September 11, 2012 / 5:06 PM / 7 years ago

UPDATE 1-EIA raises U.S. natgas output growth, lowers demand estimate

* EIA sees 2012 gas output at record-high 68.86 bcfd

* EIA sees 2013 production setting record for third year

* 2012 gas demand seen up 3.2 bcfd (4.8 pct) from 2011 (Adds consumption, LNG and price data, background)

NEW YORK, Sept 11 (Reuters) - The U.S. Energy Information Administration on Tuesday slightly raised its estimate for domestic natural gas production growth in 2012, expecting output this year to be up 4 percent from 2011’s record levels.

In its September Short-Term Energy Outlook, the EIA said it expected marketed natural gas production in 2012 to rise by 2.6 billion cubic feet per day to a record 68.86 bcfd, up from its August outlook that had output this year at 68.72 bcf daily.

Despite the slight increase in its output estimate, the agency sees a small drop in production in coming months, reflecting losses from hurricanes and declines related to recent drops in the gas drilling rig count.

EIA sees gas production growth slowing in 2013, with average daily output gaining just 0.5 bcf per day to 69.32. That would still be the third straight year of record production.

The agency slightly lowered its growth estimate for consumption this year, but still sees demand climbing 3.2 bcfd, or 4.8 percent, from 2011 to 69.79 bcf daily.

Large gains in electric power use in 2012 more than offset declines in residential and commercial use.

Gas consumption in the electric power sector was expected to average 25.2 bcf per day in 2012, a 21 percent jump from 2011 levels, primarily driven by the relative cost advantage of natural gas over coal for power generation in some regions.

In 2013, EIA sees total gas demand increasing just 0.2 bcf per day, or 0.2 percent, to 69.96 bcf daily, as expected increases in residential, commercial and industrial consumption offset expected declines in the power sector.

Because of the projected increase in natural gas prices relative to coal, EIA expects the recent trend of substituting coal-fired electricity generation with natural gas generation to slow and likely reverse over the next year.

From April through August 2012, average monthly natural gas prices to electric generators increased 34 percent, while coal prices fell slightly. EIA expects that coal-fired electricity generation will increase 9 percent in 2013, while natural gas generation will fall about 10 percent.

EIA expects imports of liquefied natural gas (LNG) to halve in 2012 to about 0.4 bcfd, and remain at that level in 2013, as shippers send more gas to higher-paying markets in Europe and Asia.

“Higher prices for LNG, particularly in Asian markets, have made the United States a market of last resort for LNG suppliers,” the EIA said.

The EIA expects Henry Hub natural gas prices NG-W-HH in 2012 to average $2.65 per million British thermal units, down 2 cents from last month’s outlook and about 34 percent below 2011’s estimated average of $4.

In 2013, the EIA sees prices rising 69 cents, or 26 percent, to $3.34 per mmBtu. (Reporting By Joe Silha, Matthew Robinson and Edward McAllister in New York; Editing by Maureen Bavdek, Bernard Orr)

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