HOUSTON, Feb. 6�With the economy slowing, US electricity demand is expected to grow 2.3% this year and next, compared to a 3.6% growth rate in 2000, federal government forecasters predict.
Colder weather this winter is expected to drive total electricity demand, including industrial production, up 4.5% over last winter's level, boosted by the residential and commercial sectors, which are expected to be up by 6.8% and 3.7%, respectively.
In its February short-term energy outlook, the US Energy Information Administration (EIA) reported the outlook for gas storage improved in January thanks to a combination of new supply, demand cutbacks due to fuel substitution, and industrial slowdowns. It estimated overall conservation saved about 140 bcf more than anticipated in January.
According to the American Gas Association, during the week ending Jan. 26, a total of 128 bcf was withdrawn from storage, bringing the total of working gas to 38% full, or 1,241 bcf. EIA estimates that gas stocks at the end of January were about one-third below the previous 5-year average, better than previously thought, but still risky with the possibility of more cold weather in store.
Milder than normal weather eased demand during the latter part of January in much of the nation's gas consuming regions, sending spot gas prices to under $6/Mcf from $10/Mcf. But forecasters project spot and wellhead prices will remain high by historical standards.
January natural gas demand is still estimated to have increased by about 5-6% over a year-ago, as heating degree-days (HDD) averaged 3-4% above year-ago levels, down considerably from the growth rates estimated for November and December 2000. Severe winter weather pushed natural gas demand in these months up 13% higher than a year ago, led by the residential and commercial sectors.
In 2001, forecasters expect the annual average wellhead price to be close to $5/Mcf. This spring and summer, they projected monthly average wellhead prices to drop from the winter peak by about $4/Mcf as the weather-related demand recedes.
Winter price rise
But prices will turn back up during the 2001 heating season, averaging $6.14/Mcf, a 50% increase for residential customers, according to EIA forecasters.
Natural gas demand is projected to grow by 2.3% in 2001 and by 4.% in 2002, compared with estimated demand growth of 4.3 percent in 2000.
In 2001 and 2002, natural gas demand in the industrial sector is expected to increase by a hefty 3.1% and 7.5%, respectively. Natural gas demand for nonutility electricity generation in 2001 is expected to be up by about 7%. Electric utility gas demand is expected to remain about level with 2000 consumption rates, reflecting sale of generating capacity by utilities to unregulated generating companies, according to the EIA.
In 2002, "we expect the storage situation to improve modestly and with that, a decrease in the average annual wellhead price," forecasters said. But rising production costs and capacity constraints on the pipelines will help keep gas prices high in the short-term, EIA said.
Production is estimated to have risen 1.1% in 2000 and is forecast to increase by significantly higher rates of 5.4% rate in 2001 and 2.5% in 2002. EIA is forecasting net imports of gas will rise 16% in 2001 and by another 4% in 2002.
A new report by Canada's National Energy Board predicts that gas deliverability from western Canada will rise 1.1 bcf/day by 2002, due to the ongoing drilling boom. Western Canada supplies 15% of gas consumed in the US.
