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Gas Demand from Power Generation Still Running Strong

The Energy Information Administration has confirmed that gas demand from power generation posted a new record in July of 923.7 Bcf (29.8 Bcf/d), far surpassing the old record set in August 2005 of 780.9 Bcf. In a significant revision to its prior estimates, EIA sharply raised its demand estimate for July by about 138 Bcf. Furthermore, Denver-based consulting firm Bentek Energy said in several reports Wednesday that gas demand from generation remains well above levels last year, in part due to more nuclear maintenance outages in the shoulder months.

On Wednesday, demand from generators was up 24% from levels on the same day last year, and it has been running at much higher year-over-year levels since late September, according to Bentek data.

EIA data from January through August of this year shows gas demand from power generation up 8%, or 42.9 Bcf, to 547.4 Bcf compared 504.5 Bcf over the same period in 2005. While demand slipped back to near 2005 levels in September, there was another sharp spike at the beginning of October and demand has remained quite a bit higher than levels last year ever since, based on Bentek's data, which is taken from gas pipelines nationwide.

"That sort of explains why prices are still as strong as they are right now," said Bentek Chief Technology Officer Rusty Braziel. Braziel said if all the power demand that currently is not being served by nuclear generation because of maintenance outages was served instead by gas-fired generation, that would represent about 4.3 Bcf/d of gas demand. About 23,364 MW of nuclear generation currently is offline, which is 25.1% more than was offline on Nov. 1, 2005, and nuclear outages have been much higher throughout the shoulder months this year than last year.

Braziel said the nuclear outages recently have led to at least 2 Bcf/d more gas demand this year than last year. "First of all there are more nukes out this year and secondly there's more gas being burned because of the nukes that are out," he said. "The reason why more gas is being burned is because, relatively speaking, it's cheaper."

Bentek estimates that about 15 Bcf/d of gas will serve power generation demand Wednesday compared to 12 Bcf/d on the same day in 2005. The estimate for gas demand from power generation for the week ending Oct. 27 was 132 Bcf, down slightly from the week prior when the EIA reported a 19 Bcf net storage injection. Bentek estimates that this week's storage report will show the heating season's first withdrawal of about 13 Bcf because of colder than normal temperatures last week and continued strong demand from power generation.

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