The U.S. industrial sector will have the largest share of total natural gas consumption, surpassing the electric power sector in the early 2020s, according to our recently released Annual Energy Outlook 2022 (AEO2022). U.S. industrial sector consumption of natural gas will grow from 28.5 billion cubic feet per day (Bcf/d) in 2021 to 36.0 Bcf/d in 2050—a 27% increase.

The industrial sector includes manufacturing activities such as the production of bulk chemicals, steel, and cement, as well as the non-manufacturing industries of agriculture, construction, and mining. In addition, the natural gas used as a fuel in liquefied natural gas (LNG) production, and natural gas consumption from energy-related activities, such as oil and natural gas extraction and natural gas processing, also fall into the industrial category.

AEO2022 projects that more than half the growth in industrial natural gas consumption (4.7 Bcf/d) will occur in the bulk chemicals industry. Although most natural gas used in the bulk chemicals industry will be used to generate steam and electricity for manufacturing processes, over the projection period, between one-quarter and one-third of natural gas used in this sector will be consumed as feedstock for chemical reactions. We project growth will be especially strong in feedstock for ammonia-based fertilizers and for methanol. Unlike other manufacturing industries, the chemicals industry has little room for efficiency improvements to reduce feedstock use over time because of the physical limitations of chemical processes. Some efficiency increases do occur in heat and power; for example, the chemicals industry has a lot of growth in combined heat and power, where fuel is used more efficiently to produce both steam and electricity.

Continued projected growth in natural gas and hydrocarbon gas liquids upstream supply and stable prices keep the costs of chemical feedstock and fuel relatively low throughout the projection period and contribute to the growth in natural gas consumption seen in the chemicals industry. Rising natural gas production results in lease and plant fuel use growing by 1.5 Bcf/d (30%) from 2021 to 2050. Higher LNG exports lead to 0.5 Bcf/d (64%) growth in fuel use at natural gas liquefaction facilities.

For many other manufacturing industries, growth in natural gas demand from increased industrial output is tempered by greater efficiency from newer equipment and process changes. In aggregate, natural gas consumption in manufacturing industries other than bulk chemicals grows by 0.7 Bcf/d (9%), much less than natural gas consumption in bulk chemicals. Natural gas consumption in non-manufacturing industries remains essentially flat over the projection period.