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Without losses from last summer's hurricanes, U.S.domestic natural gas production -- responding to high prices -- would have shown a 1.4 Bcf/d or 2.7% increase over 2004, marking the largest production increase since 1994, according to a report by Bentek Energy LLC of Golden, CO.
The increase wouldn't have changed the balance much, however, since demand, led by power generators, grew by 2.2%. The increased demand was despite a decline in the industrial market, particularly in Texas and the Southeast, according to the report, "U.S. Natural Gas Supply/Demand 2004-2006."
And actually production in 2005 declined by 0.3% from 2004 when the 572 Bcf cumulative losses associated with hurricanes Katrina, Rita and Wilma are added into the total.
"When we drilled down to the detailed gas flows in 2005, it was clear that hurricane-related damage masked some very important changes in the gas market," commented Porter Bennett, Bentek president. "Several basins achieved double-digit increases in production. Storage was filled, in spite of hurricane-related damage. Power generation drove demand increases in the Midwest, Northeast and Southeast."
Most of the changes point to increased market and price volatility, the Bentek report said. Increased production, including unexpected increases in some older basins, is straining pipeline capacity, and bottlenecks are developing. The decline in the more stable industrial demand and increase in weather-dependent power generation increases the potential for volatility. And there could be a very precipitous price drop this summer if there is not more cold weather in February and March or an early hot summer to draw down storage.
"The bottom line of this study is volatility," noted Rusty Braziel, managing director of Bentek. "Our analysis of supply and demand is based on detailed gas flow information at almost 20,000 individual points across the pipeline grid that we derive from Bentek's Pipe2Pipe Gas Transportation Intelligence Service. We drill down into this data to reveal the most important natural gas supply, demand, transportation and storage developments. This year, all roads lead to the potential for high volatility."
"Almost 1 Bcf/d of incremental production came out of the western basins last year," Bennett said. This was led by a 16% increase in the Uinta and Piceance basins to 1.6 Bcf/d. Gas flows out of the Green River Basin were up 3% to 3.7 Bcf/d with volumes at 3.9 Bcf/d in December. Production in the Wind River Basin rose 6% to 0.7 Bcf/d, and the San Juan Basin was up about 0.1% to 4.2 Bcf/d.
Outside of the Rockies, the Fort Worth area had a 17.2% or 232 Bcf production increase, East Texas production was up 10.8% or 358 Bcf, the Arkansas-Louisiana region was up 9.5% or 125 Bcf, and Arkoma production increased 4% or 51 Bcf. The production decline offshore was 17.8% or nearly 2 Tcf, including the slightly more than half a Tcf of production lost due to hurricanes.
Bentek's tally of production gains and losses shows that production directed to the East and midwestern markets, including Gulf of Mexico gas, showed a decline of about 1.2 Tcf, while producing areas feeding western markets increased output by 360 Bcf.
Demand growth ran contrary to production trends with demand in the Northeast and Midwest each increasing 14%, followed by the Southeast at 11% and Texas by 5%. Demand in the West was flat.
Net imports rose about 6% in 2005 to an average 7.9 Bcf/d compared to 7.5 Bcf/d in 2004, Bentek said. This includes a 2% rise in imports from Canada and a 26% drop in exports to Mexico. LNG imports declined minimally by about 4% or 0.1 Bcf/d with the Lake Charles, LA terminal showing the greatest decline at -38%. Elba Island, GA had the greatest increase, up 26%.
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