Natural gas infrastructure development in North America under integrated markets

The exploitation of low-cost shale gas in the Marcellus Formation, the deregulation initiatives in the U.S. and Mexico, and the emergence of natural gas as a bridging fuel to a low-carbon economy has fueled the growth of North American natural gas production, which is projected to keep growing in the mid-term to support the increasing LNG exports. Greater introduction of renewables and deeper electrification suppress both supply and demand for natural gas in the long-term. The long lead times of pipeline operation and field exploitation render the timing of natural gas abatement critical to natural gas infrastructure stakeholders. Full integration of the U.S., Canadian, and Mexican natural gas markets implies that the abatement trajectories of the three countries are tightly linked. This paper studies the development of the integrated North American natural gas markets and infrastructure under different assumptions on resource availability, technological progress, and global crude oil prices. We quantify the impact of each scenario by using the North American Natural Gas Model. Our analysis shows that cross-border U.S.-Mexico trade is more resilient under all three shocks compared to U.S.-Canada trade. Increasing Mexican production could drive the growth of the domestic Mexican market instead of reducing U.S.-Mexico trade.