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7.14.03 Natural gas supply indicators Spot Price - After weeks of relatively strong net storage injections and a normal summer as measured by cooling degree days, natural gas commodity prices have moderated slightly to between $5 and $5.25 per mmbtu from the $6 level seen for much of the year. This may be an early indication of expanding production capability or the impacts of demand rationing. In any case, price expectations are short-term and change quickly. The potential exists for renewed upward pressure on acquisition prices from outside influences such as hurricane activity in the Gulf of Mexico or changes in demand due to gas requirements to fuel summer power generation. Working Gas in Underground Storage - For the week ending July 4, 2003 working gas levels were at 1,773 Bcf, 317 Bcf or 15.3 percent below the five-year average. Storage increased by 15.9 Bcf per day for the week. The storage inventory deficit from the five-year average that was at nearly 50 percent in April is continuing to close and is now only 15.2 percent behind. Estimates of working gas inventories entering the 2003-04 winter heating season from innumerable industry sources vary from 2.7 to 3.1 Tcf. The recent pace of storage injections would seem to indicate that 2.8 Tcf (+) is very attainable and likely conservative for beginning inventories by November 2003. Rig Count - As reported by Baker-Hughes, national counts of all rotary rigs operating in the U.S. have increased week-over-week 21 of 27 times during 2003 a sign that energy producers have responded to higher energy prices. For gas-directed operations, specifically, the current count of 908 rigs is 27.7 percent higher than one year ago when gas rigs numbered 711. More than 900 rigs looking for gas targets is not an unhealthy number of active rigs. The question is more about where they are drilling -- not their numbers. Well Completions - Gas well completions in 2000 were estimated to be 16,455 by the U.S. Energy Information Administration (EIA). In 2001, they increased to 22,083 commensurate with rig activity. For 2002, gas wells completed were 15,947. You have to go back nearly 20 years to the early 1980s to see these rates of gas well completions. The estimated pace for gas well completions for the first five months of 2003 is 16.7 percent ahead of 2002, according to EIA. Canadian Imports - Canadian imports grew from 3,329 Bcf (imports net of exports) in 1999 to 3,588 billion cubic feet (Bcf) in 2002 (up 7.8 percent). The two-month total for 2003 reported by the Energy Information Administration (EIA) indicates a volume of 629 Bcf net imports compared to 631 Bcf during the first two months of 2002. LNG Imports - The U.S. can receive LNG shipments from sources as diverse as Algeria, Qatar, Trinidad and Tobago, Nigeria, Oman and Brunei. The largest exporter of LNG to the U.S. currently is Trinidad and Tobago. In 2001, the U.S imported 238 Bcf total LNG. For 2002, 229 Bcf was imported. During January and February 2003, 42 Bcf was imported from Trinidad & Tobago, which is more than three times the same period in 2002 when only 13 Bcf was imported. At the present rate of activity and considering the likely increase in the utilization of facilities, LNG imports will probably set an annual record in 2003 of 300 Bcf or more. Gas Production - According to the EIA, gas production in 2001 -- 19.676 trillion cubic feet (Tcf) -- was the highest it had been since 1974. However, the argument presented today is -- how much real incremental production capability is being added by directing current gas drilling to already heavily drilled basins rather than exploring new areas? According to EIA, gas production for 2002 (19.047 Tcf) was 3.2 percent behind the pace for 2001 and was estimated by others to be up to 5 percent behind. For 2003, EIA estimates gas production to be 2.1 percent ahead of the 2002 pace for the first three months of the year. In any case, production capability has been falling and can only be turned around (for the long-term) by drilling in new areas. |
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