If you thought gas prices were high enough already, think again. The nation’s major natural gas producers said they are still struggling to grow gas supply, and their difficulties, combined with the need to refill storage during a slightly warmer than normal summer should drive prices even higher.

U.S. gas consumers should prepare for $6 or $6-plus prices for the “foreseeable future,” Natural Gas Supply Association (NGSA) Chairman Bill Transier said during a conference call last Wednesday on NGSA’s Summer Outlook.

“[NGSA] doesn’t really predict prices but…if you look at the forward curve [of Nymex futures prices] it shows $6 prices out through the rest of this year and really out through [most of] next year,” Transier noted in response to a question from the Chicago Tribune. “Unless something changes dramatically in the supply equation, or if demand falls off dramatically, I think you can expect prices to be in this range or maybe even higher going forward.”

Using statistics from Virginia-based consulting firm Energy and Environmental Analysis Inc. (EEA), NGSA said it expects natural gas production to be flat this summer compared to last summer at 51.3 Bcf/d, despite a 34% increase in the rig count to 925 rigs (and an expected 974 rigs this summer) and a 43% increase in annual well completions to 22,800 gas wells.

The major producers attributed the continuing supply struggle to the maturity of the gas fields they are producing and the sharp decline rates in production from those fields. Although the rig count and well completions are much higher than last year, producers say access restrictions in the Rocky Mountain region and the eastern Gulf of Mexico have prevented them from targeting some of the largest potential gas resources left in the United States.

Liquefied natural gas (LNG) imports are expected to double this summer compared to last, reaching about 364 Bcf. The re-opening of the Cove Point LNG import terminal in Maryland will add 274 Bcf of supply and 5 Bcf of storage space in the Mid Atlantic region. However, Canadian imports are expected to fall 3% this year. Canadian producers are facing some of the same challenges as U.S. producers, said Transier.

Meanwhile, traditional demand is expected to be flat, but the need to refill storage is significantly higher than average. The economy is struggling and industrial demand is expected to be down 8% this summer to 18.5 Bcf/d, according to statistics from Energy Ventures Analysis Inc. (EVA).

Although there will be a 39,000 MW increase in gas-fired generation capacity this summer, EVA sees a 0.5 Bcf/d drop in demand from power generation because of the “efficiency effect” of the new combined cycle units, which will be replacing older less efficient gas- and oil-fired units, NGSA said. However, the summer also is projected to be warmer than normal, which could change the story on the generation sector.

Gas demand from the industrial, commercial, residential and power generation sectors is expected to be down 3.1% this summer, but storage injection demand is expected to soar to 66.5 Bcf/week compared to 53.9 Bcf/week last summer. NGSA said that storage injections will have to increase 23% this summer in order for storage to be refilled to 2.7 Tcf by Nov. 1.

“This level would be comparable to 2000 when we entered the winter with only 2.75 Tcf in storage according to [the Energy Information Administration],” NGSA noted. “The low storage level in 2000 was one of the factors that contributed significantly to record prices during that winter. To reach last year’s storage level of 3.2 Tcf at the beginning of the heating season, injections during the summer season will have to average 83 Bcf/week.

“As a result of the desire to reach adequate end-of-the-season storage levels, there will be significant industry pressure to increase storage injections, causing increased competition for natural gas” between industrial customers, power generators, and local utility companies trying to fill storage.

“This increased competition will likely cause natural gas prices to remain at higher levels for most of the summer season,” the outlook concluded. For a copy of the NGSA’s Summer Outlook, go to https://www.ngsa.org/.

©Copyright 2003 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.