After anxiously waiting to see just how large the Energy Information Administration’s (EIA) downward production revisions for all of 2009 and January 2010 would be, the natural gas industry discovered Thursday morning that while the previous estimates did overstate U.S. production, revision expectations turned out to be larger than reality.
The long-awaited release by the EIA of U.S. production revisions revealed that the previous report of 63.43 Bcf/d being produced from the Lower 48 during January 2010 was actually 0.9%, or 0.6 Bcf/d, too high. Under the administration’s new 914 reporting methodology, the EIA revised its previous number for January to 62.85 Bcf/d, noting that nearly all of the 0.6 Bcf/d downward revision came from the federal Gulf of Mexico (GOM), Louisiana and Texas.
The EIA said February 2010 production data for the Lower 48 of 63.85 Bcf/d grew by 1.6%, or 1 Bcf/d, over the revised January number, with the largest increase seen in Texas with roughly a 0.35 Bcf/d (1.7%) increase. The government agency found that Louisiana, sparked by the continued development of the Haynesville Shale, displayed the largest percentage increase at 5.7%, or about 0.3 Bcf/d.
Smaller-than-expected revisions combined with a larger-than-expected 83 Bcf natural gas storage injection Thursday morning to plunge June natural gas futures values below $4 (see related story).
“We had two things happen on Thursday of great interest to the natural gas markets and industry,” said Tom Saal, a broker with Hencorp Futures in Miami. “The storage figures were a little larger than expected, which makes short-term traders a little jittery. Then we got the production revisions, which were smaller than most people were expecting. I think traders were expecting a little larger of a reduction in production than what the government revealed. Those things combined on Thursday to give us a big sell-off in natural gas futures. That said, we haven’t done any real new damage. While we’ve wiped out a lot of the upward price move of the last week or so, we have not taken out the prior low at $3.810.”
There has been some controversy over the agency’s production estimates in the last year with independent analysts saying EIA has consistently overestimated volumes and failed to track the production decline that has accompanied the declining prices (see Daily GPI, April 27; April 9). While EIA’s calculations through much of 2009 showed about a 1 Bcf/d drop in production, those of outside analysts ranged as high as a 4-5 Bcf/d fall in production (see Daily GPI, Jan. 14).
EIA started reviewing its production survey procedures about a year ago and said last month the new methodology would be unveiled with the April 29 announcement of the estimates for February (see Daily GPI, March 30). The EIA applied the new methodology to revise previous estimates for 2009 and January 2010.
The revisions fell well within the expected range set by analysts at Tudor, Pickering, Holt & Co. Securities Inc. “We’re expecting [a] 1 Bcf/d downward revision to 2H’09/Jan’10…anything greater [is] generally bullish,” the analysts said prior to the report’s release (see Daily GPI, April 28).
Revisions to 2009 estimates for the Lower 48 were generally negative as well, ranging from minus 0.3% at the beginning of the year to minus 1.3% at year end. The EIA reported that downward revisions in Texas, Louisiana and the federal Gulf of Mexico accounted for about three-quarters of the Lower 48’s growing difference from January through December 2009. This difference between the new estimates and the previous estimates grew by 0.65 Bcf/d over the year. At the end of 2009 the new estimates are roughly 0.84 Bcf/d less for the Lower 48, or about 1.3%.
“There is very little change in the estimates for Wyoming and Oklahoma [during 2009],” the EIA said. “Louisiana had the largest percent change at roughly 5% lower than the previous estimates at the end of 2009.”
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