Natural Gas Production in 2013 to Increase as Prices Rise

From Bloomberg

Marketed natural-gas production in the U.S. this year will top 70 billion cubic feet a day for the first time amid gains from onshore reserves and higher prices, a government report showed.

Daily output will average 70.01 billion cubic feet, up from 69.9 billion estimated in May, the Energy Information Administration said in its monthly Short-Term Energy Outlook, released today in Washington. Production will set a record for the sixth straight year as new wells come online at shale formations, such as the Marcellus in the Northeast and the Bakken in North Dakota, government data show.

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.92 per million British thermal units, up from the May estimate of $3.80, according to the report from the EIA, the Energy Department’s statistical arm. The average for third quarter was raised 7.4 percent to $4.05 from $3.77.

Colder winters in 2013 and 2014 compared with unusually warm weather in 2012 are “expected to increase the amount of natural gas used for residential and commercial space heating,” the EIA said. Onshore production will increase this year and in 2014 while federal Gulf of Mexico output drops.

Gas inventories at the end of October will total 3.813 trillion cubic feet, revised higher from 3.796 trillion estimated last month, according to the report. Supplies rose to a record 3.929 trillion last November.

Lower 48

Production in the lower 48 states will average 64.96 billion cubic feet a day, up from last month’s estimate of 64.77 billion. The forecast for total gas consumption fell to 70.04 70.17 billion cubic feet a day from 70.17 billion.

The U.S. is exporting a record amount of gas by pipeline to Mexico, which is seeing its usage of the fuel rising faster than domestic production, the EIA said. Daily exports from the U.S. jumped almost 29 percent to average 1.6 billion cubic feet a day this year as of May 6 from a year earlier, government data show.

An above-normal hurricane season this year may curtail production in the Gulf of Mexico by 46 billion cubic feet, compared with 32.1 billion last year, according to the report. Gulf output in 2013 will average 4.14 billion cubic feet a day.

“The growing share of total production from inland areas has reduced the vulnerability of overall U.S. oil and natural gas supply to hurricanes,” the EIA said.

Demand for gas from power plants will average 22.49 billion cubic feet a day this year, lower than the previous estimate of 22.78 billion. The estimate for daily industrial use rose to 19.88 billion cubic feet from 19.79 billion in May’s report.

Natural gas for July delivery fell 4.6 cents, or 1.2 percent, to $3.754 per million Btu at 1:43 p.m. on the New York Mercantile Exchange. Prices have gained 12 percent this year.

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