Natural gas production in North America fell about 4.5% year-over-year in the first quarter, with U.S. production off 6%, according to Lehman Brothers’ latest oil and gas exploration and production survey. This year, gas production volumes are forecast to fall 2% in the United States and 2-3% in Canada, according to Lehman Brothers.
In contrast, the U.S. Energy Information Administration estimates that U.S. dry gas production was flat in the first quarter and will rise 1.2% this year to 19.31 Tcf.
Lehman Brothers analyst Tom Driscoll concluded that U.S. gas demand hit a 10-year low in 2003, and “further supply declines are likely to keep supply and demand tight and prices strong.” Overall, U.S. gas supply, including imports, is expected to fall 2% in 2004 and 1% in 2005, he said.
Because of the declines, “the U.S. market will become more reliant on liquefied natural gas (LNG) imports.” Driscoll estimated LNG imports to the United States would double to 7% of total U.S. supply by 2008, with Trinidad expected to remain the primary U.S. supplier.
Lehman analysts surveyed 53 North American producers, which account for 70-75% of U.S. and Canadian natural gas volumes. Before royalties, estimated at 18.75%, the surveyed U.S. companies were estimated to account for 32.8 Bcf/d of production — 73% of total U.S. volumes.
In the first quarter of 2004, U.S. gas production for the producers surveyed decreased an estimated 0.5-1% sequentially and about 6% over 1Q2003. In Canada, gas production was flat sequentially and down 0.5-1.5% from 1Q2003.
The EIA, however, estimates that dry gas production remained at 4.78 Tcf in the first quarter, slightly higher than the fourth quarter 2003 total of 4.77 Tcf and about the same as in the first quarter of 2003. EIA said net gas imports fell to 0.80 Tcf in the first quarter from 0.82 Tcf in 1Q2003, and EIA expects net imports to fall this year to 3.13 Tcf from 3.15 Tcf in 2003. EIA expects LNG imports to rise 22% this year to 620 Bcf or about 1.7 Bcf/d.
LNG imports in the first quarter of 2004 averaged 1.65 Bcf/d, or about 3% of total U.S. supply, according to the Lehman Brothers report. The first quarter estimate is “slightly higher” than 4Q2003 import levels of 1.6 Bcf/d.
Among the U.S. producers surveyed, the biggest production loss year-over-year was by Amerada Hess, which, on asset sales, saw its production fall 42%. El Paso Corp., which also has sold numerous assets in the past year, reported a 36% loss in production compared with 1Q2003. Other production losses year-over-year included Unocal, 27%; Spinnaker and Swift, 23%; Noble Energy, 16%; ChevronTexaco, ExxonMobil and Williams, 15%; Marathon and Plains Exploration, 14%; ATP, 12%; National Fuel and Total, 11%; and BP, 10%.
There were a few notable production gains for U.S. producers, including Pioneer Natural Resources, up 46%; EnCana (U.S.), 25%; XTO, 21%; Chesapeake, 18%; Tom Brown, 13%; and Forest Oil, 12%. Cimarex gained 9% year-over-year, while Murphy Oil, Magnum Hunter and Nexen (U.S.) all gained 8%.
Of the 14 Canadian producers surveyed, the biggest production loss year-over-year was ConocoPhillips, off 10%. Losses were also recorded by Nexen (Canadian), 8%; Burlington Resources, 6%; Talisman and PetroCanada, 5%; and Anadarko, 4%.
EnCana’s Canadian operations showed the most impressive production gains, up 21% year-over-year. Small gains were also reported by EOG Resources, 3%; and Devon, 2%.
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