EIA hikes production loss estimate from deepwater drilling ban

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, July 8 -- The Obama administration’s 6-month deepwater drilling moratorium will reduce US crude oil production by an estimated 31,000 b/d during this year’s fourth quarter, the US Energy Information Administration predicted in its latest short-term energy outlook. This latest estimate was notably higher than the 26,000 b/d figure in EIA’s June monthly forecast.

EIA’s latest US oil production decline estimate for 2011 resulting from the moratorium was an average 82,000 b/d, higher than the 70,000 b/d estimate in its June forecast. Reductions will increase from a monthly average of 10,000 b/d in September to nearly 100,000 b/d in December 2011, EIA said in the July 7 forecast. It said it would continue to refine its moratorium impact estimates as more information becomes available.

EIA said it still projects a 75,000 b/d increase in US oil production for 2010 to an average 5.39 billion b/d, despite an expected heavier hurricane season in the Gulf of Mexico with a median forecast of 26 million bbl of shut-in crude production because of tropical systems.

But EIA also said US crude production in 2011 would fall by 26,000 b/d to an average 5.37 million b/d, reflecting growing impacts of the deepwater drilling moratorium.

Two other government energy analysts at the Federal Reserve Bank of Dallas suggested in their latest quarterly energy update on July 1 that the moratorium should not have a significant impact on wells that are currently producing. A federal appeals court judge’s decision to repeal the moratorium and the Obama administration’s pledge to appeal the ruling and reinstate the ban creates “considerable uncertainty,” Jackson Thies and Mine Yucel said.

Natural gas outlook
EIA also estimated that US natural gas production would average 61.3 bcfd in 2010, 1.3 bcfd more than in 2009, before falling to an average 60.9 bcfd in 2011. EIA anticipates that onshore gas production growth will help offset declines from wells in the gulf, where it expects production to drop by about 10% both this year and in 2011 because of the moratorium and hurricane outages.

EIA said it expects the moratorium to trim gas production in the gulf by an average 0.05 bcfd during 2010’s final 6 months and 0.25 bcfd during 2011. Storm-related shut-ins during the 2010 hurricane season will cut production by an estimated cumulative 166 bcf, significantly higher than the 2009 figure of 19 bcf, it indicated.

Onshore gas production in the Lower 48 is expected to grow by 2 bcfd, or 3.8%, in 2010 and 0.2 bcfd, or 0.3% in 2011, according to EIA. It noted that Baker Hughes Inc.’s gas rig counts climbed from below 670 in July 2009 to about 950 this past April and have remained relatively stable since.

EIA said its forecast of LNG imports for 2010 now averages 1.37 bcfd, about 0.14 bcfd less than in its June forecast, and that it expects US LNG imports to grow to an average 1.52 bcfd in 2011. “While imports are expected to grow, higher prices in European and Asian markets will likely divert LNG cargoes from the United States,” it added.

It also forecast that gross pipeline imports of gas will average 8.8 bcfd in 2010, about 2.9% less than in 2009, and 8.2 bcfd in 2011. Storage inventories totaled 2,684 bcf as of June 25, 27 bcf below the level a year earlier and 287 bcf higher than the 5-year average, EIA said. It said that it expects working gas inventories this year to remain very near 2009 levels, reaching 3,810 bcf by the end of October.

Contact Nick Snow at nicks@pennwell.com.

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