U.S. gas deliverability, output gap widens

Jan. 19, 1998
Lower 48 Gas Monthly Output, Capacity [45,646 bytes] The U.S. Energy Information Administration reports that continuing increases in natural gas productive capacity in the U.S. Lower 48 this year will be more than adequate to meet normal production demand. It noted that the largest U.S. gas producing area, the Gulf of Mexico, is expected to meet its historical market share of U.S. production and maintain substantial surplus productive capacity. But EIA said that, beyond 1998, a sufficient
The U.S. Energy Information Administration reports that continuing increases in natural gas productive capacity in the U.S. Lower 48 this year will be more than adequate to meet normal production demand.

It noted that the largest U.S. gas producing area, the Gulf of Mexico, is expected to meet its historical market share of U.S. production and maintain substantial surplus productive capacity. But EIA said that, beyond 1998, a sufficient number of discoveries or imports must be added to ensure an adequate gas capacity and supply.

Capacity on the upswing

The EIA report said that the decline in gas productive capacity that began in 1986 was clearly reversed in 1996, and capacity is expected to continue increasing through 1998 under its high, low, and base case forecasts.

It said exceptionally high "peak-day" or "peak-week" heating or cooling demand may temporarily exceed projected productive capacity, or production may be limited by other factors such as pipeline availability, but various methods, such as deliveries from storage and peak-day shaving, are available to meet peak demand.

EIA said, "For decades, the Lower 48 states' natural gas productive capacity has been adequate to meet production requirements. In the 1970s, the capacity surplus was small because of market structure (split between interstate and intrastate), increasing production requirements, and insufficient drilling.

"In the early 1980s, lower production requirements, together with increased drilling and price incentives for tight gas, led to a large surplus capacity.

"After 1986, this large surplus began to decline as requirements for gas increased, gas prices fell along with oil prices, and gas well completions dropped sharply.

"In late December 1989, the decline in this surplus, accompanied by exceptionally high requirements and temporary weather-related production losses, led to concerns about the adequacy of productive capacity for natural gas.

"These concerns were moderated by the gas system's performance during the unusually severe winter weather in March 1993 and January 1994."

Deliverability uncertainty

EIA said that, at yearend 1995, deliverability into the Lower 48 pipeline system was about 53 bcfd of dry gas, only 85% of the dry gas productive capacity at the wellhead.

"However, there is substantial uncertainty in this deliverability estimate. Should the surplus in wellhead productive capacity decline, more reliance would be placed on gas withdrawals from storage to meet peak heating and cooling demand. Gas storage requirements can be met by maintaining gas productionellipsecloser to gas productive capacity throughout the year. This would lead to smaller seasonal variations in gas production."

EIA said that, although imports and storage improvements in recent years have increased the flexibility of the supply system, they have not prevented price spikes like that in late 1996, when gas demand was high and there was an industry perception of actual or potential tightness in gas supply.

It concluded, "The increased drilling in 1996 and projected increases in 1997 and 1998 allow for increased production and an increasing surplus capacity."

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