US natgas supplies seen healthy for winter

02 October 2008 18:00  [Source: ICIS news]

WASHINGTON (ICIS news)--US natural gas supplies should be adequate and wholesale prices relatively stable through the North American winter, gas industry officials said on Thursday, noting that drilling and production are at record highs.

 

The Natural Gas Supply Association (NGSA) said that its analysis of natgas market fundamentals suggests “relatively stable wholesale price pressure this winter when compared to last heating season”.

 

Natural gas is widely used in the US for home heating during winter months, and it is seeing growing use as a fuel for electric power generation.  US chemicals manufacturers are heavily dependent on natural gas as a feedstock and energy resource.

 

In issuing its annual winter supply outlook, the association said it expects to see natural gas production reach its highest levels since the mid-1970s and gas output to be nearly 8% higher this winter than last year.

 

“More wells will be completed this year, nearly double the amount of wells from just six years ago and nearly 750 more than last year,” said Patrick Kuntz, the association’s chairman and vice president for natural gas sales at Marathon Oil Company.

 

“In addition, technological advances in drilling and completion methods are proving to be very successful in improving resource recovery,” Kuntz said.

 

Those advances include strong gains made in development of shale gas resources.

 

Gas supply during the 2008-2009 winter months, generally October through March, also will be aided by forecasts for a slightly warmer than normal winter, a stagnant economy, mild growth in natgas demand and relatively high gas storage levels, the association said.

 

Storage levels at the onset of winter are expected to be around 3,450bn cubic feet (bcf), close to the record storage level of 3,545 bcf reached a year ago, the association said.

 

But demand is rising, the association noted.

 

“Last year, for the first time in US history, the electric generation sector exceeded the industrial sector’s annual demand for energy,” the association said, adding that it expects that trend to continue this year.

 

“As utilities build plants to generate electricity, they are increasingly choosing clean-burning natural gas,” Kuntz said. “Natural gas now fuels about 20% of the nations electrical generating capacity, and that consumption is expected to grow again this winter.”

 

US natgas prices at the Henry Hub have been running in the $7-8/MMBtu range, still considerably above the $2/MMBtu range that was common in North America for the decade prior to 2000.

 

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By: Joe Kamalick
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