UPDATE 1-EIA sees U.S. 2014 natgas output up 5.3 pct from 2013's record

Tue Aug 12, 2014 1:22pm EDT

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(Adds storage and price forecasts)

Aug 12 (Reuters) - The U.S. Energy Information Administration on Tuesday raised its estimate for U.S. natural gas production in 2014 to 5.3 percent over 2013's record high levels.

In its August Short-Term Energy Outlook (STEO), the EIA said it expects marketed natural gas production in 2014 to rise 3.71 billion cubic feet per day (bcfd) from 2013 to 73.89 bcfd, up a bit from last month's forecast increase.

That would be the fourth straight annual record as strong increases in Texas and the Marcellus states offset declines in the Gulf of Mexico, EIA said, noting production in 2015 is expected to grow by 2.1 percent over 2014.

EIA also forecast gas consumption in 2014 will rise 1.24 bcfd, or 1.7 percent, from 2013 to 72.57 bcfd, up a bit from last month's forecast increase. Consumption gains were led by the industrial sector, EIA said.

EIA projected working gas inventories will reach 3.46 trillion cubic feet (tcf) at the end of October, up from its 3.43 tcf forecast in July. That is still 0.35 tcf below the level at the end of the injection season last year.

EIA reduced its forecast for gas prices at the Henry Hub, the benchmark supply point in Louisiana, to an average of $4.46 per million British thermal units in 2014 and $4 in 2015, 31 cents and 51 cents lower than last month's STEO, respectively. In 2013, Henry Hub prices averaged $3.73.

Growing domestic production is expected to continue to put downward pressure on gas imports from Canada, and increase exports to Mexico, EIA said, projecting net imports will decline to 3.3 bcfd in 2014 and to 2.6 bcfd in 2015.

On the coal front, EIA said coal inventories at power plants fell to 118 million short tons (MMst) in March, the lowest level since 2006, because of the increase in coal-fired generation as gas prices rose, cold weather boosting electric demand, and rail congestion over the winter slowing coal deliveries.

Stocks increased to 136 MMst at the end of May, but were still 40 MMst lower compared with the same time last year, EIA said.

Midwestern coal inventories are down about 10 MMst from last year, posing problems for some generators in Wisconsin and Minnesota, EIA said noting ongoing coal delivery problems have the "potential to hinder or even lead to the curtailment of some power production."

EIA said coal used for power generation will rise to 40.4 percent in 2014 from 39.1 percent in 2013 due to stronger gas prices, before falling to 39.0 percent in 2015, when numerous coal plants retire due to implementation of the federal Mercury and Air Toxics Standards (MATS).

Gas for power generation, meanwhile, will fall to 26.5 percent in 2014 from 27.4 percent in 2013, before rising to 27.5 percent in 2015, EIA said. (Reporting by Scott DiSavino; Editing by Jonathan Oatis and Chizu Nomiyama)

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