Material Insights · Understanding the Material World

Natural gas and Unconventional oil and gas

Shale and tight formations now supply most US gas, which turned the United States into a net exporter and the world's largest LNG seller. Through LNG, the cost of US shale gas plus liquefaction has become a reference point for gas prices in Europe and Asia.

Natural gas (energy) and Unconventional oil and gas (energy): 4 relationships.

How they are linked

1. Shale supplies US gas

Physical flow · Strong · Unconventional wells to gas supply

Horizontal drilling and hydraulic fracturing let gas flow from tight shale rock that would not produce otherwise, so these wells became the main US gas source.

  • about 78% share of US dry gas production from shale, 2023
  • 37.87 tcf US shale gas production, 2023

The EIA attributes most US production growth since 2005 to horizontal drilling and fracturing, and expects shale and tight gas to supply most US output through 2050. Some US gas comes from oil wells, so gas output also follows oil drilling.

Sources: US Energy Information Administration; US Energy Information Administration

2. Shale gas exported as LNG

Physical flow · Strong · US shale gas to world LNG markets

Shale growth pushed US output above domestic use, and the surplus is exported as LNG, linking shale fields to gas buyers in Europe and Asia.

  • about 15 Bcf/d US LNG exports, 2025, the world's largest
  • 68% share of US LNG exports going to Europe, January to November 2025
  • about 13% US gas production above consumption, 2022

Exports rose from 11.9 Bcf/d in 2024, when Europe took 53% and Asia 33%. New US export plants mean shale drilling increasingly responds to world prices, not only to US demand.

Sources: US Energy Information Administration; Journal of Petroleum Technology (on EIA data); Journal of Petroleum Technology (on EIA data)

3. Henry Hub as reference

Cost and price · Medium · Shale gas cost to world LNG prices

US LNG contracts price gas at a multiple of Henry Hub plus a fixed fee, so the cost of shale gas plus liquefaction becomes a reference for what buyers abroad pay, and cargoes are hard to sell for much less.

  • 115% of Henry Hub plus USD 3 Cheniere export contract formula with KOGAS, 2012

When Asian prices were about three and a half times US prices in early 2014, US exports were very profitable, which is what drew investment into export terminals.

Sources: RBN Energy

4. Price link: co-product

Cost and price · Medium · Both ways

Shale gas and gas from oil wells flow from the same drilling, but the site's gas series is the European price, which is set by pipeline and LNG supply rather than by US shale.

  • 0.13 monthly change correlation
  • 0.59 12-month change correlation
  • 1 month lag at which the link is strongest

The yearly link of 0.59 reflects shared moves in oil and gas markets. It may strengthen as US LNG exports grow and tie Henry Hub more closely to European prices.

Sources: Material Insights (World Bank, FRED, IMF data)

For investors

Key learnings

  1. About 78% of US gas came from shale in 2023, so US gas supply depends on drilling activity and well productivity in a few basins.
  2. US LNG exports of about 15 Bcf/d in 2025 made shale a world supply source, tying Henry Hub more closely to TTF and JKM.
  3. Associated gas from oil drilling means oil prices can change US gas supply regardless of gas prices.

What to track

  • US dry gas production: Rising output with flat domestic use means more gas for export (Monthly · EIA Natural Gas Monthly)
  • US LNG export volumes and new terminal start-ups: Higher exports strengthen the link between Henry Hub and world prices (Weekly · EIA Natural Gas Weekly Update)
  • Henry Hub to TTF and JKM spreads: Wide spreads support US export margins and new projects (Daily · CME; ICE; Platts)

For policymakers

Key learnings

  1. Shale turned the US from importer to the largest LNG exporter, widening the supply options of importers such as India.
  2. Henry Hub-linked contracts give importers a price formula that is not tied to oil, which helps diversify price risk.
  3. US decisions on export approvals change expectations of future world LNG supply.

What to track

  • US LNG export approvals and policy: Restrictions would tighten future LNG supply (As announced · US Department of Energy)
  • Share of India's LNG contracts linked to Henry Hub: A higher share diversifies price exposure away from oil (Yearly · company reports; PPAC)

India

India imports about half of its gas, so US shale output, through its effect on world LNG supply and prices, matters for India's import bill.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. How much shale (tight) gas is produced in the United States?, US Energy Information Administration (2024)
  3. Natural gas explained: where our natural gas comes from, US Energy Information Administration (2025)
  4. US ranked as world's top LNG exporter in 2024, EIA reports, Journal of Petroleum Technology (on EIA data) (2025)
  5. Courtesy of the red, white and blue: how the US shale gas boom benefits Asian LNG importers, RBN Energy (2014)
  6. A decade after first Sabine Pass cargo, US LNG exports hit 15 Bcf/D, Journal of Petroleum Technology (on EIA data) (2026)