Study: EIA annual natural gas outlook needs revising

Warren R. True
Chief Technology Editor-LNG/Gas Processing

HOUSTON, Nov. 12 -- The US Energy Information Administration has largely underestimated near-term US natural gas production in its Annual Energy Outlook, released early this year, according to a study by FACTS Global Energy, Singapore, released earlier this month.

EIA's own data in its October 2008 Short-Term Energy Outlook documented the annual forecast's gap. Actual production for 2007 grew by 4.3%, rather than the originally forecast 2.7%.

Forecast production for 2008 and 2009 will rise by 6.8% and 4.3%, respectively, said the Short-Term Energy Outlook, well ahead of the originally forecast 0.9% and 0.5%.

Unconventional gas
Responsible for the rapid and unpredicted growth are the massive investments in drilling in unconventional basins, mainly shale gas, coalbed methane, and tight sandstones.

Especially important in the production growth is the Barnett shale in Texas. Predictions for two other shale plays, Haynesville in Louisiana and Texas and Marcellus in the US Northeast, are for equally large increases.

FGE says that modifications of EIA's AEO 2008 are needed to reflect recent changes in long-term supply and demand balance.

Production from unconventional resources will continue to add large volumes of natural gas to the US market, says FGE. These will "more than compensate" production decline that has been ongoing in conventional fields.

Sector demand
FGE cites the lack of extensive information about reserves and production profiles in unconventional fields as its reason for taking a conservative assumption of an average 3%/year growth for 2010-11. After 2011, unconventional growth likely will slow until about 2017.

Residential and commercial demand to at least 2013 will increase by 1%/year, says the study. Not addressed in it, however, is the effect of the current downturn in the US economy and the likelihood that it slipped into recession in third-quarter 2008. Nor is this very recent event factored into FGE's estimate of 2010-13 industrial demand growth, saying it will average about 1.4%.

FGE's estimate of power demand over the next 11-12 years differs considerably from EIA's. The consulting company believes that over the period, as much as 90% of new generation capacity added in the US will be gas-powered.

This forecast is based on nearly no nuclear power generation coming online until 2019-20, uncertainty over carbon taxation preventing generators from extensive investment in coal-fired generation, and the increased production of natural gas keeping the price low, thereby making the economics of gas-fired plants vs. coal-fired ones "likely to improve."

Again, however, the FGE study fails to address the possible effect on power demand of a deep and long US recession.

LNG
Another effect of increased natural gas production from unconventional reservoirs will be to limit the need for LNG imports until 2014. LNG, says the report, will "remain marginal in the US portfolio of supplies," and the delivery of LNG cargoes will be "unlikely" to affect the price on the US gas market.

Implicit in FGE's study is that the LNG high prices in Asia that have taken spot LNG cargoes away from the US will continue. Yet, as recently as last week, LNG cargoes into India had fallen in price by a reported 50%, to about $11/MMbtu. With US LNG demand always seen as a solid market of last resort, sellers may be more willing to send cargoes to the US.

In response to OGJ questions, FGE principal consultant and head of its gas team Cecile Jovene, who wrote the study, said it is still hard to assess the impact of the financial crisis on LNG trade. "We expect demand to slow in developed countries," she said.

The "wild cards" continue to be such developing markets as China and India. "LNG supply has been constrained by high prices in recent years and [those countries'] demand could pick up should prices fall," said Jovene.

To a lesser extent, she said, the financial crisis will also affect the pace of development of greenfield liquefaction projects. "Oil and gas majors have plenty of cash and can finance their projects without debt," said Jovene. She added that ultimately construction costs should also decrease, helping "to release tensions" on LNG prices.

About the recent fall in spot Asian LNG, she said those prices don't affect the outlook of the study. That spot price decline is triggered by the "fall of oil prices and futures gas prices in the UK. We expect spot to mid-term contract prices to fall significantly" in the next 2-4 years.

Contact Warren True at: warrent@ogjonline.com

Related Articles

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

Shell makes FID on Appomattox deepwater development in Gulf of Mexico

07/01/2015 Royal Dutch Shell PLC has taken a final investment decision (FID) on the Appomattox deepwater development, authorizing construction and installatio...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

BHP, Woodside move to decommission Stybarrow field

07/01/2015 BHP Billiton Ltd. and Woodside Petroleum Ltd. have started preparations for decommissioning of the Stybarrow group of oil fields in production lice...
White Papers

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected