# Presentation: 488887

## OUTLOOK FOR NATURAL GAS

**Administrator**
**Energy Information Administration**

**for**
**Chemical Industry Global Outlook 2005 Conference**
**December 10, 2004**
**New York, New York**

***OUTLOOK FOR NATURAL GAS***

## Consumption of Natural Gas Varied By Location and Customer Class in 2002

**Consumption of Natural Gas Varied By Location and Customer Class in 2002**

**Residential**

**Electric Power**

**Industrial**

**Commercial**

**0.5 Tcf**

**1 Tcf**

**2 Tcf**

**Source: *****Natural Gas Annual*****, 2002****.**

**3 Tcf**

## Residential and Commercial Consumption Show More Seasonal Variation Than Industrial and Electric Power Load

- Source: EIA.

**Residential**

**Industrial**

**Commercial**

**Electric Power**

## Spot Price for Gas is Volatile And Currently Remains Below the Spot Price for Oil

**Spot Price for Gas is Volatile And Currently Remains Below the Spot Price for Oil**

**Sources: *****Natural Gas Intelligence,***** EIA**

## WELLHEAD PRICE: $5.47 per Mcf in 2004 and 2005
CONSUMER PRICES:  Residential prices 7% higher this winter than last
			Annual residential prices up 11% in 2004 and 2% in 2005
CONSUMPTION:  Increased residential demand this heating season	
			          Increased annual demand in 2005
SUPPLY : Growth in 2005
Storage inventory  is 11% higher than 5-year average
Production increase in 2005 after decline in 2004
New well completions remain high but production from existing wells is declining
Modest, but steady increases in LNG imports
CAVEAT: Outlook incorporates NOAA weather forecast.  Extremes in market or weather conditions could change this outlook.

**CONSUMER PRICES****:**  **Residential prices 7% higher this winter than last**
**	****	****	****Annual residential prices up 11% in 2004 and 2% in 2005**
**CONSUMPTION**:  **Increased residential demand this heating season****	**
**	****	****	****          ****Increased annual demand in 2005**
**SUPPLY**** ****: ****Growth in 2005**
**Storage inventory  is 11% higher than 5-year average**
**Production increase in 2005 after decline in 2004**
**New well completions remain high but production from existing wells is declining**
**Modest, but steady increases in LNG imports**
**CAVEAT**: **Outlook incorporates NOAA weather forecast.  Extremes in market or weather conditions could change this outlook.**

**EIA’s SHORT-TERM OUTLOOK CALLS FOR CONTINUED MARKET TIGHTNESS**

## Henry Hub Spot Prices Are Expected to Average About $6 per Mcf through 2005(Base Case and 95% Confidence Interval*)

**Henry Hub Spot Prices Are Expected to Average About $6 per Mcf through 2005**(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:  Natural Gas Week;  Projections: *Short-Term Energy Outlook*, December 2004.

**Average Spot Price:**
**about $6.03 /Mcf in 2004**
**about $6.01 /Mcf in 2005**

## Consumer Prices Are Expected to Trend Upward For All Consumers

**Consumer Prices Are Expected to Trend Upward For All Consumers**

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

**History**

## U.S. Natural Gas Demand Flat in 2004 but Growth in 2005

**U.S. Natural Gas Demand Flat in 2004 ****but Growth in 2005**

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

**-6%**

**-4%**

**-2%**

**0%**

**2%**

**4%**

**6%**

**1993**

**1994**

**1995**

**1996**

**1997**

**1998**

**1999**

**2000**

**2001**

**2002**

**2003**

**2004**

**2005**

**Percent Change**

**History**

**Projection**

**Annual Change in Demand**

## Storage Stocks Are Above 5-Year Range

**The ****red line**** represents *****actual *****storage from Jan 2003 to November 2004 and *****projected***** storage from December 2004 through December 2005**

**Storage Stocks Are Above 5-Year Range**

**Source: *****Short-Term Energy Outlook*****, December 2004**

**Projection**

**5-Year Range**

**Actual Storage**

## Drilling Rate is Rising butProduction Growth Is Limited

**Sources: EIA, Baker Hughes Gas Rig Counts, Short-Term Energy Outlook, December 2004**

## 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**

**1993**

**≤**** ****1 Year Old**

**≤**** ****2 Years Old**

**≤**** ****3Years Old**

## Pipeline Imports Decline asLNG Imports Increase

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

**Pipeline Imports Decline as****LNG Imports Increase**

**LNG Imports:**
**2003: 510  Bcf**
**2004: 650  Bcf**
**2005: 780  Bcf**

## EIA Expects Oil Markets to Remain Tight in the Short-term

**Growing world oil demand**
**Growing non-OPEC production**
**Call on OPEC remains near capacity**
**Inventories remain relatively low**
**Geopolitical concerns remain**
**Prices are expected to remain relatively high despite recent downward trends**

## Natural Gas Consumption by Sector:

**2003, 2010, 2020, and 2025 (trillion cubic feet)**

**2010**

**2025**

**21.9**

**26.2**

**25.4**

**31.4**

**30.7**

**Transportation**

**Residential**

**Commercial**

**Industrial**

**Electric Power**

## Growth in Natural Gas Supply Depends on Unconventional & Alaskan production and LNG Imports

**Growth in Alaskan production**

**Growth in**
**Non-associated unconventional**

**Growth in LNG imports**

**Base production (all sources)**

**Trillion Cubic Feet**

- Source: 2005 *Annual Energy Outlook*

## U.S. Imports are a Critical Component of the Supply Mix through 2025

**15%**

**28%**

**Net imports**

**Consumption**

**Production**

**Natural Gas Net Imports,  2003 and 2025**

**Sources: History: EIA; Projections: *****2004 Annual Energy Outlook, 2005 Annual Energy Outlook***

**Trillion Cubic Feet**

**U.S. Imports are a Critical Component of the Supply Mix through 2025**

**2003**

**AEO 2004**

**AEO 2005**

**2025**

**2025**

**2003**

**2003**

**Pipeline**

**LNG**

## EIA Expects Higher Gas Prices in AEO2005,  Averaging  $4.79 in 2025

**Lower-48 Average Wellhead Price**

**2003 Dollars per Thousand Cubic Feet**

- Source: 2005 *Annual Energy Outlook*

## In Summary:EIA’s Natural Gas Outlook

**       ****Short-Term**
**Continued market  tightness. **
**Some demand recovery.**
**Modest production increase. **
**LNG import increase offsets decrease in pipeline import.**

**      ****Long-Term**
**Technology advances and access to additional supply sources will moderate gas prices.**
**U.S. LNG market is expected to grow .**
**Electricity use of gas, coal and renewables expected to increase.**

## www.eia.doe.gov

**www.eia.doe.gov**