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US natgas output to drop in 2016 for first time since 2005

US natgas output

The EIA has reduced its Short Term Energy Outlook for US natgas output this year, however, in 2017, the agency predicts dry gas production would return to a record high. Joshua Gunter photo.

US natgas output falls as energy prices reduce drilling activity

Nov 8 (Reuters) – The U.S. Energy Information Administration on Tuesday projected year-over-year dry natural gas production in 2016 would fall for the first time since 2005 as low energy prices reduced drilling activity.

EIA reduced its output projection to its monthly Short Term Energy Outlook (STEO) for 2016 to 72.34 billion cubic feet per day, down from the 72.49 bcfd it forecast last month. That compared with an all-time high of 74.14 bcfd in 2015.

EIA forecast dry gas production would return to a record high in 2017, rising to 75.06 bcfd.

The last time year-over-year gas production declined was in 2005 when Hurricanes Katrina and Rita slammed into the Gulf Coast, damaging energy infrastructure.

In 2005, more than 20 per cent of annual U.S. dry gas output of 49.45 bcfd came from the federal waters in the Gulf of Mexico.

Since then, producers have figured out how to use horizontal drilling and hydraulic fracturing and other technologies to unlock more gas trapped in shale rocks.

Today, the seven biggest U.S. shale fields provide more than 60 per cent of the nation’s dry gas production, while the Gulf of Mexico accounts for just 4 per cent of the total.

The EIA also forecast U.S. gas consumption would slip to 75.66 bcfd in 2016 versus the 75.97 bcfd it forecast in October.

That would still top the 2015 record high for gas demand of 74.81 bcfd and would be the seventh annual record in a row.

EIA forecast gas demand in 2017 would rise to a new all-time high of 75.97 bcfd.

EIA projected the United States would become a net exporter of gas in the fourth quarter of 2017 as sales of liquefied natural gas to the world and pipeline flows to Mexico increase, while imports from Canada ease as U.S. production grows.

The U.S. was last a net exporter of gas on an annual basis in 1957, according to federal data.

Power generators, meanwhile were expected to increase the amount of coal they burn in 2017 to 31 per cent from a forecast 30 per cent in 2016 as the price of gas rises. That, however, was still down from 33 per cent in 2015 due to numerous coal plant retirements in recent years.

The power sector was expected to burn less gas to produce electricity next year, just 33 per cent in 2017 versus a forecast 34 per cent in 2016. That compared with 33 per cent in 2015.

(Reporting by Scott DiSavino; Editing by Marguerita Choy)

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