PITTSBURGH—Despite the lull in commodity prices over the last 18 months, the future remains bright for the U.S. oil and gas industry, with the country set to become a major exporter of hydrocarbons in the coming decade, according to Carmine Difiglio, deputy director for energy security at the U.S. Department of Energy (DOE).

“We expect the U.S. to become one of the biggest LNG exporters by 2022, second only to Qatar,” he said while speaking at Hart Energy’s recent DUG East Conference & Exhibition.

According to Difiglio, U.S. gas exports—via LNG and pipeline—will total 10 billion cubic feet per day (Bcf/d) by 2022, and will increase to 20 Bcf/d by 2040. This is quite the increase from the 4.88 Bcf/d the country exported in 2015.

“The Marcellus and Utica shales continue to be the most productive for natural gas, and especially impressive is the increase between last July and now,” he continued.

Despite the severe price downturn in 2015, production continued to grow on the back of shale plays, which reached a record level of production—the top-producing states were Pennsylvania, Ohio and West Virginia.

These three states, which make up the bulk of the Appalachian Basin, were among the few states that saw production growth in 2015. The continued strength of the Marcellus and Utica shales will remain a driving force behind the production growth that will fuel much of these exports.

Further production records can be expected to be set in the coming years, as Difiglio anticipates demand returning soon, with domestic gas production expected to surpass 80 Bcf/d by the end of next year as supply and demand continue catching up to each other.

Despite the LNG market becoming more competitive with more volumes available through new capacity, the U.S. should remain a strong player. The U.S. has about 50% of global capacity under construction.

In addition, U.S. projects have advantages over their rivals, according to Difiglio. “U.S. LNG projects are brownfield projects and already have pipeline connections to gas supplies. They also have marine terminals and have a relatively efficient transition from regasification to liquefaction,” he said.

By comparison, Australian LNG projects are much more expensive, as they require more infrastructure to be built because the industry is relatively young in that country. Companies must build all new construction, including pipelines. These greenfield projects will add costs that will help keep U.S. LNG economical even as Henry Hub prices improve.

The sheer size of U.S. reserves is also an advantage, as domestic producers can send more volumes out to market based on demand while not diverting volumes away from consumers. “If gas prices rise, production increases; so as we export more LNG, the gas to supply LNG terminals is coming from new production. It’s not taking away from new consumption,” he said.

Another advantage for domestic producers is that U.S. LNG contracts are more favorable to consumers than those found in other parts of the world.

Difiglio noted that U.S. contracts only require buyers to pay tolling fees with no penalties for gas not purchased, and that gas purchased under contract is based on Henry Hub spot prices plus markup. U.S. contracts are also typically more liquid since they don’t have destination clauses.

The U.S. is also set to increase its role as a major NGL exporter. The country is also exporting a significant amount of LPG, and Sunoco Logistics recently began exporting ethane from its Marcus Hook facility outside of Philadelphia. Enterprise Products Partners LP is planning an ethane export terminal along the Gulf Coast. As more ethane crackers are built in the Northeast, Marcus Hook will be able to export the increased volumes coming out of the Marcellus and Utica.

Though the U.S. ban on crude exports was lifted at the end of 2015, Difiglio said this market won’t show much strength going in the short-term with an unbalanced market leading to more volatility. On a long-term basis, the situation is more positive, with demand increasing worldwide and non-OPEC supply growth declining.

“As supply stalls, demand increases; and if we experience more oil supply outages, we could again see high prices,” Difiglio said.

Frank Nieto can be reached at fnieto@hartenergy.com.