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EIA Sees U.S. LNG Imports Dropping by 12% This Year

Imports of liquefied natural gas (LNG) into the United States are expected to decline by 12% this year compared to 2007 due to increased demand from Asia and Western Europe, according to the Energy Information Administration's (EIA) Short-Term Energy and Summer Fuels Outlook. LNG imports are forecast to rebound in 2009, however.

The EIA, in its outlook released last Tuesday, projects that U.S. LNG imports this year will fall to 680 Bcf from the record volume of 770 Bcf received in 2007. "Strong demand in Asia and Western Europe, which compete with the United States for LNG supplies, has greatly reduced the number of U.S.-bound LNG cargoes so far this year," the agency said.

"Although current import volumes are low, EIA expects U.S. LNG imports to rebound slightly this summer as global demand wanes. An increase in global LNG supplies, particularly expansions in Nigeria and Norway, are expected to boost shipments of LNG to the United States in 2009, when import volumes are projected to total about 950 Bcf," the EIA noted.

As for natural gas prices, the Henry Hub spot price averaged $9.74/Mcf in March, which was the first month since December 2005 in which spot prices averaged more than $9/Mcf, the agency said. "The recent upward price shift reflects a number of factors, including the dropoff in LNG imports compared to year-ago levels; high crude oil prices; and the drawdown in storage to the lowest levels in four years. As seasonable demand wanes, spot prices are expected to decline before they begin to rise again toward a winter peak."

On an annual basis the EIA projects that Henry Hub spot prices will average about $8.59/Mcf this year and $8.32/Mcf in 2009.

At the end of the winter heating season (March 31), working gas in storage was 1,248 Bcf, 6 Bcf above the five-year average and 304 Bcf below the level last year at this time, according to EIA.

On the demand side, the agency expects total natural gas consumption to climb by 1% to 63.78 Bcf/d this year from 63.16 Bcf/d in 2007, and rise slightly by 0.8% to 64.29 Bcf/d in 2009. "The assumption of normal weather is expected to lead to limited growth in residential and commercial demand in 2008, while economic conditions are [likely] to limit industrial sector growth for the year. In 2009, consumption is projected to decrease slightly in the residential and commercial sectors, with a small increase expected in the industrial sector."

It anticipates that milder summer temperatures will leave natural gas consumption for electricity generation unchanged this year, after an increase of more than 10% in 2007. The EIA estimates that demand in the electric power sector will be 18.80 Bcf/d this year compared to 18.83 Bcf/d in 2007. It projects that gas demand in this sector will climb to 19.34 Bcf/d in 2009.

The EIA sees U.S. marketed natural gas production rising by 2.9% to 56.82 Bcf/d this year from 55.21 Bcf/d in 2007, and by 0.2% to 56.93 Bcf/d in 2007. "In 2008 the development of deepwater supplies is expected to drive production growth of 4.8% in the Gulf of Mexico. Production from the Lower 48 region is expected to continue the upward trend of recent years, increasing by 2.7%, led by growth in unconventional production basins," the agency noted.

"In 2009 production growth will be offset partially by the absence of further increases in rigs drilling natural gas prospects; the natural decline in production from current wells, particularly in the offshore fields; and rising production costs." The EIA projects that natural gas production in the Gulf will decline by 0.7% in 2009, while production in the Lower 48 onshore region is likely to increase by 0.3%.

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