NGSA forecasts higher gas production this winter

Oct. 9, 2006
A dramatic natural gas market recovery following last year’s two major Gulf Coast hurricanes points to higher production and lower prices in the 2006-07 winter heating season, the Natural Gas Supply Association said on Sept. 28.

A dramatic natural gas market recovery following last year’s two major Gulf Coast hurricanes points to higher production and lower prices in the 2006-07 winter heating season, the Natural Gas Supply Association said on Sept. 28.

Onshore production, which was already growing moderately from expansions in the Rocky Mountains and Texas before Hurricanes Katrina and Rita hit, also contributed to the rebound, NGSA Pres. Chris Conway told reporters in Washington, DC.

“Going forward in 2007, the key market drivers point to a continued steady increase in production, reflecting high rig counts and the startup of major new deepwater developments,” he said.

An average of 1,417 gas rigs were at work in the US during August, up from 1,230 a year earlier, according to NGSA’s forecast, which was prepared by Energy & Environmental Analysis Inc., Arlington, Va. It said this suggests gas well completions will climb to 30,100/year in 2006 from 27,000/year in 2005.

US gas production could climb to an average 50.7 bcfd from 40.9 bcfd, while imports from Canada decline to 8.4 bcfd from 9.2 bcfd, NGSA said. It forecast an increase in LNG imports to 2 bcfd from 1.5 bcfd.

“Most of the increased activity in recent years has been onshore, concentrated in noncommercial gas production: tight gas, coalbed methane, and shale gas. Offshore activity, meanwhile, has been fairly constant during the past few years,” said Conway, who also is president of ConocoPhillips’s gas and power division.

Going into winter, gas storage will reach 3,500 bcf, with 65 bcf of additional capacity, up from 3,264 bcf and 20 bcf more capacity a year earlier, the forecast said.

NGSA warned that weather, which is expected to be colder this winter than during the 2005-06 heating season, could partially offset downward price pressure from increased supplies and higher production.

It said Global Insight, one of the consultants which NGSA used to develop its winter gas demand outlook, expects upward price pressure from economic expansion to be relatively flat as growth in gross domestic product falls to 2.7% from 3.4%, manufacturing declines to 3.5% from 4.7%, and the Department of Labor’s Consumer Price Index slows to 3.3% from 3.7%.

The forecast suggests that unemployment will average 4.8% nationwide this winter, unchanged from a year earlier.

Consumers and policymakers should not become complacent, NGSA warned. “The country continues to appreciate the comfort and convenience of natural gas, which is 83% domestically produced. The industry has made tremendous strides in hurricane recovery, yet continues to seek additional sources of cost-effective supply for consumers,” Conway said.