It may take some time before fewer drilling rigs and curtailed output make a dent in domestic onshore natural gas production. Dry gas production skyrocketed 11.6% in January from a year earlier to 2,047 Bcf gross, the Energy Information Administration (EIA) said.

In its monthly report for March, which included the January numbers, EIA said the “other states” category, which includes all of the gas producing states except for Alaska, Louisiana, New Mexico, Oklahoma, Texas, Wyoming, as well as production in the Gulf of Mexico (GOM) — basically, the Marcellus Shale and some emerging unconventional plays — recorded the biggest uplift in production both year/year (y/y) and from December 2011.

The “other states” saw production jump to 665,116 MMcf in January from 543,223 MMcf in January 2011. Output also was up from December 2011’s total of 653,397 MMcf.

All of the gas producing states showed gains y/y: Alaska, 319,849 MMcf from 239,280 MMcf; Louisiana, 273,076 MMcf from 226,870 MMcf; New Mexico, 113,736 MMcf from 107,008; Oklahoma, 166,560 MMcf from 155,786 MMcf; Texas, 689,114 MMcf from 655,623 MMcf; and Wyoming 206,143 MMcf from 200,409 MMcf. In the GOM gross gas production rose in January to 2.578 Bcf from 2.309 Bcf a year earlier.

Mild weather in the first month of the year also “created the lowest residential consumption, 802 Bcf, since 2006,” or down about 5.1% from a year earlier, said government analysts. In addition, underground storage net withdrawals also were the lowest for January since 2006 at 545 Bcf.

According to data, gross withdrawals of gas averaged 83.2 Bcf/d in January, which were the highest output levels since records were kept beginning in 1980. Gas consumption in January was higher than gross withdrawal levels by about 6%, compared with 24.6% in January 2011, EIA said.

Gas marketed in January averaged 69.3 Bcf/d, up 8.9% from a year earlier. Consumption topped gross withdrawals in January by just 6%, compared with 24.6% a year earlier. That was the narrowest gap between those figures in January on EIA data beginning in 2001.

The combination of weak demand and high production lifted the volume of working gas in storage at the end of January to a record of 2.916 Tcf at the end of the month, which was 26.5% higher than at the end of January 2011.

EIA last week revised downward by 21% its projection for gas prices this year, citing abundant storage levels and prolific production. In its Short-Term Energy Outlook for April released last Tuesday, the agency said 2012 gas prices likely will average $2.51/MMBtu, down from a March projection of $3.17/MMBtu. Natural gas spot prices averaged $2.18/MMBtu at the Henry Hub in March, the lowest average month price since April 1999, EIA said.

The weak gas prices were largely due to the growth in total marketed production last year, which rose by an estimated 4.8 Bcf/d (7.9%), the largest y/y volumetric increase in history, EIA said. “This strong growth was driven in large part by increases in shale production.” The y/y output should continue through the year, “much lower rate than in 2011 as low prices reduce new drilling plans.” Total marketed production is seen averaging 69.22 Bcf/d this year, up 3 Bcf/d from 2011.

Thanks to a warmer-than-usual winter and continuing strong shale development, gas storage is bulging at the seams. At the end of March, the official close of the winter heating season, working inventories totaled 2,479 Bcf, 887 Bcf more than last year’s level and 934 Bcf above the five-year average. In the last two decades, end-of-March inventories have not risen over 1,700 Bcf, and prior to that, rose above 2,100 Bcf only once, in 1983, EIA said. Given the current inventory state, EIA expects gas storage levels at the end of October to set a new record high as well.

Natural gas demand this year is expected to be fueled primarily by power generation, according to EIA. Gas consumption is predicted to average 69.6 Bcf/d, up 2.8 Bcf (4.2%) from 2011, and then climb to 70.54 Bcf/d in 2013. While it is projecting declines in residential and commercial gas use, gas consumption in the electric power sector is seen growing by about 16% this year — accounting for an average of 24.15 Bcf/d of total gas demand — due to the cost advantages of natural gas.

“Consumption in the electric power sector peaks in the third quarter…at 30.6 Bcf/d, when electricity demand for air conditioning is highest. This compares with 27.7 Bcf/d in the third quarter of 2011.” Next year, when closer-to-normal temperatures are predicted, EIA projects that gas demand in the residential, commercial and industrial sectors will rise, while there will be a “3.4% decline in power sector natural gas burn.”

Pipeline gross imports may fall by 0.7 Bcf/d (7.2%) this year as domestic supply displaces Canadian sources; pipeline gross exports grew by 1 Bcf/d last year driven by increased exports to Mexico, according to EIA. The gross exports “are expected to continue to grow, at a slower rate, in 2012 and 2013,” the agency said.

Expanding shale supplies in the United States will continue to take their toll on liquefied natural gas (LNG) imports. The EIA estimates that LNG imports will fall by 0.3 Bcf/d (28%) this year. It expects that an average of about 0.7 Bcf/d will arrive in the United States this year and in 2013 (mainly at the Everett LNG terminal in New England and the Elba Island terminal in Georgia), either to fulfill long-term contract obligations or to take advantage of temporarily high local prices due to cold snaps and disruptions.