# Presentation: 732296

## Natural Gas Outlook

**North American **
**Energy Standards Board**
**(NAESB)**
**Annual Meeting**
**September 17, 2003**
**Barbara Mariner-Volpe,**
**Energy Information Administration (EIA)**
***Barbara.MarinerVolpe@eia.doe.gov***

**www.eia.doe.gov**

## 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**

## Short-Term Outlook for Natural Gas

**SUPPLY**** **:  Cautious Optimism because of the following  expectations
- Production increases in ’03 (result of strong drilling)
- Net imports (including LNG) increases in 2004
- Storage adequate at start winter 2003  (3 Tcf)
**CONSUMPTION** : Little change in totals for 2003, 2004
**WELLHEAD PRICE**:  $5 per Mcf in 2003, decreasing $1 in 2004
**CONSUMER PRICES****: **higher this winter  v. last;
-                                                   expect relief starting in 2Q 2004** **
**CAVEAT**: Extremes in market or weather conditions would change this outlook.

## U.S. Gas Production Is Expected to Increase in 2003 and Remain Flat in 2004

- Sources: EIA, *Short-Term Energy Outlook*, September 2003

## Both Imports and Exports Are Expected To Increase Through 2004

- Notes: Includes LNG. Net Imports equal imports minus  exports.
- Sources: EIA, *Short-Term Energy Outlook*, September 2003

**Both Imports and Exports Are Expected To Increase Through 2004**

## Natural Gas Import Sources

- Sources: History:  EIA;  Projections: *Short-Term Energy Outlook* September, 2003.

**LNG Imports:**
**2002: 229 Bcf**
**2003: 488  Bcf**
**2004: 584  Bcf**

**Natural Gas Import Sources**

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

**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**

**Monthly**

**Billion Cubic Feet**

**5-Yr Min/Max**

**Range**

**End-of-Month-Stocks**

**Projection**

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

## Gas Storage Projections For Winter 2003, Compared to Historical Levels

**Gas Storage Projections For Winter 2003, Compared to Historical Levels**

- Note: The blue shaded area represents the range of working gas in storage levels during the years 1998 to 2002.  Source: EIA Weekly Natural Gas Storage Survey and EIA estimates. Max refill rate is the max monthly rate observed between 1998 and 2002.   EIA estimate is based on EIA’s STEO forecast September, 2003.

**Projections**

**EIA Estimates Working Gas Levels At 3 Tcf by End of October**

**2,486 Bcf in Underground Storage as of Sept. 5, 2003**

**~ 3,056 Bcf Assuming 5-Yr. Maximum Refill Rate**

**~ 2, 917 Bcf**
**Assuming 5-Yr. Avg. Refill Rate**

## Natural Gas Spot Prices Are Expected to Average About $4.50 in 2004(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, September 2003.

**0.0**

**1.0**

**2.0**

**3.0**

**4.0**

**5.0**

**6.0**

**7.0**

**8.0**

**9.0**

**10.0**

**Jan-01**

**Mar-01**

**May-01**

**Jul-01**

**Sep-01**

**Nov-01**

**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**

**Monthly**

**Dollars per Thousand Cubic Feet**

**Projections**

**Average Spot Price:**
**about $5.57 /Mcf in 2003**
**about $4.52 /Mcf in 2004**

**Natural Gas Spot Prices Are Expected to Average About $4.50 in 2004**(Base Case and 95% Confidence Interval*)

## Total Natural Gas Demand Is Expected to Remain Flat For the Next Two Years

- Sources: History:  EIA;  Projections: *Short-Term Energy Outlook*, September 2003.

**-6%**

**-4%**

**-2%**

**0%**

**2%**

**4%**

**6%**

**8%**

**10%**

**12%**

**1991**

**1992**

**1993**

**1994**

**1995**

**1996**

**1997**

**1998**

**1999**

**2000**

**2001**

**2002**

**2003**

**2004**

**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**

**Projection**

## Households Are Expected to Pay More For Gas Service This Winter

| Winter | 1999-00 | 2000-01 | 2001-02 | 2002-03 | 2003-04 |
| --- | --- | --- | --- | --- | --- |
| Midwest | Actual | Actual | Actual | Actual | Forecast |
| Consumption (Mcf) | 81.7 | 99.1 | 81.3 | 95.2 | 91.8 |
| Avg. Price ($/Mcf) | 6.69 | 9.53 | 7.38 | 8.37 | 9.41 |
| Expenditures ($) | 546 | 944 | 600 | 797 | 864 |
|  |  |  |  |  |  |
|  |  |  |  |  |  |
|  |  |  |  |  |  |
|  |  |  |  |  |  |

- Notes: Consumption based on typical per household use for the Midwest, and New England & New York.
- Sources: History:  EIA;  Projections: *Short-Term Energy Outlook* September, 2003.

## Summary

**Storage is expected to be near the 5-year average level by Nov 1.   **
**LNG holds significant potential as a supply source. **
**Consumers will pay more for gas this winter v.  last. Rate reductions expected in 2004. **
**A substantial boost in supplies from production or imports will take time and may require additional infrastructure.**

**Summary**