US natural gas production could break records this summer, along with demand for gas to generate electricity, the US Federal Energy Regulatory Commission’s staff suggested in its Summer 2018 Energy Market and Reliability Assessment on May 17.
This year could set a summer record for gas demand to generate power, FERC said. The US Energy Information Administration forecast that US gas production will climb to near record levels, the report added.
“In Southern California, lower-than-average hydro generation may create challenges as gas-fired generation, the replacement for hydro production shortfalls in past years, may be limited due to reduced gas storage capacity and local pipeline outages,” it warned.
Gas storage inventories began the injection season on Apr. 1 at 1,354 bcf, about 350 bcf less than the 5-year average, the assessment said. It was the largest deficit to the 5-year average at the start of an injection season since 2014, it noted.
“Extreme cold temperatures in the Northeast in December and January led to record gas storage withdrawals, resulting in a 486 bcf deficit from the 5-year average at the end of January,” it said. Below-average storage withdrawals since the cold-weather event narrowed the deficit to within the 5-year average by the end of March to a total 2,436 bcf. This was 22% higher year-to-year but still within the typical withdrawal range and significantly less than 2013-14 and 2014-15 withdrawals.
Meanwhile, growing gas production from fields in Texas, Appalachia, and elsewhere increased US output to record levels, the assessment said. “In March 2018, the US produced 84.9 bcfd of marketed gas, a year-over-year gain of over 8 bcfd. Continued production at this volume should position the market to meet summer demand and adequately restock storage inventories,” it said.
“Specifically, EIA forecasts that inventories will grow to about 3,800 bcf by November, which is within the 5-year range. To meet the EIA inventory forecast would require 2,382 bcf of injections for the 2018-19 injection season, an 11% increase from the average injection amount of the past 5 years,” the report pointed out.
Storage deficits in West
It said that record storage deficits are expected to continue in the West from operational constraints in Southern California associated with the Aliso Canyon and other storage facilities.
This summer also could see near-record demand for gas to generate power, the assessment said. “EIA forecasts natural gas power burn to average 35.16 bcfd through June, July, and August, just 0.3 bcfd less than the record set in the summer of 2016, and 3 bcfd higher than last year,” it said. More than 1,600 Mw of additional gas-fired generation capacity since 2016 and relatively low gas prices are the reasons why.
Nick Snow
NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.
