U.S. natural gas consumption significantly outpaced domestic production in 2007, keeping Henry Hub spot prices on average north of $7 for the year, the Energy Information Administration (EIA) said last Tuesday in its Short-Term Energy Outlook for January.
Consumption increased by 6% to 62.88 Bcf/d in 2007 from 59.32 Bcf/d in the year-earlier period, while total marketed production rose modestly to 54.43 Bcf/d from 53.10 Bcf/d in 2006, the agency said. Gas demand in 2007 “[was] driven largely by increases in the residential, commercial and electric power sectors that occurred earlier in the year,” the EIA noted. It expects gas consumption hikes in 2008 and 2009 to be more modest — 0.6% and 1%, respectively — due to anticipated near-normal weather during both years.
Domestic marketed gas production “was estimated to have risen by 2.5% in 2007, with the increases in onshore Lower 48 production [to 45.52 Bcf/d] offsetting declines in the offshore Gulf of Mexico [to 7.67 Bcf/d],” according to the EIA. In 2008, the agency sees marketed production increasing by 1.6% to 55.28 Bcf/d primarily due to the start-up of new deepwater Gulf supply infrastructure, which is expected to increase Gulf production by 7.9% to 8.27 Bcf/d for the year. Lower 48 production is likely to rise by 0.5% to 45.73 Bcf/d this year.
The EIA said it sees the reverse occurring in 2009 — a drop in offshore production to 8.04 Bcf/d and a modest hike in onshore activity to 46.10 Bcf/d. “[An] anticipated 2.8% decline in production from the Gulf due to steep decline rates in the offshore fields is expected to be offset by production growth of 0.8% in the Lower 48 onshore region, resulting in net growth in total marketed production of 0.2%.”
Spot gas prices stayed above the $7 mark due in part to the supply and demand imbalance. The EIA estimates that the spot price averaged $7.17/Mcf in 2007 and is expected to average $7.78/Mcf in 2008 and $7.92/Mcf in 2009. It reported that the Henry Hub spot price averaged $7.32/Mcf in December and is projected to climb to slightly more than $8/Mcf in both January and February.
The EIA said working gas in storage at the end of December was 2,921 Bcf, 222 Bcf above the five-year average and 160 Bcf below the level last year at that time.
Imports of liquefied natural gas (LNG) climbed to about 781 Bcf last year, a 34% increase over 2006, the agency noted. “The import volume in 2007 varied significantly throughout the year; the highest daily receipts of over 3 Bcf occurred in the spring and the lowest daily receipts of less than 1 Bcf occurred in recent months. The latest decline in LNG imports to the United States has been caused by the combination of increased demand and higher natural gas prices in other markets around the world, including Asia and Europe.”
The EIA sees annual import volumes climbing to about 937 Bcf and 1,179 Bcf in 2008 and 2009, respectively.
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