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EIA Expects Uptick In U.S. NatGas Production As Prices Soar

Natural Gas Storage

Embattled U.S. natural gas producers have a reason to perk up: the Energy Information Administration has forecast that natural gas production in the country over the second half of the year will increase, stimulated by a continuing rally in gas prices.

The average spot price of natural gas at Henry Hub in June was US$2.52/mmBtu, up over 30 percent from May. The increase came on the back of greater demand from the power generation sector and lower production. The June price was also the highest monthly average since September last year.

Though the news is good in that it could encourage producers to lift output, higher prices could eventually have a negative effect on demand, with power plants switching to coal to save money. Still, overall consumption is growing persistently, the EIA said, estimating the 2016 average to be 76.5 bcf a day, compared with 75.3 bcf/d last year. The average for 2017 is projected at 77.7 bcf/d. Besides greater demand from power plants, rising gas exports are also a factor contributing to the price rise.

The EIA has projected that the U.S. is on track to become a net natural gas exporter by the second half of 2017, with shipments to Mexico on the rise as well as LNG exports from the Gulf coast. The administration forecast a 700 mcf daily increase in pipeline exports in 2016, which will slow down to 200 mcf in 2017 to reach a daily average of 5.3 bcf. Demand from Mexico will be the key driver of the increase, as power plant gas consumption there is growing, while local production is stalling. Related: Is China’s Silk Road Fund About To Make A Big Move In Gold?

LNG exports following the start of operation at the Sabine Pass liquefaction plant in Louisiana should rise by an average 500 mcf per day this year, and 1.3 bcf a day next year.

Gas imports, on the other hand, are seen to drop from 2.6 bcf a day last year to 200 mcf in 2017, the EIA also said in its Short-Term Energy Outlook.

By Irina Slav for Oilprice.com

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