Despite indications — such as $4 gas prices and some analysts’ opinions — that gas supply is getting extremely short approaching the winter heating season, the American Gas Association (AGA) on Tuesday assured the nation that taken together supply fundamentals, including reserves, storage, imports and pipeline capacity, “look solid” and will be “adequate to meet customers’ needs” this winter.

AGA pointed to the “strong underground storage position, diverse North American resource development opportunities, relatively high rig and well completion counts and the availability of other gas supplies such as liquefied natural gas to meet seasonal demand” as positive factors in providing supply reliability this winter.

In its Policy Analysis Issue Brief on Natural Gas Supply Fundamentals, AGA stressed that while lower than in 2000, gas production “always reflects demand for natural gas, not just current deliverability.” The association admitted that production has been “increasingly subject to resource depletion in existing fields,” but estimated that it will be down only 0.2 Tcf this year to 19 Tcf from 19.2 Tcf in 2000.

In contrast, many other observers have stressed the larger decline in domestic production compared to last year when production soared in response to high prices. EOG Resources CEO Mark Papa, for example, recently forecast an annual domestic production decline of about 7% (see Daily GPI, Sept. 25). And on Monday, analysts with Raymond James & Associates predicted gas supply would fall 3-10 Bcf/d short of demand this winter (see Daily GPI, Oct. 1). However, the Energy Information Administration is predicting domestic dry gas production will fall only about 1.7% this year compared to last, and will rise 0.7% compared to production in 2000.

The AGA also stressed that substantial reserves are readily available. Using data from the Potential Gas Committee, AGA forecast that Non-Producing Gas Reserves, a subset of total reserves that can be an indicator of potential new gas deliverability that may be made available in a relatively short period of time, will reach 43 Tcf this winter, up slightly from 2000 (42.8 Tcf) and up significantly from 1990 levels (35.1 Tcf). Total domestic natural gas resources, AGA noted, have been rising steadily and should reach 1,100 Tcf by this winter compared to 1,091 Tcf in 2000 and 1,002 Tcf in 1990.

Operating gas rigs, while expected to be down to 700 this winter from 939 in 2001, are still well above levels in 1990 (464 rigs). “Rigs operating for 2002-03 will far exceed the recent low cycles of drilling activity (400 rigs or less for gas-directed drilling),” AGA said. New gas well completions are expected to fall to 15,000 in 2002 from 22,883 last year, but there were only 11,044 wells completed in 1990, AGA added.

Canadian gas imports are expected to be down to 3.6 Tcf this year from 3.7 Tcf last year, AGA admitted, but attributed the drop to lagging demand growth. Only 1.4 Tcf of Canadian gas was imported in 1990. The decline in domestic demand also was blamed for an expected drop in LNG imports this year to 160 Bcf from 237 Bcf last year. But AGA noted the LNG imports are “likely to increase significantly” over the next three to five years.

Meanwhile, natural gas in storage entering this winter is expected to be 5.2% above the five-year average. Supplemental supplies, propane air and synthetic natural gas, also are expected to grow this year to 80 Bcf from 77 Bcf last year. AGA estimates that pipeline capacity has grown to 96 Bcf/d in 2002 from 89.4 Bcf/d in 1998 and 73.7 Bcf/d in 1990.

“Reliable service is the hallmark of the natural gas utility industry and we feel confident that natural gas production will be adequate to meet customers’ needs and that the expanded pipeline system will continue delivering increased volumes of natural gas from producing areas to end-users,” said Chris McGill, AGA’s managing director of policy analysis.

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