Natural Gas

HeaderTable of Contents

  1. What is natural gas?
  2. How is natural gas used?
  3. How is natural gas transported?
  4. How much natural gas does the U.S. produce, consume, export, and import?
  5. How much does natural gas cost?
  6. How much does natural gas harm the environment?
    • Reserves
    • Production
    • Consumption
    • Imports
    • Exports



1.  What is natural gas?

Much like coal and oil, natural gas is formed by organic matter.  Millions of years ago the remains of plants and animals (organic matter) decayed and built up in thick layers. Over time sand and silt covered the organic matter and changed to rock, trapping the organic matter beneath the rock. Pressure and heat changed some of this organic material into coal, some into oil (petroleum), and some into natural gas — tiny bubbles of odorless gas.

Petroleum & Natural Gas Formation

The process of extracting natural gas


Geologists conduct seismic surveys that use echoes from a vibration source at the Earth’s surface (usually a vibrating pad under a truck built for this purpose) to collect information about the rocks beneath. Scientists and engineers also explore a chosen area by studying rock samples from the earth and taking measurements.


If a site looks promising drilling begins.

SeparationDid You Know - Mercaptan

Some of the gases that are produced along with methane, such as butane and propane (also known as “by-products”), are separated and cleaned at a gas processing plant. The by-products, once removed, are used in a number of ways. For example, propane can be used for cooking on gas grills.

Natural gas withdrawn from a well may contain liquid hydrocarbons and nonhydrocarbon gases. This is called “wet” natural gas. The natural gas is separated from these components near the site of the well or at a natural gas processing plant. The gas is then considered “dry” and is sent through pipelines to a local distribution company, and, ultimately, to the consumer.

Dry natural gas is also known as consumer-grade natural gas. In addition to natural gas production, the U.S. gas supply is augmented by imports, withdrawals from storage, and by supplemental gaseous fuels.

Most of the natural gas consumed in the United States is produced in the United States. Some is imported from Canada and shipped to the United States in pipelines. A small amount of natural gas is shipped to the United States as liquefied natural gas (LNG).



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2.  How is natural gas used?

Natural Gas Use, 2012

1.  Electricity - Natural gas generated approximately 25% of energy used in the United States in 2012.  The United States used 25.46 trillion cubic feet (Tcf) of natural gas in 2012.

2.  Industrial fuel - Natural gas is used as a heat source to produce steel, glass, paper, clothing, and brick.

3.  Residential heating fuel – Slightly more than half of the homes in the United States use natural gas as their main heating fuel. Natural gas is also used in homes to fuel stoves, water heaters, clothes dryers, and other household appliances.

4. Raw material – Natural gas is also an essential raw material for many common products. Some products that use natural gas as a raw material are:

  • paints,
  • fertilizer,
  • plastics,
  • antifreeze,
  • dyes,
  • photographic film,
  • medicines, and
  • explosives.


The major consumers of natural gas in the United States in 2012 included:

  • Electric power sector — 9.1 trillion cubic feet      (Tcf)
  • Industrial sector —7.1 Tcf
  • Residential sector — 4.2 Tcf
  • Commercial sector —2.9 Tcf




3.  How is natural gas transported?

A.  Pipelines

The Natural Gas Industry

Transporting natural gas from the production field to the consumer involves a series of steps, generally carried out in order:

  • Wellhead to Processing Plant:  Gathering systems, mostly small, low-pressure pipelines, move raw natural gas from the wellhead to a natural gas processing plant or to an interconnection with a larger mainline pipeline.
  • Separation:  Processing plants separate natural gas liquids and impurities from the natural gas before the natural gas is delivered into a mainline transmission system.
  • Production to Market:  About 306,000 miles of wide-diameter, high-pressure interstate and intrastate transmission pipelines transport natural gas from the producing area to market areas. Compressor stations (or pumping stations), located strategically along the length of the pipeline network, keep the natural gas flowing forward along the pipeline system. More than 200 companies operate mainline transmission pipelines.
  • Storage:  Underground storage facilities, fashioned from depleted oil, natural gas, or aquifer reservoirs or salt caverns, are used to store natural gas as a seasonal backup supply. In 2007, about 125 natural gas storage operators managed roughly 400 active storage fields. When needed, this reserve is withdrawn to meet additional customer demand during peak usage periods, like in the winter. Aboveground liquefied natural gas storage facilities are also used for this purpose.
  • Local Distribution:  More than 1,300 local distribution companies deliver natural gas to end users through hundreds of thousands of miles of small-diameter service lines. Local distribution companies reduce the pressure of the natural gas received from the high-pressure mainline transmission system to a level that is acceptable for use in residences and commercial establishments.

An intricate transportation system, made up of about 1.5 million miles of mainline and other pipelines, links production areas and natural gas markets. The U.S. natural gas transportation network delivered more than 24 trillion cubic feet of natural gas during 2011 to about 71 million customers.

Pipeline Map


How Did This Transmission and Distribution Network Become So Large?

Mainlines.  Almost half of the current 306,000 miles of the mainline natural gas transmission network were installed in the 1950s and 1960s as consumer demand for low-priced natural gas more than doubled following World War II. In fact, about half of the natural gas pipeline mileage currently installed in Texas and Louisiana, two of the largest natural gas production areas in the country, was constructed between 1950 and 1969. By the close of 1969, marketed natural gas production exceeded 20 trillion cubic feet for the first time.

Local distribution.  A large portion of the 1.2 million miles of local distribution pipelines, which receive natural gas from the mainline transmission grid and deliver it to consumers, was also installed during the same period. However, the period of greatest local distribution pipeline growth has been more recent. In the 1990s, more than 225,000 miles of new local distribution lines were installed to provide service to the many new commercial facilities and housing developments that wanted access to natural gas supplies during that period of economic growth.

The demand for natural gas has grown in recent years in part because it is considered a relatively environmentally-friendly energy source. Its use as an electric power generation fuel also has grown steadily with a decline in the capital costs of producing electric power from natural gas as technology in the area has improved.

Natural gas prices, along with oil prices, increased substantially between 2003 and 2008. Higher prices gave natural gas producers the incentive to expand development of new natural gas fields. Consequently, new pipelines have been and are being built to link these new production sources to the existing mainline transmission network. Construction of new transmission and local distribution mainline pipeline mileage during the current decade, 2000-2009, is projected to surpass that of any other decade since the 1950s.


B.  Liquefied Natural Gas (LNG)

Liquefied natural gas (LNG) is natural gas that has been cooled to about -260°F for shipment and/or storage as a liquid. The volume of the liquid is about 600 times smaller than in its gaseous form. In this compact form, natural gas can be shipped in special tankers to receiving terminals in the United States and other importing countries. At these terminals, the LNG is re-gasified and transported by pipeline to distribution companies, industrial consumers, and power plants.

Liquefying natural gas provides a means of moving it long distances where pipeline transport is not feasible, allowing access to natural gas from regions with vast production potential that are too distant from end-use markets to be connected by pipeline.

In 2012 total U.S. natural gas production was equal to 94% of the U.S. natural gas consumption. Net natural gas imports contributed to the remaining consumption volume.


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4.  How much natural gas does the U.S. produce, consume, export, and import?


Consumption, Production, ImportsProduction & Consumption

U.S. natural gas production and consumption were nearly in balance through 1986. After that, consumption began to outpace production, and imports of natural gas rose to meet U.S. demand for the fuel. Production increased from 2006 through 2011, when it reached the highest recorded annual total since 1973. The increases in production were the result of more efficient, cost-effective drilling techniques (horizontal drilling and hydraulic fracturing, also known as fracking, notably in the production of natural gas from shale formations.

Share of 2011 natural gas marketed production:

  • Texas (29%)
  • Wyoming (9%)
  • Federal Offshore Gulf of Mexico (8%)
  • Louisiana (13%)
  • Oklahoma (8%)

Underground PictureTop Natural Gas Producing States, 2011Shale Gas

Shale is a very fine-grained sedimentary rock that is easily broken into thin, parallel layers. Shales can contain a large amount of natural gas, but it’s not necessarily mobile. Extensive efforts such as horizontal drilling and creating artificial fractures in the rock are often needed to achieve satisfactory production rates.

Gas shale is one of a number of “unconventional” sources of natural gas; other unconventional sources of natural gas include natural gas produced from coalbeds and from “tight” (impermeable) sandstone or chalk formations.

Imports & Exports

In 2011, net pipeline imports totaled 1,670 billion cubic feet, or 7% of total natural gas consumption. The United States received almost 90% of its pipeline-imported natural gas from Canada with the remainder from Mexico. In 2011, LNG imports totaled 349 billion cubic feet, or about 1% of total natural gas consumption. LNG imports from Egypt, Qatar, Trinidad and Tobago, and Yemen contributed about 90%of total LNG imports.

Reliance on natural gas imports has declined in recent years due to a surge in natural gas production, resulting from more efficient, cost-effective drilling techniques, notably in the production of natural gas from shale formations. Net imports (imports minus exports) of natural gas accounted for 8% of U.S. natural gas consumption in 2011, compared to the 2007 peak of 16%.

Natural gas can be transported in two ways:

  1. Via pipeline — Forty-eight natural gas pipelines, representing approximately 28 billion cubic feet per day of capacity, imports, and exports natural gas between the United States and Canada or Mexico.
  2. Via ship in the form of liquefied natural gas (LNG)LNG Imports


Exports of natural gas peaked in 2011, largely due to expanded pipeline exports to Canada and Mexico. Canada accounted for 62% of pipeline natural gas exports, and Mexico accounted for 33%. U.S. exports of natural gas also include:

  • Domestically produced natural gas shipped to Japan as LNG
  • LNG originally imported to the United States that is “re-exported” to new destinations where prices are higher


5.  How much natural gas is left in the U.S.?

Reserves Map


Did You Know - first wellBackground

A “reservoir” is a place where large volumes of methane, the major component of natural gas, can be trapped in the subsurface of the Earth at places where the right geological conditions occurred at the right times.

Reservoirs are made up of porous and permeable rocks that can hold significant amounts of oil and gas within their pore spaces.

Proved reserves of natural gas are estimated quantities that analyses of geological and engineering data have demonstrated to be economically recoverable in future years from known reservoirs.

Proved reserves are added each year with successful exploratory wells and as more is learned about fields where current wells are producing. For this reason those reserves constantly change and should not be considered a finite amount of resources available. Application of new technologies can convert categories of previously uneconomic natural gas resources into proved reserves. U.S. proved reserves of natural gas have increased in every year since 1999, a trend accelerated by shale gas drilling.

In addition to proved natural gas reserves, there are large volumes of natural gas classified as undiscovered technically recoverable resources. Undiscovered technically recoverable resources are expected to exist because the geologic settings are favorable despite the relative uncertainty of their specific location. Undiscovered technically recoverable resources are also assumed to be producible over some time period using existing recovery technology.

In 2010, U.S. natural gas proved reserves, estimated as “wet” gas which includes natural gas plant liquids, increased by 12% to 318 trillion cubic feet (Tcf). Major improvements in shale gas exploration and production technologies drove the increase in U.S. natural gas proved reserves.

6.  How much does natural gas cost?

Wellhead and Residential Prices

The price that residential consumers pay for natural gas has two main parts (all cost components include a number of taxes):

1. Commodity costs — the cost of the natural gas itself, known as the wellhead cost.

2. Transmission and distribution costs — the cost to move the natural gas by pipeline from where it is produced to the customer’s local gas company, and to bring the natural gas from the local gas company to the customer’s house. These transmission and distribution costs account for the difference between the price of natural gas at the wellhead and the price paid by residential customers.

The low wellhead price in recent years reflects several market conditions:

  • Record levels of production due to the development of gas from shale formations (plays)
  • Growth in supply exceeding growth in demand
  • Few supply disruptions as a result of relatively calm hurricane seasons


Residential prices also reflect market forces including:

  • Pipeline constraints to high-demand areas, particularly in the Northeast
  • Net producing regions tend to be geographically removed from net consuming regions

Residential Prices 2010Although national average prices for residential natural gas have declined in recent years, the prices in individual states can differ greatly. These differences are related to a number of factors:

  • the market’s proximity to the producing areas
  • the number of pipelines in the state
  • average consumption per residence receiving service
  • transportation charges associated with delivery
  • state regulations
  • degree of competition



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Factors Affecting Natural Gas Prices

Factors on the SUPPLY side that may affect prices include:

  • Variations in the amount of natural gas being produced
  • The volume of gas being imported and/or exported
  • The amount of gas in storage facilities (referred to as storage levels)
  • Severe Weather Can Disrupt Production
  • Natural Gas Supplies Held in Storage Play a Key Role in Meeting Peak Demand


Factors on the DEMAND side that may affect prices include:

  • The level of economic growth
  • Variations in winter and summer weather
  • Oil prices
  • Economic Growth Can Affect Natural Gas Demand and Prices
  • Winter Weather Strongly Influences Residential and Commercial Demand
  • Hot Summer Weather Can Increase Power Plant Demand for Gas
  • Competition with Other Fuels Can Influence Natural Gas Prices


7.  How much does natural gas harm the environment?


Natural gas has many qualities that make it an efficient, relatively clean, and economical energy source. There are, however, environmental and safety issues with its production and use.

Burning natural gas for energy results in much fewer emissions of nearly all types of air pollutants and carbon dioxide (CO2) per unit of heat produced than coal or refined petroleum products. About 117 pounds of carbon dioxide are produced per million Btu equivalent of natural gas compared to over 200 pounds of CO2per million Btu of coal and over 160 pounds per million Btu of fuel oil. These clean burning properties have contributed to an increase in natural gas use for electricity generation and as a transportation fuel for fleet vehicles in the United States.

Natural gas is made up mostly of methane, which is a potent greenhouse gas. Some natural gas leaks into the atmosphere from oil and gas wells, storage tanks, pipelines, and processing plants. These leaks were the source of about 28% of total U.S. methane emissions, but only about 3% of total U.S. greenhouse gas emissions in 2009. The oil and natural gas industry tries to prevent gas leaks, and where natural gas is produced but can’t be transported economically, it is “flared” or burned at well sites. This is considered to be safer and better than releasing methane into the atmosphere because CO2 is not as potent a greenhouse gas as methane.

When geologists explore for natural gas deposits on land, they may have to disturb vegetation and soils with their vehicles. A gas well on land may require a road and clearing and leveling an area to make a drill pad. Well drilling activities produce air pollution and may disturb wildlife. Pipelines are needed to transport the gas from the wells, and this usually requires clearing land to bury the pipe. Natural gas production can also result in the production of large volumes of contaminated water. This water has to be properly handled, stored, and treated so that it does not pollute land and water.

While the natural gas that we use as a fuel is processed so that it is mainly methane, unprocessed gas from a well may contain many other compounds, including hydrogen sulfide, a very toxic gas. Natural gas with high concentrations of hydrogen sulfide is usually flared. Natural gas flaring produces CO2, carbon monoxide, sulfur dioxide, nitrogen oxides, and many other compounds depending on the chemical composition of the natural gas and how well the gas burns in the flare.

New drilling and gas recovery technologies have greatly reduced the amount of area that has to be disturbed to produce each cubic foot of natural gas. Horizontal and directional drilling techniques make it possible to produce more gas from a single well than in the past, so fewer wells are needed to develop a gas field. Hydraulic fracturing (commonly called “hydrofracking,” or “fracking,” or “fracing”) of shale rock formations is opening up large reserves of gas that were previously too expensive to develop. Hydrofracking involves pumping liquids under high pressure into a well to fracture the rock and allow gas to escape from tiny pockets in the rock. However, there are some potential environmental concerns that are also associated with the production of shale gas.

  • The fracturing of wells requires large amounts of water. In some areas of the country, significant use of water for shale gas production may affect the availability of water for other uses, and can affect aquatic habitats.
  • If mismanaged, hydraulic fracturing fluid — which may contain potentially hazardous chemicals — can be released by spills, leaks, faulty well construction, or other exposure pathways. Any such releases can contaminate surrounding areas.
  • Hydrofracturing also produces large amounts of wastewater, which may contain dissolved chemicals and other contaminants that require treatment before disposal or reuse. Because of the quantities of water used and the complexities inherent in treating some of the wastewater components, treatment and disposal is an important and challenging issue.
  • According to the United States Geological Survey, hydraulic fracturing “causes small earthquakes, but they are almost always too small to be a safety concern.  In addition to natural gas, fracking fluids and formation waters are returned to the surface. These wastewaters are frequently disposed of by injection into deep wells. The injection of wastewater into the subsurface can cause earthquakes that are large enough to be felt and may cause      damage.”

Because a natural gas leak can cause an explosion, there are very strict government regulations and industry standards in place to ensure the safe transportation, storing, distribution, and use of natural gas. Because natural gas has no odor, natural gas companies add a strong smelling substance called mercaptan to it so that people will know if there is a leak. If you have a natural gas stove, you may have smelled this “rotten egg” smell of natural gas when the pilot light has gone out.



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*Information obtained from the Energy Information Administration (


8.  Data


1.  Reserves

Reserves - Graph - Natural Gas

Reserves - Table - Natural Gas


2.  Production

Production - World - Natural Gas

Production - Country - Natural Gas

Production - Table

3.  Consumption

Consumption - World - Natural Gas

Consumption - Country - Natural Gas

Consumption - Table - Natural Gas


4.  Imports

Imports - World - Natural Gas

Imports - Country - Natural Gas

Imports - Table - Natural Gas

5.  Exports

Exports - World - Natural Gas

Exports - Country - Natural Gas

Exports - Table - Natural Gas


**The information on this website was obtained from various pages of the U.S. Department of Energy website ( and the U.S. Environmental Protection Agency website (  The data on this website was obtained from various pages of the U.S. Energy Information Administration website (  Please consult those websites for further information.