Total U.S. Natural Gas marketed production will grow by an average rate of 4.0% this year to 73 Bcf/d and 1.3% in 2015 to 73.97 Bcf/d, with Lower 48 onshore production increases -- most coming from shale plays -- more than offsetting declines from the Federal Gulf of Mexico (GOM) and Alaska, according to the Energy Information Administration's latest Short-Term Energy Outlook.
Onshore Lower 48 marketed production, which was 65.66 Bcf/d last year, is expected to be 68.93 this year and 69.95 in 2015, EIA said. GOM production is forecast to decline from 3.59 Bcf/d in 2013 to 3.20 Bcf/d in 2014 and 3.16 Bcf/d in 2015, while production from Alaska will decline from 0.93 Bcf/d in 2013 to 0.87 Bcf/d this year and 0.86 Bcf/d next year.
"EIA expects that new infrastructure projects will support production growth in the Marcellus formation, which is largely driving increases in overall production," the agency said. "Several new projects to support Marcellus production have either recently come online or will begin operations this year. For example, in April, ANR Pipeline's Lebanon Lateral began sending Marcellus natural gas west to ANR's mainline; additionally, in November 2014 Texas Eastern Transmission expects to bring on line 0.9 Bcf/d of capacity to move gas out of Appalachia."
Natural gas spot prices averaged $4.58/MMBtu at the Henry Hub in May, down 8 cents from April, and EIA expects spot prices will remain near current levels until the start of the next winter heating season. The agency is projecting that Henry Hub natural gas prices will average $4.74/MMBtu this year and $4.49/MMBtu in 2015.
Gas futures prices for August 2014 delivery (for the five-day period ending June 5) averaged $4.58/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for September 2014 contracts at $3.54/MMBtu and $5.92/MMBtu, respectively. One year ago, the gas futures contract for September 2013 averaged $3.97/MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $3.03/MMBtu and $5.21/MMBtu, EIA said.
"Rapid natural gas production growth in the Marcellus formation is contributing to falling natural gas forward prices in the Northeast, where prices often fall below Henry Hub prices outside of peak winter demand months," EIA said. "Consequently, some drilling activity may move away from the Marcellus back to Gulf Coast plays such as the Haynesville and Barnett, where prices are closer to the Henry Hub spot price."
EIA expects total natural gas consumption will average 72.5 Bcf/d this year, an increase of 1.7 Bcf/d compared with 2013, with a 0.2 Bcf/d falloff expected in 2013 as a return to near-normal winter weather contributes to lower residential and commercial consumption. "Higher natural gas prices this year contribute to a 0.5% decline in natural gas consumption in the power sector to 22.2 Bcf/d in 2014," the agency said. "EIA expects natural gas consumption in the power sector to increase to 23.0 Bcf/d in 2015 with lower natural gas prices and the retirement of some coal plants."
Net imports of natural gas are expected to be 3.6 Bcf/d in 2014 and 3.1 Bcf/d in 2015, which would be the lowest level since 1987. EIA projects that the United States will be a net exporter of natural gas beginning in 2018.
Based on the National Oceanic and Atmospheric Administration's forecast of a relatively mild 2014 Atlantic hurricane season (see Daily GPI, May 22), EIA estimates that 30 Bcf of natural gas production in the GOM will be shut in at some point.
"EIA's simulation results indicate a 69% probability of offshore natural gas production experiencing outages during the 2014 hurricane season that are equal to or larger than the 6.7 Bcf of production shut in last season," EIA said. "Despite the potential for significant outages if a strong hurricane were to pass through the GOM producing region, the overall effect on U.S. supply would not be as severe as in past years because the share of total U.S. natural gas production originating in the GOM has declined sharply. In 1997, 26% of the nation's natural gas was produced in the federal Gulf of Mexico; by 2013, that share had fallen to 5%."
EIA has said it expects a rebuild of nearly 2,600 Bcf over the gas storage injection season, which would push inventories up to 3,424 Bcf by the end of October (see Daily GPI,April 8).