The Henry Hub spot price averaged $3.97/MMBtu in March, 12 cents below the average spot price in February, and it is likely to average $4.10/MMBtu in 2011, a decrease of 29 cents from the 2010 average, the Energy Information Administration (EIA) said in its Short-Term Energy Outlook for April.

But increasing consumption, led by strong growth in the electric power sector, will nudge Henry Hub prices to $4.55/MMBtu next year, EIA said.

The growth in total marketed natural gas production is expected to slow from 2010’s 4.5% (2.6 Bcf/d) increase, according to EIA, which projects total marketed production to grow by 2.4% (1.5 Bcf/d) to 63.3 Bcf/d in 2011 and by 0.8% (0.5 Bcf/d) in 2012. For both this year and next, EIA expects declines in federal Gulf of Mexico production to be more than offset by increases in production in the Lower 48.

The latest EIA data for monthly gas production showed a decline in Lower 48 production for January 2011, ending two consecutive months of increases. Some of the decline was caused by freeze-offs during cold winter weather that forced some producers to temporarily shut down some production.

“Production is expected to recover from these freeze-offs before beginning modest declines that will continue through the year because of a falling gas-directed drilling rig count,” EIA said. “The number of rigs drilling for natural gas, as reported by Baker Hughes Inc., has fallen from 973 in April 2010 to 889 as of April 8, 2011. The large price difference between petroleum liquids and natural gas on an energy-equivalent basis contributes to an expected shift towards drilling for liquids rather than for dry gas.”

EIA expects total gas consumption this year to increase slightly compared with 2010 levels, reaching 66.7 Bcf/d primarily because of a forecast 3.6% increase in industrial consumption. Total consumption is forecast to grow 0.7% in 2012, with a 2.9% increase in the electric power sector and a 1.3% increase in the industrial sector offsetting further declines in residential and commercial consumption.

Liquefied natural gas (LNG) imports will average 1.05 Bcf/d this year, a decrease from 1.18 Bcf/d in 2010, but increased demand in Japan, already the world’s largest LNG importer at more than 9 Bcf/d last year, will drive LNG prices higher, EIA said.

“Because of the earthquake in Japan and subsequent nuclear outages, Japan’s demand for LNG as a replacement fuel for electric power generation is expected to increase, contributing to higher global LNG prices,” EIA said.

On April 1 working gas in storage was 1,579 Bcf, slightly below last year’s level at this time. EIA expects that inventories, though somewhat below their 2010 levels for the first half of the year, will remain robust. Cold temperatures and production freeze-offs in January and February contributed to a larger-than-expected draw on inventories, EIA said.

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