# Presentation: 668319

## Natural Gas Outlook

**Presented to:**
**Ohio Oil & Gas Association Conference**
**March 12, 2004**
**Presented by:**
**Guy F. Caruso, Administrator**
**Energy Information Administration (EIA)**
***Guy.Caruso@eia.doe.gov***

**www.eia.doe.gov**

## Short-Term Outlook for Natural Gas

**WELLHEAD PRICE**:  $5.04 per Mcf in 2004, $4.87 in 2005
**CONSUMER PRICES****: **higher this winter  v. last;
-                                                   consistent relief not likely until 2005
**CONSUMPTION**: Some recovery in 2004 from decrease in 2003
**SUPPLY**** **:  Cautious Optimism because of the following:
- Production increases expected in 2004 and 2005
- Storage stocks higher than this time last year
**CAVEAT**:  Outlook incorporates NOAA weather forecast.  Extremes in market or weather conditions could change this outlook.

## Natural Gas Spot Prices Continue to Be Volatile(Dollars per MMBtu)

**Natural Gas Spot Prices ****Continue to Be Volatile****(Dollars per MMBtu)**

- Source: *Natural Gas Intelligence*, Natural Gas Index

**Henry Hub Daily **

**Midpoint Price **

**$18.85 on 2/25/03**

## Gas Rigs Tend To Follow Spot Prices With A Lag

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

**Gas Rigs Tend To Follow Spot Prices With A Lag**

*****

*****

## A Growing Percentage of Production Flows from Wells Three Years Old or Less

**Sources: EIA.**

**0**

**10**

**20**

**30**

**40**

**50**

**60**

**Percent Total Wellhead **

**Capacity**

**2003**

**< 1 Year Old**

**< 2 Years Old**

**< 3 Years Old**

**1993**

**< 1 Year Old**

**< 2 Years Old**

**< 3 Years Old**

## Reserve Additions Exceeded Production for 8 of the Last 9 Years

- Source: Energy Information Administration, Advance Summary of *U.S. Crude Oil, Natural Gas, and Natural Gas Liquids *
*Reserves 2002 Annual Report*

## U.S. Gas Production Is Expected to Increase in 2004 and 2005 

- Sources: EIA, *Short-Term Energy Outlook*, March 2004

**Projections**

## Natural Gas Import Sources

- Sources: History:  EIA;  Projections: *Short-Term Energy Outlook* March, 2004.

**Natural Gas Import Sources**

**LNG Imports:**
**2003: 510  Bcf**
**2004: 640  Bcf**
**2005: 750  Bcf**

## Projected Import Terminal CapacitiesBcf Per Day

**Projected Import Terminal Capacities****Bcf Per Day**

- Source: *EIA, Office of Fossil Energy, trade press, and industry estimates.*

|  | 2002 | 2003 | 2004 | 2005 | 2006 |
| --- | --- | --- | --- | --- | --- |
| Cove Point | 0 | 1 | 1 | 1.32 | 1.32 |
| Elba Island | 0.675 | 0.675 | 0.675 | 1.075 | 1.075 |
| Everett | 0.55 | 0.71  | 0.71 | 0.71 | 0.71 |
| Lake Charles | 1 | 1 | 1 | 1 | 1.3 |
| Total | 2.225 | 3.385 | 3.385 | 4.105 | 4.405 |

## U.S. Import Terminal Capacity

**Billion Cubic Feet per Day**** **

- Source: Energy Information Administration

## Working Gas in Underground Storage Compared with 5-Year Range

- Sources: EIA, *Short-Term Energy Outlook*, March 2004

## Monthly Consumption, Production and Net Imports

**Consumption**

**Net Imports**

**Production**

| Consumption | Total
Tcf | Daily
Bcf/d |
| --- | --- | --- |
| 2003 | 22.0 | 60.2 |
| 2004 | 22.5 | 61.6 |
| 2005 | 22.6 | 62.0 |

**Projection**

- Source: EIA, *Short-Term Energy Outlook*, March 2004

## Natural Gas Spot Prices Are Expected to Average $5.05 This Winter(Base Case and 95% Confidence Interval*)

** ****0.0**

** ****1.0**

** ****2.0**

** ****3.0**

** ****4.0**

** ****5.0**

** ****6.0**

** ****7.0**

** ****8.0**

** ****9.0**

** ****10.0**

** ****Jan-02**

** ****Mar-02**

** ****May-02**

** ****Jul-02**

** ****Sep-02**

** ****Nov-02**

** ****Jan-03**

** ****Mar-03**

** ****May-03**

** ****Jul-03**

** ****Sep-03**

** ****Nov-03**

** ****Jan-04**

** ****Mar-04**

** ****May-04**

** ****Jul-04**

** ****Sep-04**

** ****Nov-04**

** ****Jan-05**

** ****Mar-05**

** ****May-05**

** ****Jul-05**

** ****Sep-05**

** ****Nov-05**

**Monthly**

** ****Dollars per Thousand Cubic Feet**

**Projections**

**Natural Gas Spot Prices Are Expected to Average $5.05 This Winter**(Base Case and 95% Confidence Interval*)

****The confidence intervals show  +/- 2 standard errors based on the properties of the model.  The ranges do not include the effects of major supply disruptions.***
- Sources: History:  EIA;  Projections: *Short-Term Energy Outlook*, March 2004.

**Average Spot Price:**
**about $5.19/Mcf in 2004**
**about $5.17/Mcf in 2005**

## In 2004-05, Gas Demand Is Expected to Recover from the Decrease in 2003

- Sources: History:  EIA;  Projections: *Short-Term Energy Outlook*, March 2004.

** ****-6%**

** ****-4%**

** ****-2%**

** ****0%**

** ****2%**

** ****4%**

** ****6%**

** ****8%**

** ****10%**

** ****12%**

**1992**

**1993**

**1994**

**1995**

**1996**

**1997**

**1998**

**1999**

**2000**

**2001**

**2002**

**2003**

**2004**

**2005**

**Percent Change**

**0**

**10**

**20**

**30**

**40**

**50**

**60**

**70**

**80**

**90**

** ****Billion Cubic Feet per Day**

**  ****Percent Change (Left Axis)**

**  ****Total (Right Axis)**

**History**

** ****Proj.**

## Natural Gas Production, Consumption, and Imports, 1970 - 2025 (trillion cubic feet)

**Natural Gas Production, Consumption, and Imports, 1970 - 2025 (trillion cubic feet)**

**Consumption**

**Production**

**Net Imports **

**History**

**Projections**

**Natural Gas Net Imports, 2001 and 2025**

**(trillion cubic feet)**

**2001**

**2025**

**2025**

- Source: 2004 *Annual Energy Outlook*

**23%**

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

**History**

**Industrial**

**Electric generators**

**Residential**

**Commercial**

**CNG vehicles**

**Projections**

- Source: EIA, 2004 *Annual Energy Outlook.*

## Technically Recoverable U.S. Natural Gas Resources as of January 1, 2002 (trillion cubic feet)

**Undiscovered nonassociated**

**Inferred nonassociated**

**Unconventional**

**Other unproved**

**Proved**

**Offshore**

**Coalbed methane**

**Shale gas**

**Tight gas**

**Alaska**

**Lower 48 associated-dissolved**

**Onshore**

**Offshore**

**Onshore**

**222**

**475**

**232**

**168**

**183**

**Total: 1,279 trillion cubic feet**

- Source: Energy Information Administration

## U.S. Dry Natural Gas Production, 1990 - 2025 (trillion cubic feet)

**History**

**Projections**

**Associated/Dissolved**

**Nonassociated**
**Offshore**

**Nonassociated**
**Onshore Conventional**

**Onshore Unconventional**

**Alaska**

- Source: 2004 *Annual Energy Outlook*

## Lower 48 Unconventional Production by Type(trillion cubic feet)

**History**

**Projections**

**Coalbed Methane**

**Tight Sands**

**Total Unconventional**

**Gas Shales**

- Source: 2004 *Annual Energy Outlook*

## Regional Natural Gas Production, 2002, 2015, 2025 (trillion cubic feet)

**   ****Northeast**

**   ****Gulf****  ****Coast**

**   ****Midcontinent**

**   ****Southwest**

**   ****Rocky**** **** ****Mountain**

**   ****West**** ****Coast**

**   ****Gulf of Mexico**

- Source: 2004 *Annual Energy Outlook*

## Major Sources of Incremental Natural Gas Supply,

- supplemental natural gas production, Canadian, and Mexican imports.

**2002**

**2010**

**2020**

**2025**

**16**

**20**

**24**

**28**

**32**

**Major Sources of Incremental Natural Gas Supply,**
** ****2002-2025 (trillion cubic feet)**

**Growth in Alaskan Production**

**All Other Production**

*****

**Growth in Non-associated **

**Unconventional**

**Growth in LNG Imports**

## LNG Imports at Existing Terminals, 2000-2025 (billion cubic feet)

**History**

**Projection**

**Everett, MA**

**Lake Charles, LA**

**Elba Island, GA**

**Cove Point, MD**

- Source: 2004 *Annual Energy Outlook*

## Net U.S. Imports of Natural Gas, 1970-2025(trillion cubic feet)

**Net U.S. Imports of Natural Gas, 1970-2025**(trillion cubic feet)

**History**

**Projections**

**Canada**

**LNG**

**Mexico**

- Source: 2004 *Annual Energy Outlook*

## Lower 48 Natural Gas Wellhead Prices, 1970-2025 (2001 dollars per thousand cubic feet)

**Lower 48 Natural Gas Wellhead Prices,**** 1970-2025 (2001 dollars per thousand cubic feet)**

**1995**

**2025**

**Reference case**
**(nominal dollars)**

**1.55**

**8.44**

**History**

**Projections**

- Source: EIA, 2004 *Annual Energy Outlook.*

**Reference**

**Rapid technology**

**Slow technology**

## Summary

**Current storage inventories: below normal but above year ago   **
**Over the longer term, higher demand will require an increasing dependence on unconventional production, natural gas from Alaska and liquefied natural gas imports.**
**LNG holds significant potential as a supply source – particularly over the long term.***** ***
**A substantial boost in supplies from production or imports will take time and require capital investments for additional infrastructure.**
**The pace of technology advances could change the outlook.  **

**Summary**

## www.eia.doe.gov

**www.eia.doe.gov**