12 March 2014, News Wires – The US Energy Information Administration on Tuesday raised its estimate for US natural gas production in 2014 to 2.5% over 2013’s record-high level, due primarily to higher output from shale plays in the Lower 48 states, according to a report.
In its March Short-Term Energy Outlook (STEO), the EIA said it expected marketed natural gas production in 2014 will rise 1.78 billion cubic feet per day from 2013 to 71.96 Bcf/d, Reuters reported.
This would be the fourth straight annual record.
EIA said it expects the Henry Hub gas spot price, which averaged $3.73 per million British thermal units in 2013, will average $4.44 per mmBtu in 2014, an increase of 28 cents from the 2014 projection in last month’s energy outlook.
EIA noted Henry Hub spot prices were volatile over the past two months with prices up from $3.95 per mmBtu on 10 January to a high of $8.15 on 10 February, before falling back to $4.61 on 27 February and bouncing back up to $7.98 on 4 March.
EIA said rapid gas production growth in the Marcellus formation, centred in Pennsylvania, is causing gas forward prices in the Northeast to fall even with or below Henry Hub prices outside of peak-demand winter months.
That may cause some drilling activity to move away from the Marcellus back to Gulf Coast plays such as the Haynesville in Louisiana and Texas and Barnett in Texas where prices are closer to the Henry Hub spot price, EIA said.
Liquefied natural gas imports have declined over the past several years because higher prices in Europe and Asia are more attractive to sellers than the relatively low prices in the United States, EIA said.
EIA said the more frigid weather in February contributed to continuing large withdrawals of gas from storage and a surge in gas spot prices, which hit record levels in several markets during periods of Arctic temperatures.
Natural gas working inventories on 28 February totaled 1.20 trillion cubic feet, 910 Bcf, or 43%, below the level at the same time a year ago and 760 Bcf, or 39%, below the five-year average (2009-13).
To rebuild stocks for next winter, EIA said higher gas prices should spur additional production and reduce demand for gas from the power sector.
Those higher prices overseas have prompted several companies to seek to build liquefaction capacity to export LNG from the United States, EIA said.
Cheniere Energy’s Sabine Pass facility with a planned capacity of 3 Bcf/d is expected to be the first to liquefy gas produced in the Lower 48 states for export when it comes on line in late 2015, EIA said.
Growing domestic production over the past several years has displaced some pipeline imports from Canada, while exports to Mexico have increased.
EIA said it expects these trends will continue through 2015 with net imports of 3.6 Bcf/d in 2014 and 2.6 Bcf/d in 2015, which would be the lowest level since 1987.