The gas industry will be relying less on domestic gas production this winter and more on gas from storage and liquefied natural gas (LNG) imports compared to the supply mix in recent years, the American Gas Association (AGA) said in a new report. The association predicts that there will be little relief from high prices as the supply-demand balance will remain tight.

In a report titled “Examining the Changing Balance of Natural Gas Supplies for the 2005-2006 Winter Heating Season,” the association estimated that peak month supply this winter, including production, Canadian imports, LNG, storage and supplementals, will total about 2,763 Bcf, or slightly more than the highest monthly demand level recorded during the last five years of 2,716 Bcf.

“This comparison points to the likely adequacy of supplies, but also to the tight supply-demand balance expected for the coming winter heating season, which in turn implies that relief from upward pressure on natural gas prices during the [winter heating season] is unlikely in the short term,” the association said.

Part of the reason for that tight balance is the slightly declining role of domestic production in the supply mix, according to AGA. The association determined that about 57% of supply (1,600 Bcf) could come from gas production during a peak month this winter compared to 64% during the peak month in the 2002 winter (January).

Meanwhile, gas from underground storage is expected to account for 30.1% (or 840 Bcf) of peak month supply compared to 26% last January (702 Bcf) and 22% in January 2002. “Utilities’ efforts to plan ahead by drawing on natural gas in underground storage are increasingly vital to ensuring reliability as is the industry’s effort to supply a part of America’s natural gas needs through imported LNG,” said AGA’s Chris McGill, managing director of policy analysis. (However, storage also accounted for 30.1%, or 853 Bcf, of peak winter month supply in January 2003 when production also was at 57.4% of total supply, according to AGA’s data).

LNG imports are expected to cover 1.8% (50 Bcf) of supply in January 2006 compared to only 0.3% (8 Bcf) in January 2002. Gas imports from Canada are expected to account for 10.8% (or 300 Bcf) of peak month supply this winter compared to 11.8% last January (319 Bcf) and 12.7% (318 Bcf) in January 2002. And supplementals, including LNG peak shaving operations, are forecast to cover 0.3% (or 6 Bcf) this coming January compared to 0.1% last January.

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