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EIA Estimates for U.S. Production Growth Up, Demand Down

Domestic natural gas supply projections inched upward while imported liquefied natural gas (LNG) and overall consumption growth estimates were easing down in the latest predictions for 2008 natural gas, reported by the Energy Information Administration (EIA) in its March Short-Term Energy Outlook released last Tuesday. Price projections also were up.

EIA said cold weather so far in the first quarter has kept pressure on prices, with the Henry Hub spot price averaging $8.76/Mcf in February, 51 cents/Mcf more than the average January spot price. While prices are expected to decline as heating demand begins to wane in April, EIA sees an annual average Henry Hub spot price of about $8.18/Mcf in 2008 and $7.95/Mcf in 2009. That's up from the February projection for an annual average of $7.83/Mcf in 2008 and $7.93/Mcf in 2009.

Total U.S. marketed natural gas production is expected to increase by 2.9% in 2008, EIA said in March, compared to its February estimate of 2.2% growth this year. The gain is being driven by new deepwater supply infrastructure, which came online at the end of 2007 and is expected to drive growth of 5.8% in the Gulf of Mexico in 2008, while unconventional supplies push Lower 48 onshore production up by 2.5%.

LNG imports are projected to be about 770 Bcf for 2008, or about the same amount imported in 2007. The latest 2008 LNG import projection is down slightly from the 788 Bcf estimated last month, which in turn is down from the 937 Bcf predicted in January for this year. EIA said recent LNG supply start-ups in Equatorial Guinea, Nigeria and Norway, and a project under construction in Qatar are expected to boost shipments to the United States later this year and in 2009.

Meanwhile, the agency said natural gas consumption growth is expected to drop from the 6.4% growth seen in 2007 to a projected 0.7% growth in 2008 and 0.8% growth in 2009. The most recent numbers are lower than the 0.9% and 1% for 2008 and 2009 that EIA predicted in February. The lower numbers are based on predictions of a milder summer, plus the economic slowdown, which will cut into electric power and industrial demand.

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