U.S. Natural Gas Consumption to Level Off Next Year

U.S. natural gas consumption is expected to outpace production in 2007 but will level off next year due to an expected drop in imports of liquefied natural gas, a government report said recently.

Higher demand for residential, electric and commercial gas this year is expected to boost total gas consumption by 4.5 percent, while production is projected to rise by 1.4 percent in 2007, and 1.3 percent in 2008, according to the U.S. Energy Information Administration's Short-Term Energy Outlook report.

Total U.S. gas consumption is projected to grow only 0.9 percent in 2008, with 2 percent growth expected in residential consumption, the EIA reported. Commercial gas consumption is expected to increase 0.9 percent in 2008, while electric power consumption is expected to rise 1.3 percent.

Industrial demand for gas is expected to decline by 0.7 percent in 2007 and remain flat in 2008.

Imports of liquefied natural gas reached record levels over the summer but have since fallen off as other nations pay higher prices for gas.

Earthquakes in Japan knocked a nuclear power plant off-line, forcing the nation to seek gas imports for replacement gas-fired power generation, the EIA said. Still, U.S. gas imports are expected to rise by 39 percent this year, followed by 24 percent next year, the EIA said.

While offshore U.S. Gulf of Mexico supplies have been dropping and are expected to decline by 2.8 percent this year, production will grow by 7.4 percent in 2008, the EIA reported. The increase is due to developments of deep-water fields such as the Anadarko Petroleum Corp.-led Independence Hub project, which is expected to come onstream by the end of 2007.

Drilling in unconventional gas fields is expected to grow production by 2.2 percent this year and by 0.3 percent in 2008, the EIA said.

Current gas in storage is at 3.509 trillion cubic feet, breaking a 17-year-old weekly record level, the EIA said.

In the meantime, the Henry Hub spot price, the Louisiana-based hub by which all domestic natural gas is priced, is expected to average $7.30 per thousand cubic feet (mcf) this year. Peak winter prices in January 2008 are expected to average $8.65 per mcf, while the full-year Henry Hub price in 2008 is projected to average $8.01 per mcf, the EIA said.