While economists say the recession has ended and some economic indicators have begun to trend upward, continued weak demand led to another decline in natural gas marketing during the third quarter, with the total volume sold in North America tumbling 4% — nearly 5 Bcf/d — according to NGI‘s 3Q2009 Top North American Gas Marketers Ranking.

The 22 reporting marketers for the quarter that also participated in the 3Q2008 survey transacted 118.3 Bcf/d in 3Q2009, compared with 123.26 Bcf/d they reported in the year-ago period.

And the tough times may not be over for some marketers, despite the industry’s promising long-term outlook, according to Houston Energy Partners co-manager John Olson.

“Natural gas has great promise over the next five to 10 years, but over the next two years things are going to be volatile and tricky,” Olson told NGI.

BP plc, still the top marketer in the survey, reported physical sales of 28.10 Bcf/d, a 6% decline from 29.90 Bcf/d in 3Q2008. Shell Energy North America (US) LP moved to second from third in the survey, with a 9% increase to 15.10 Bcf/d compared with 13.80 Bcf/d in 3Q2008, while ConocoPhillips reported 14.80 Bcf/d in 3Q2009, down 5% compared with 15.50 Bcf/d in 3Q2009. Louis Dreyfus Highbridge Energy had the largest increase in the survey, up 1.89 Bcf/d (25%) to 9.31 Bcf/d in 3Q2009 compared with 7.42 Bcf/d in 3Q2008.

Source: Quarterly financial reports with the Securities and Exchange Commission, or if necessary, statements signed by company officials and provided to NGI. Some previous-year data has been updated by the companies since it was originally reported.

Companies providing data directly to NGI include BP, Chevron, ConocoPhillips, EDF Trading NA (formerly Eagle Energy Partners), JP Morgan, Louis Dreyfus, Merrill Lynch, RBS Sempra, Shell Energy and Tenaska. *Macquarie Cook integrated Constellation Energy’s gas trading business into its operation at the beginning of April 2009. No combined data is available for 3Q2008. Macquarie Cook Energy data reflects Macquarie Cook Energy LLC’s transactions in the United States and Macquarie Cook Energy Canada’s transactions in Canada. **The gas volume figures for Apache, Chesapeake, Devon, EnCana, ExxonMobil and XTO represent the amount of North American gas produced in the quarter. Those companies may be marketing more third-party gas for sale.

A dozen of the marketers reported declines and nine reported increases, an improvement of sorts over the second quarter survey, in which only six companies reported increases. While total volumes sold can be used as an indicator, it is not directly comparable to production since the same package of gas may be traded a number of times before it reaches the ultimate consumer.

Nevertheless, the steep drop in volumes sold by marketers comes as the Energy Information Administration (EIA) reported that total gas production fell by about 2%, or 1.39 Bcf/d, in September from August due to a combination of plant maintenance, repairs and shut-ins brought on by depressed gas prices (see Daily GPI, Dec. 1). Prices remained depressed and there was a decline in drilling activity, according to EIA.

Gross production from the Lower 48 states in September was 61.83 Bcf/d, down 2.2% from 63.22 Bcf/d in August. Total U.S. gas production, which includes the federal Gulf of Mexico (GOM) and Alaska, rose 0.3% to 70.46 Bcf/d in September from 70.27 Bcf/d in August, according to the agency. Gas output in the GOM in September fell 2.3% to 6.87 Bcf/d from 7.03 Bcf/d in August, while Alaskan gas production jumped to 8.63 Bcf/d from 7.05 Bcf/d in August. A year ago total domestic production stood at 64.31 Bcf/d.

Total U.S. gas demand in September was approximately 1,557 Bcf, up 98 Bcf from 1,459 Bcf in September 2008, thanks in large part to power generation gas demand. With the exception of the power generation market, “I don’t see a lot to get excited about” when it comes to natural gas demand, an official with Tudor, Pickering, Holt & Co. Securities Inc. recently told NGI (see Daily GPI, Dec. 2).

The number of drilling rigs seeking natural gas in the U.S. trended upward during 3Q2009, from a low of 665 in mid July to a high of 710 at the end of September, according to Baker Hughes, which reported rig counts as high as 1,606 in 3Q2008. The steep drop off in rig counts over the past year in part is reflective of economic turbulence and the resulting decline in demand, as well as the current overabundance of gas in storage.

As of Nov. 27 working gas in storage stood at a record 3,837 Bcf and storage injections were recorded for every week of November — after the official start of winter — for only the second time in history, according to the EIA (see Daily GPI, Dec. 4). The most recent Baker Hughes Rotary Rig Count reported no change in the number of drilling rigs actively seeking gas in the United States during the week ending Dec. 4, leaving the tally at 748. Baker Hughes’ latest count was up 2% from a month earlier but 48% less than the year-ago level.

Olson said six months ago gas demand was likely to lag behind the recession’s end and any economic recovery. Now, despite the end of the recession, the industry is still searching for signs of a demand resurgence, Olson said.

Over the past eight months “we’ve seen a surge in deliverability despite a declining rig count and a storage level which has been about 14-15% above normal and we’re drowning in the stuff right now,” he said.

“Most parts of the gas market have been OK, with the significant exception of industrial demand. That’s where you have the auto industry, the Great Lakes markets, the Rust Bowl markets, the petrochemical markets that are really in disarray. At the same time you’ve had one nice positive, which has been running 1-1.5 Bcf/d in round numbers, and that is fuel-switching from coal to natural gas because the price of natural gas got so low. So the forecasts are basically that gas demand will be down about 2% this year and, if you believe the EIA numbers, will be down another 0.5% next year, largely due to the expected reversal of the coal-to-natural gas fuel-switching.”

A return to pre-recession conditions won’t come without a boost in industrial demand, Olson said.

“The gas markets have been the gas markets; they move to a very slow pace. Most of the market — 65-70% — has held up well despite the recession. The other 30% is down about 12%,” he said. “That’s the industrial falling out.”

Highlights of NGI‘s 3Q2009 Top North American Gas Marketers Ranking include the addition of EDF Trading NA and JP Morgan to the survey. EDF Trading, which recently reached an agreement with Gazprom Marketing & Trading Ltd. to swap natural gas between the United States and United Kingdom markets (see Daily GPI, Oct. 21), reported physical sales of 4.05 Bcf/d in 3Q2009. EDF Trading’s assets include gas storage facilities, a portfolio of long-term gas contracts, regasification capacity in Europe and the United States and liquefied natural gas supply agreements. EDF Trading operates on all of Europe’s gas trading hubs and in the wholesale natural gas markets for North America. The company is a subsidiary of EDF Group, the European electricity producer.

JP Morgan joins the survey nearly a year after it announced that it would acquire UBS Commodities Canada Ltd., the Canadian energy operations of UBS AG (see Daily GPI, Dec. 23, 2008). UBS Energy last participated in NGI‘s Top North American Gas Marketers ranking in 3Q2008, when it marketed 3 Bcf/d. JP Morgan joins the survey ranked 11th with 3.79 Bcf/d transacted.

Sequent, which reported 2.70 Bcf/d, up 4% from 2.60 Bcf/d in 3Q2008, recently bought substantially all of Integrys Energy Services Inc.’s wholesale gas marketing business (see Daily GPI, Dec. 8; Oct. 30). The second part of the two-part transaction, scheduled to be completed by April 2011, will include 11.5 Bcf of storage contracts. Houston-based Sequent is a subsidiary of Atlanta-based AGL Resources.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.