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Oil report

UPDATE 3-U.S. overestimates natgas output, shale blamed

 * U.S. EIA changing report due to more shale gas output
 * EIA now using more up-to-date data to estimate output
 * Louisiana production estimates expected to fall
 * Updated report slated for April 29
 (Recasts, adds EIA quotes, links)
 By Ayesha Rascoe and Timothy Gardner
 WASHINGTON, April 5 (Reuters) - The U.S. Energy Information
Administration is revamping the way it calculates domestic
natural gas production after it overestimated output from key
producer states Texas and Louisiana, an agency official said on
Monday.
 Rapid changes to U.S. natural gas output involving a wave
of new small producers of shale gas made it difficult to get an
accurate picture of the market, said Gary Long, acting director
of the reserves and production division of the agency's oil and
gas office.
 U.S. natural gas data is being watched perhaps closer than
ever as a drilling technique known as hydraulic fracturing, or
"fracking," has led to excitement about the potential of vast
new supplies of the relatively clean burning fuel from New York
to Louisiana. Fracking, which gets to natural gas deposits
associated with shale, has helped boost U.S. reserves of the
fuel by a third since 2006, according to the EIA.
 The EIA, the statistics arm of the Department of Energy,
found that some of its output numbers were inflated in the
monthly release, known as the 914 report, Long said.      
 "Things changed but we weren't seeing that change in our
methodology," Long told Reuters in an interview.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FACTBOX: Shale gas stirs energy hopes, concern [ID:nN18204577]
MAP: U.S. shale reserves        link.reuters.com/fur74c
TAKE A LOOK: Future of shale gas               [ID:nN18229665]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 To remedy this, the EIA is moving to use more up-to-date
data to help estimate U.S. natural gas output, starting with
the next report due out on April 29, he said.
 The report has relied on frequent surveys of the largest
natural gas producers, but has only estimated output from about
13,000 smaller producers, which are harder to track.
 In an effort to make the data more accurate, the EIA will
estimate output from small producers using data that is six to
18 months old, rather than the previous practice that used data
that was two to seven years old, the agency said.
 The changes in its monthly natural gas production report
will likely lead to smaller natural gas output figures from
Texas and Louisiana.
 "I think we'll see probably see a lower volume in
Louisiana," said Long. Louisiana was the fifth largest U.S.
natural gas producer in 2007, according to the EIA website and
is home to a significant deposit of natural gas in the
Haynesville Shale formation.
 About a year ago, the EIA began to notice some
irregularities in its monthly report regarding production
figures in Texas, where output from the Barnett Shale play was
booming. "We had a feeling that our estimates were probably a
little too high," Long said.
 In 2007, Texas was the top U.S. natural gas producer and
Louisiana was No. 5, according to the latest EIA data.
 The upgrade of the report is "significant" and will likely
lead to tighter fundamentals in a market that has already
tightened considerably in the past six months, said Chris
Jarvis, senior analyst with Caprock Risk Management in New
Hampshire.
 "With the changes, and given the short positions in the
market, some traders will be on edge and uncomfortable not
knowing the extent of the revisions for some time," he said.
 "Longer term, the new collection process should yield
tighter data points and increase the level of confidence in the
numbers that has been lacking for some time now," Jarvis said.
 The revisions could provide some support for natural gas
prices, said Tim Evans, an energy analyst at Citi Futures
Perspective in New York.
 Front-month May natural gas futures on the New York
Mercantile Exchange NGK0 were trading up about 16 cents, or 4
percent, at $4.245 per million British thermal units early
Monday. Last week, they hit a six-month low of $3.832 per mmBtu
on concerns about a sluggish economy and rising supplies.
 But the report is not as critical to natural gas traders as
the weekly storage figures, which are more timely, Evans said.
 The changes come as the EIA's market-moving reports come
under heightened criticism for using outdated technology and
methods that may result in skewed data.
 Last month, the EIA came under criticism for errors in its
flagship weekly oil inventory report. [ID:nN19137661]
 (Additional reporting by Eileen Moustakis in New York; Editing
by Marguerita Choy)
 (Washington commodities desk, +202 898 8376)




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