The U.S. natural gas supply-demand balance was long by 1.1 Bcf/d in 2009 compared with 2008, which translated into record-high gas storage levels at the end of last year. And at the end of this year storage should see about the same levels, according to an analysis by Bentek Energy LLC.
So far this year the supply-demand balance is net short by 1.8 Bcf/d compared with a year ago, but at the end of February it was 5.5 Bcf/d short, so the market is working off the short balance, “and that got us back into a storage range between the five-year high and low,” Bentek analyst Jim Simpson told attendees at the firm’s annual Benposium in Houston Wednesday.
Gas production so far this year is down by about 0.6 Bcf/d compared with a year ago, Simpson noted. “We’ll end the year short about 0.2 Bcf/d, so that gets us back to a storage balance at the end of the year roughly where we were last year.”
Coal-to-gas switching was a major factor in the gas market during 2009, and that helped to keep things in balance and prices from getting crushed. In 2010 there will be switching again, but it will be less extensive, Simpson said.
In 2009 coal-to-gas switching among power generators resulted in an additional 2.76 Bcf/d of gas demand, according to Bentek. “Coal-to-gas switching really turned out to be a pretty major factor in 2009,” Simpson said. For 2010 he said he expects switching to result in an additional 0.9 Bcf/d of demand. The reduction in switching is due in part to the fact that operators of coal-fired generating plants have stockpiles of coal they need to burn through, Simpson said.
Much more liquefied natural gas (LNG) was expected to make its way to the United States this year, but so far that has not been the case, Simpson noted. Low gas prices in the United States have kept cargoes away. And they’ve also helped to lower natural gas prices in the rest of the world, Simpson said with some enthusiasm as he pointed out that domestic shale plays are “driving world costs down. Our low prices are helping to drive gas costs down in the entire world.”
Even if the United States does not realize a Lower 48 LNG liquefaction export terminal, as has been proposed by Cheniere Energy Partners LP (see Daily GPI, June 7), it will still be possible to move domestic gas all the way up to Western Canada via backhauls. From there it can be exported from the Kitimat LNG export terminal (see Daily GPI, May 26) once it is built, Simpson said.
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