Gas prices are likely to average $6.10 at the Henry Hub this year and catapult over the $7 mark in 2005, according to consultants at Energy and Environmental Analysis Inc. in Arlington, VA. EEA said in a report Wednesday that despite adequate storage injections and average working gas levels, it expects prices for the rest of the injection season to average $6.45 at the Henry Hub.

Prices could “easily” jump to $7 during a heat wave, EEA said. The firm also said it sees winter prices at the Hub ranging from $4.50 to $9.50/MMBtu.

EEA’s averages compare closely with those of the Energy Information Administration (EIA), which currently expects Henry Hub prices to average $6.64 in the fourth quarter, $6.59 in the first quarter of 2005 and $6.30 for all of 2004 because of the tight supply-demand balance.

In its latest Monthly Gas Update, EEA said the supply-demand balance has shown no significant signs of change. However, with the economy expected to continue growing, demand from residential and commercial sectors is bound to increase slowly. EEA estimates that demand from the power generation sector will be up 12% this year to 13.5 Bcf/d and will grow another 1 Bcf/d next year.

Meanwhile, domestic gas productive capacity remains flat. “U.S. domestic production will be hard pressed to reach 2001 levels anytime soon,” EEA said. The firm expects production to rise slightly this year, while gas imports will be hindered by tight world LNG supply and similar production difficulties in Canada.

In a closer look at one of the biggest sources of future supply, EEA said it expects the Green River, Uinta, Piceance and surrounding basins in the central U.S. Rockies to be producing 5.1 Bcf/d by 2010 compared to about 3.8 Bcf/d in 2003. Most of the production growth will come from the Jonah and the Pinedale fields, which are being developed mainly by EnCana (Jonah), Ultra Petroleum (Pinedale) and Questar (Pinedale), in the Green River Basin of southwestern Wyoming.

“The development of the Jonah-Pinedale gas field shows the importance of the Cretaceous tight gas sand resource base, and its potential to make a major contribution to U.S. gas supply,” EEA said. “At least in this play, industry has discovered the right combination of completion and stimulation practices to bring forth a tremendous amount of new gas production.”

After evaluating all the new industry information on Pinedale and Jonah, which target mainly the Lance formation, EEA estimated that the two fields total 9.8 Tcf of technically recoverable gas resources, with 3.9 Tcf in Jonah and 5.9 Tcf in Pinedale.

EEA also speculated that the stimulation and completion techniques used in these areas may open up substantial new development in other areas of the Rockies, which many hope will be the most significant contributor to future U.S. gas supply.

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