Natural Gas Production Growth to Slow on Lower Prices

June 12, 2012
Gas drillers cut back production in 'dry' fields as prices continue to drop, EIA reports.

Natural gas production is expected to grow at a slower year-over-year rate in 2012 as low prices reduce new drilling plans, the Energy Information Administration said Tuesday in its monthly outlook.

Houston-based oilfield-services company Baker Hughes Inc. (IW 500/69) reported the U.S. natural gas rig count hit its lowest level since 1999, EIA noted in its report.

The rig count was 588 as of June 1, down from an October 2011 high of 936.

EIA expects mainly flat natural gas production through the fall. Overall 2012 production will average about 2.3 billion cubic feet per day, 3.4% above 2011 levels.

Production is declining as drilling companies scale back their activities in dry natural gas plays.

But some of that declining production is being offset by growth in liquids-rich areas, including the Eagle Ford play in south Texas and the wet areas of the Marcellus Shale.

Meanwhile, EIA estimates West Texas Intermediate crude oil prices will fall $11 per barrel lower than its previous estimate to $95 a barrel during the second half.

The lower forecast reflects market concerns about world economic and oil demand growth, EIA said in its report.

EIA expects crude oil prices to remain relatively flat in 2013. The forecast assumes U.S. real gross domestic product grows by 2.2% this year and 2.4% in 2013, while world oil-consumption-weighted real GDP grows by 3.1% and 3.5% in 2012 and 2013, respectively.

EIA expects U.S. total crude oil production to reach its highest production level since 1998, with average production of 6.3 million barrels per day. By 2013, U.S. crude oil production could reach 6.7 million barrels per day, EIA reported.

But 4.5 million barrels of crude oil and 9.5 billion cubic feet of natural gas in the federal Gulf of Mexico could be shut in during the hurricane season based on National Oceanic and Atmospheric Administration weather projections, EIA said.

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