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Rising gas production should ease storage deficit

Heading into the colder months, inventories of natural gas are down compared to last year.

Natural gas in storage was 3,480 billion cubic feet (Bcf) as of Oct. 24, according to the U.S. Energy Information Administration’s weekly report released Thursday.

While that figure is a net increase of 87 Bcf from the previous week, it was 294 Bcf less than last year and 310 Bcf below the five-year average of 3,790 Bcf, according to EIA estimates.

Oct. 31 generally marks the end of the period when natural gas inventories are replenished to prepare for the colder months ahead.

Still, the red alert siren isn’t sounding just yet.

Erica Bowman, vice president of research and policy analysis for Washington, D.C., trade group America’s Natural Gas Alliance, noted that natural gas production, largely from U.S. shale plays, is about 4 percent higher than last year.

“Add that to the storage level, actually we have more combined gas available than last year,” Ms. Bowman said.

Teri Viswanath, director, commodity strategy for natural gas at BNP Paribas said there are at least 10 pipeline projects that will allow natural gas production to surge this winter — to the tune of about 4.25 Bcf/d more than last year.

“Our sense is the industry will quickly convert this deficit into a surplus,” Ms. Viswanath said. “This winter, unless the weather is particularly cold, the surplus will probably remain for the balance of the year and keep prices low.”

Another indication of the high production levels of U.S. shale plays is that after last year’s infamously frigid winter drained natural gas inventories, this summer saw record injections back into storage, according to EIA figures.

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“Should the industry be comfortable as we transition into the heating season? The answer seems to be ‘yes,'” Ms. Viswanath said.

“I think the market is well supplied,” Ms Viswanath said. “Official guidance indicates that there are some areas that will experience bottlenecks, especially in New England where there’s insufficient infrastructure to supply the market. But that notwithstanding, the overall market is well-supplied.”

Meanwhile, production from the Marcellus Shale has grown steadily. The formation, located primarily in Pennsylvania and West Virginia, accounts for about 40 percent of U.S. shale gas production.

Ms. Bowman added that natural gas prices are still below $4.

“The prices are signaling that we have plenty of gas,” Ms. Bowman said. “Depending on how the winter goes, we’ll see some price response to that, but it is going to be in an affordable price range.”

“We have plenty of gas available, and there’s been a lot of pipeline infrastructure added in the Marcellus,” Ms. Bowman said. “There’s still more pipeline that needs to be put in the ground, but some of it has been done.”

Even as Halloween marks the traditional end of the so-called storage injection season, the dates aren’t strict cutoff points.

“In each of the past 11 years, going back to the first full year of EIA’s weekly gas storage surveys, there have been net injections during one or more weeks in November,” EIA said.

“In two of the past five years, 2009 and 2011, inventories on the last day of November have been greater than the tallies for October,” EIA said. “Similarly, the nominal beginning of the injection season is April 1 each year, but for 6 of the past 11 years, there have been net injections in March.”

According to the American Natural Gas Association, 1,000 cubic feet of natural gas is enough to meet the natural gas needs of an average home, including space-heating, water-heating and cooking, for four days.

About 1 Bcf of natural gas is enough to meet the needs of 10,000 to 11,000 homes for one year.

 

Stephanie Ritenbaugh: sritenbaugh@post-gazette.com or 412-263-4910. 

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