Energy Solutions, Inc. – U.S. Natural Gas Production Highest in Decades

The most recent 914 production report from the Energy Information Administration (EIA) indicates that U.S. natural gas production levels reached an all-time historical monthly high. Energy Solutions, Inc. predicts that the production of natural gas will continue to increase despite drilling moratoriums in the Gulf of Mexico, prompted by environmental disasters such as the BP oil rig explosion, which has released millions of gallons of crude oil into the Gulf ecosystem.

Production growth continued to be highest in Louisiana, reaching 5.59 Bcf/day, up 3.7% from February’s numbers. Texas came in second with a 2.0% increase over February levels. The biggest decline occurred in the Gulf of Mexico where natural gas production fell by 1.2% from February levels.

However, “natural gas production has been expanding each week as the drilling rig count has grown. Yet, in recent weeks, the drilling rig count seems to have leveled off at around 950 natural gas rigs and more declines are expected due to the drilling moratoriums on drilling in the Gulf of Mexico,” says Valerie Wood, President of Energy Solutions, Inc.

Despite those potential declines, in its June Short-Term Energy Outlook, the EIA projects total marketed natural gas production in 2010 to increase by 1.2 Bcf/day over 2009 levels, but they then project a decrease of 0.5 Bcf/day in 2011 due to deepwater Gulf of Mexico production declines and the impacts of the government’s drilling moratorium. The EIA says, however, that while supplies are expected to be up this year, the supply/demand balance will be tighter.

Wood goes on to explain that some analysts disagree with the EIA data. “Analysts from Raymond James believe 2010 production levels are dramatically understated and by the fall, supply levels could near a 4 Bcf/day increase over 2009 levels. They note, however, that a rebound in industrial gas demand and a decline in natural gas prices to the low-$3, which would incent coal-to-gas fuel switching, could still create a tighter supply/demand balance, but not nearly as tight as what is proffered by the EIA.”

In light of these reports, the fact remains that natural gas storage inventories continue to build at near-record pace, with storage at about 65% full as of June 4, 2010.

Additional information on natural gas production and storage levels is discussed in the June Monthly Edition of The Advisor.  Take a FREE 30-day trial to The Advisor and receive the most recent Weekly Edition, as well as the Monthly Edition for June, which contains additional insight into the potential price impacts of a drilling moratorium.  Learn more by visiting www.energysolutionsinc.com. 

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About Energy Solutions, Inc. 

Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 50 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.