Consulting firm Global Insight has exceeded many other forecasters in predicting that Henry Hub gas prices will average more than $12/MMBtu this winter (November-March) as a consequence of massive cumulative supply losses totaling 8% of U.S. gas supply during the fourth quarter due to damage from hurricanes Katrina and Rita.
“Hurricanes Katrina and Rita will have a combined cumulative impact three times as large as that from Hurricane Ivan in 2004,” Global Insight’s Jim Osten said in his Natural Gas Weekly. Osten forecasts that by the end of December the cumulative shut-in Gulf production (both onshore and offshore) from hurricane damage will total about 500 Bcf. That compares with a prediction by Arlington, VA-based consulting firm Energy and Environmental Analysis Inc. that offshore shut-ins will total only 402 Bcf by next March (see related story on NGSA’s winter supply outlook).
Osten said while the Minerals Management Service (MMS) currently shows cumulative offshore Gulf production shut-ins at 181 Bcf, the onshore and offshore total could reach 225 Bcf by the end of September. Osten said he expects as much as 3 Bcf/d could remain offline through December because of damage to processing, deepwater platforms, rigs and other gas facilities.
“I think we’ll probably see an average of about 90 Bcf/month (shut in or delayed through December), including things like the delay for the Thunder Horse platform, which was supposed to produce about 200 MMcf/d” (see Daily GPI, July 27), Osten said in an interview with NGI. Shell’s Mars and BP’s Thunder Horse platforms are the “big ones that are damaged. Many other smaller rigs and platforms were just wiped out. There’s also more damage to gas plants onshore than there was with Ivan. It still isn’t even clear what the magnitude of the damage is to pipelines. There’s a lot more damage to platforms. Drilling rigs also are an issue.
“With Ivan you also still had most of the onshore base for the offshore industry intact,” he said. “I think there are some problems with the base areas this time. We’ve lost several hundred thousand homes, whole communities. The personnel side certainly will be an issue for a while.
“We may be overly pessimistic, but there are a lot of things that we don’t know about the processing, the people and the pipelines and some of the rigs and projects,” said Osten. “I think if you count the MMS numbers, plus the onshore situation and the foregone production, you are going to get a high number. I hope I’m being too pessimistic.”
Osten is expecting working gas levels in storage to reach only 3,050 Bcf by the end of October, which is about 277 Bcf less than working levels entering last year’s heating season. “A growing deficit in storage will support double-digit prices into next spring,” he said.
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