The U.S. Energy Information Administration predicted Wednesday that U.S. 2010 natural gas production will decline slightly less than previously forecast, citing an expected uptick in drilling activity later this year.
U.S. gas production will decrease 2.6% to 58.7 billion cubic feet a day in 2010, below the 3% decline the EIA had predicted last month. The EIA's 2011 production forecast was unchanged at a 1.3% increase.
Gas producers scaled back output dramatically over the past year in response to lower gas prices, but the rig count has begun to stabilize as prices climb with colder weather. The EIA expects U.S. gas inventories at the end of March 2010, the end of the winter heating season, to total 1.644 trillion cubic feet, about 7% above the five-year average.
Total gas consumption is forecast to increase by a modest 0.4% in 2010 to 62.5 bcf/d and another 0.4% in 2011, with stronger gas demand in the residential, commercial and industrial sectors offset by lower consumption in the electric-power industry amid rising gas prices and increased coal-fired generation. The EIA had previously forecast that consumption would remain unchanged in 2010 and climb 0.4% in 2011.
Liquefied natural gas imports to the U.S. were expected to rise in 2010 in response to new supplies from Russia, Yemen, Qatar and Indonesia, the EIA said. Imports of natural gas from Canada were expected to fall by 8.3%, or 0.7 bcf/d, to 8.1 bcf/d in 2010 on lower Canadian drilling activity.
Natural gas prices at the benchmark Henry Hub should average $5.37 a million British thermal units in 2010 and $5.86/MMBtu in 2011, the EIA said. High inventory levels and robust domestic production are likely to keep prices from rising sharply in 2010, according to the EIA.