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

Canada Briefs

12/12/2014

Kinder Morgan to deliver natural gas to Corpus Christi Liquefaction

12/11/2014 Kinder Morgan Inc. (KMI) companies Kinder Morgan Texas Pipeline, Kinder Morgan Tejas Pipeline, and Tennessee Gas Pipeline Co. (TGP) have entered in...

Magnolia LNG lets EPC contract to SK E&C USA

12/03/2014 Magnolia LNG LLC parent-company Liquefied Natural Gas Ltd. agreed to an engineering, procurement, and construction contract with SK E&C USA cov...

Pipeline leak dampens Atlantic LNG production

12/01/2014 Atlantic LNG (ALNG) reported a 35% reduction in LNG production because of insufficient natural gas supply from Trinidad and Tobago’s National Gas C...

Real-time monitoring improves LNG inventory measurement

12/01/2014 Kogas has improved the calculation method for determining stocks at its LNG terminals, changing from a sampling method to a real-time monitoring sy...

Watching Government: Greece and energy in Europe

11/24/2014 Amid growing energy supply geopolitics, Greece is a stable anchor within a rapidly destabilizing region, Yannis Maniatis, its Environment, Energy, ...

Freeport LNG nears construction phase

11/19/2014 Freeport LNG Expansion LP expects later this month to close on financing and begin construction on the first two trains of its natural gas liquefac...

Woodside releases draft EIS for Browse LNG project

11/19/2014 Woodside Petroleum Ltd. has released its draft environmental impact statement (EIS) for the proposed Browse LNG project offshore Western Australia.

ANGA president calls for sharper focus on gas transportation issues

11/17/2014 America’s Natural Gas Alliance Pres. Martin J. Durbin called for a stronger focus on transportation as he outlined issues that the US gas industry ...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


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