# Presentation: 811671

## Energy Information Adminisration’s Outlook On Natural Gas 

**Arkansas Public Service Commission**
** ****“****The Future Supply And Price of Natural Gas”**
**June 3, 2003**
**Barbara Mariner-Volpe**
**Energy Information Administration**
**Barbara.MarinerVolpe@eia.doe.gov**

**www.eia.doe.gov**

## Presentation Coverage

**Winter 2002/2003**
**Status of Working Gas Storage**
**Natural Gas Market Outlook**

## High Natural Gas Prices in Winter 2002-2003

** ****High crude prices**
** ****Cold temperatures in major gas markets**
**   ****-     New England, Middle Atlantic states **
** ****Weak production **
**Decrease in net imports in 2002**
**Relatively heavy stock drawdown**

## Gas Prices Were High But Less Than Crude Prices Till Spring 2003

**Source:  NGI's Daily Gas Price Index**

## Winter 2002/2003: Colder Than Previous Winter and in Some Key Markets, Colder than Normal  (Cumulative Heating Degree Days, Heating Season 2002-2003)

- Source: Energy Information Administration, derived from Heating Degree Day Monitoring, National Climatic Center.

## Gas Rigs Tend To Follow Spot Prices With A Lag and Led to Production Declines in 2002

- Source: Natural Gas Intelligence Weekly Gas Price Index, Baker-Hughes Weekly US Rig Report.

## NATURAL GAS STORAGE

## Natural Gas Stocks are Beginning to Recover from Winter Lows 

**Natural Gas Stocks are Beginning to Recover from Winter Lows **

## Assuming Average Refill Rates, Natural Gas in Storage on Nov. 1 Will be Low Relative to Recent History

- Working Gas in Storage
- (billion cubic feet)

- Storage Stocks as of November 1

**Source: EIA data and estimate assuming average refill rate from May 16 – Oct. 31.**

## Working Gas Stock Projections Compared to Historical Levels

- Average
- 1998-2002

- Band is Maximum
- and Minimum Values
- 1998-2002

**~ 2,500 Bcf**
**assuming 5-Yr. Avg. Refill Rate**

**~ 2,900 Bcf**
**assuming 2001**
**Refill Rate**

- 1,085 Bcf as of
- May 23, 2003

**Source: EIA Weekly Natural Gas Storage Survey and EIA estimates.**

## Short-Term Outlook

## Short-Term Outlook: Natural Gas

- Demand expected to fall slightly in 2003 then increase in 2004
- Economic recovery will increase industrial demand in 2004
- Growing gas-fired electricity capacity
- Continued pressure on prices (Average wellhead price around $5 in 2003), dependent on weather and market conditions.
- Supply picture is mixed
- Need increasing completion rates to offset decline from producing wells
- Expect net imports in 2004 to remain at 2003 level
- Storage refill is a question

## Demand Growth Expected in 2004, But Level Stays Below 2000 Peak 

## U.S. Natural Gas Production Growth Requires High Rig Growth

**Sources: EIA, Baker Hughes Gas Rig Counts, **
**Short-Term Energy Outlook, May 2003**

## Natural Gas Storage : Expected to Remain Low

**Natural Gas Storage : Expected to Remain Low**

**Source: EIA, May 2003, Short-Term Energy Outlook**

**History**

**Projections**

**Billion Cubic Feet**

## Distillate and Propane stocks are expected to remain low  relative to normal levels

**Distillate and Propane stocks are expected to remain low  relative to normal levels**

**Colored Band is normal inventory range**
**Source: EIA, Short-Term Energy Outlook, May 2003**

## Near-Term Natural Gas Market Issues

**Supply:**		Will supply increase enough to satisfy 				growth  in consumption? Will boom and 				bust cycles discourage investment?
**Weather:****	**	The possibility of a hot summer or cold 				winter would put upward demand pressure 			on gas markets.
**Storage:**		Will refill be adequate for next winter’s 				demand?
**Consumption:**	Will forecasted growth in natural gas  				consumption be realized? How will 				consumption be affected by price level and 			volatility, fuel competition and service 				requirements of electric generators?

## Long-term Outlook for the Natural Gas Market 

- U.S. gas demand is projected to grow 54% by 2025, to 35 Tcf
- Prices will increase slowly to about $3.90 (2001 dollars/mcf) in 2025 ($7.06 in nominal dollars)
- Imports increase to about 7.8 Tcf by 2025 (including 2.1 Tcf of LNG imports)
- Rising prices and technology improvements increase reserve additions and production
- Alaskan Pipeline expected to start service in 2021

## Natural Gas Supply, Consumption, and Imports Are Projected to Expand Through 2025(Trillion cubic feet)

**Natural Gas Supply, Consumption, and Imports Are Projected to Expand Through 2025****(Trillion cubic feet)**

## U.S. Natural Gas Consumption by Sector, 1990-2025(trillion cubic feet)

**History**

**Industrial**

**Electric generators**

**Residential**

**Commercial**

**CNG vehicles**

**Projections**