U.S. natural gas production in 3Q2006 increased 5.5% year over year — an improvement largely reflective of the recovery from last year’s hurricanes, according to energy analyst John Gerdes. However, Gerdes’ survey also showed 2.2% production growth compared to 2Q2006, suggesting that overall, domestic gas production may rise about 2% this year, or 1 Bcf/d. Those numbers closely match actual gas supply data compiled by Denver-based consulting firm Bentek Energy.
Gerdes, the Houston-based analyst of SunTrust Robinson Humphrey/the Gerdes Group, said his production survey of 41 Lower 48 producers is in line with earlier positive forecasts that suggest that, discounting the rise attributed to storm recovery from 2006, domestic gas production still may be slightly higher than levels last year. The producers surveyed by Gerdes, which include majors and independents, account for about two-thirds of the trend in U.S. gas production “after considering royalties/working interest.” The survey was adjusted for acquisitions and divestitures to reflect actual organic growth.
“In 2006, given an average rig count of 1,375 and a 9% decline in rig productivity, our models forecast an increase in U.S. gas production of approximately 0.9 Bcf/d,” Gerdes noted. “While historically our U.S. Natural Gas Production Survey has consistently understated U.S. gas production, reduced emphasis on Gulf of Mexico production and a reemphasis by the majors on North American gas development has aligned the survey with actual production trends.”
Bentek Energy’s Supply/Demand Balance report, dated Nov. 20, seems to confirm that prediction. Bentek, which collects data from interstate pipelines across the country, calculated an overall domestic gas production increase of about 1.9% year to date, or about 1 Bcf/d, to 52.3 Bcf/d.
Taking a closer look at where supply is on the rise, Bentek found that Appalachian Basin gas production has posted the largest percentage increase over levels last year. The growth in the Appalachian Basin has gone largely unnoticed but is significant at about 14% year to date to 1.1 Bcf/d. If that rate of growth continues, it could put downward pressure on Northeast prices and basis. That downward pressure will become much greater when the Rockies Express pipeline brings Rocky Mountain gas production across the country to Ohio in 2008.
Rocky Mountain region gas production is showing the greatest volumetric growth this year at about 1 Bcf/d (or 10%) higher than levels in 2005 to 11.4 Bcf/d, which goes a long way toward explaining recent price weakness in the region. And the Midcontinent also has shown increases this year of about 2.2%, or 200 MMcf/d, to 10.6 Bcf/d, Bentek reported. Meanwhile, Gulf Coast/Gulf of Mexico production remains down about 4.5% from 2005 levels to 12.1 Bcf/d.
The Bentek and Gerdes’ gas production reports are more optimistic than the 3Q2006 survey issued by Raymond James Energy analysts earlier this month (see NGI, Nov. 20). The Raymond James analysts, whose survey covers about 55% of total U.S. gas production, reported domestic gas output rose 5% year-over-year. However, removing the hurricane impact from 2005, Raymond James analysts estimated U.S. gas production fell about 0.3% from 3Q2005.
According to Gerdes, BP plc was the leading domestic gas producer in 3Q2006, producing 2,332 MMcf/d, down 1% from 2,364 MMcf/d in 3Q2005. ConocoPhillips was the second leading domestic gas producer for the quarter, with output at 2,320 MMcf/d, up 7% from 2,170 MMcf/d a year earlier. Rounding out the top five were Chevron Corp., down 3% to 1,846 MMcf/d from 1,897 MMcf/d; Anadarko Petroleum Corp., up 7% to 1,693 MMcf/d from 1,588 MMcf/d; and Devon Energy Corp., up 6% to 1,620 MMcf/d from 1,534 MMcf/d.
It’s a good thing for consumers that domestic producers are working hard to boost supply because Canadian and liquefied natural gas (LNG) imports are way down this year. Canadian imports have fallen about 1.9%, or 200 MMcf/d, to 9.1 Bcf/d, while LNG has dropped 6.3% to 1.6 Bcf/d, according to Bentek’s data. Bentek reports that domestic gas demand is down 0.3% year to date to 59.6 Bcf/d. Demand from power generation has soared nearly 15% this year to 8.7 Bcf/d on average, and industrial demand is up about 7.5% to 18.4 Bcf/d, but residential and commercial natural gas demand is down 7.4%, or 2.6 Bcf/d, to 32.5 Bcf/d, Bentek’s report showed.
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