The Energy Information Administration in its Short-Term Energy Outlook for December projects a speedier recovery for hurricane-impaired Gulf of Mexico natural gas infrastructure, citing the innovative methods producers are employing to reroute their gas around damaged pipelines to reach working processing plants.

“The interconnectivity of the natural gas gathering system has helped speed the recovery of shut-in production as suppliers reroute gas flow around damaged pipelines to active processing plants…Consequently, in this outlook we have accelerated the recovery of the natural gas supply system from our November outlook prediction. We now expect shut-in federal Gulf of Mexico natural gas production to fall to 0.66 Bcf/d (6.5% of pre-hurricane Gulf production) by March 2006,” the statistical arm of the Department of Energy (DOE) said in its latest outlook, which was released Tuesday.

At the start of this month, an estimated 36% of federal Gulf of Mexico oil output (509,270 bbls/d) and 29% of federal Gulf of Mexico gas production (2.7 Bcf/d) remained shut in due to Hurricanes Katrina and Rita. Onshore Louisiana, about 40% of the state’s oil and gas production remained offline, but it is projected to be fully restored by the end of March 2006, the EIA said.

Prices for natural gas, as well as crude oil and petroleum products, “are projected to remain high through 2006 because of continuing tight international supplies and hurricane-induced supply losses,” the agency noted. It estimated that Henry Hub spot prices will average $8.88/Mcf this year and $9.30/Mcf in 2006. The Henry Hub price for the fourth quarter was expected to be $12.26/Mcf, according to the EIA.

“Relatively warmer October and November weather across most of the United States has led us to reduce slightly the winter heating expenditures we projected in the November outlook.” Households heating with natural gas are likely to spend $281 more for fuel this winter over last winter, up 38%; heating oil households can expect to spend $255 more, up 21%; households using propane will see a $167 increase this winter, up 15%; and households using electricity will pay $46 more, up 7%, the EIA estimated. However, “should colder weather prevail” for the remainder of the winter heating season, “expenditures could be significantly higher,” the agency warned.

The average natural gas customer can expect to pay $15.36 per Mcf of gas this year, compared to $11.14/Mcf in 2004, the EIA said.

Due to the run-up in natural gas prices this year, gas demand (22.35 Tcf) is expected to be flat with demand in 2004 (22.36 Tcf). But it is projected to increase by 1% to 22.58 Tcf in 2006, assuming a return to normal weather and expected reactivation of damaged industrial plants along the Gulf Coast region. Declines in gas consumption are seen for both the residential and industrial sectors this year, with slight recoveries anticipated for 2006.

The EIA said its sees domestic dry gas production falling by 3.8% this year to 17.95 Tcf from 18.67 Tcf in 2004 due mainly to the hurricane-induced disruptions in the Gulf, to be followed by a 4.8% hike in 2006. Fourth quarter dry gas production was pegged at 4.19 Tcf compared to 4.65 Tcf for the same period in 2004. Total liquefied natural gas net imports are estimated to remain at their 2004 level of 650 Bcf, then increase in 2006 to an average of about 1,000 Bcf.

At the end of November, working gas in storage stood at an estimated 3,170 Bcf, 74 Bcf below a year ago but 6.3% above the five-year average and about 150 Bcf above the level projected by the EIA in its November energy outlook. End-of-year storage levels are expected to be 8.9% lower at end of 2005 than they were at the close of 2004.

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