generation at utility-scale facilities in 2016

As shown in figure 5, power generation and industrial sectors have the largest natural gas consumption.

Break-out of natural gas use by consuming sector; pie chart. Industrial: 32%; Electric Generation: 24%; Residential: 22%; Commercial: 14%; Other: 8%
Figure 5: U.S. Natural Gas Consumption by Sector, 2015
Sources: EIA

Domestic production in the US (see figure 6) has grown dramatically in recent years due to the same advanced technologies that have allowed crude oil production to increase: “3-D” seismology, horizontal drilling and new “fracking” methods. All contribute to successful recoveries from hard formations such as the new “shales.”

Figure 6: U.S. annual natural gas marketed production 1900-2016
Source: EIA

Figure 7 illustrates the growth in production of the currently active shale basins in the US. 

Figure 7: Monthly dry shale gas production (billion cubic feet per day). 
Production Growth of Active U.S. Shale Basins
Source: EIA

Canada represents the largest source of imported natural gas, with Mexico contributing a minor amount, see figure 8. Additionally, there are export points into Canada and Mexico. Figure 9, below, indicates the major import/export and, LNG import points in the US.

Break-out of natural gas use by consuming sector; pie chart. Industrial: 32%; Electric Generation: 24%; Residential: 22%; Commercial: 14%; Other: 8%
Figure 8: U.S. Natural gas imports, exports, and net imports, 1950 - 2016
Sources: EIA

Figure 9: Natural gas trade by country (1985 - 2016)
Sources: EIA