IPAA Projects Short Supply, Strong Demand Growth
Gas supply this year is expected to fall below last year's
levels and will struggle to meet projected demand, the Independent
Petroleum Association of America indicated in a report released to
investors in New York yesterday. With the gas rig count down about
a third compared to 1998 levels, U.S. production is expected to be
down 1.2% this year to 18.75 Tcf, while gas imports are expected to
rise 2.7% to about 3.22 Tcf, and gas demand is expected to shoot up
3.2% to 21.97 Tcf.
"Natural gas has become a victim of the crude oil price crisis,"
the study notes. "Natural gas rig counts have been needed upwards
of the 600-rig level to maintain production over the past few
years. Up to 80% of the gas being delivered today is from wells
drilled in the 1990s. Capital expenditure budgets may be changed,
but are not expected to change until the second half of the year."
IPAA's Scott Espenshade, vice president of economics, said with
the steep decline rates in the Gulf Coast region and along the
Continental Shelf offshore, producers had been struggling to
maintain production even at peak drilling rates. With the current
drilling decline, the Gulf is expected to be the first region to
show a sharp drop in wellhead deliverability, he said.
Higher gas futures prices are expected to prompt a drilling
rebound by mid-summer and U.S. gas production is expected to climb
1.3% next year, reaching 19 Tcf, IPAA said in its Short-Term
Outlook. But the industry probably will need any storage surplus
available this winter to meet growing demand.
Assuming normal weather for the rest of this year, IPAA sees
demand finally returning to the strong growth the market
experienced in the early 1990s. Residential demand is projected to
grow by 6.7% this year and commercial gas usage is expected to
increase 5.5%. Industrial demand is expected to grow 2.4% to 8.6
Tcf. The expected milder summer temperatures this year compared
with 1998 and higher hydro electric output will result in lower
demand for gas for electric generation this year, IPAA said.
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