The survey estimated that 4Q2004 total North American gas production fell 0.4% sequentially and 2.5% from 4Q2003. Lower U.S. production outweighed an increase in Canadian production. Also, 4Q2004 U.S. gas production for the surveyed companies decreased an estimated 1.1% sequentially and about 3.9% over 4Q2003.
"We expect overall supply to be roughly unchanged in the future, as rising LNG imports are offset by declining U.S. production," said analyst Thomas Driscoll. "We expect continued strong prices in the long term as a result."
The analyst estimated there was a 4.8% decline in supply in 2003, which necessitated a 4.8% decline in demand -- "the two thirds increase in natural gas prices from 2002 to 2003 induced consumers to reduce gas consumption," said Driscoll. "The 3.2% decline in supply/demand that we estimate in 2004 has helped to support prices this year."
The major components of Lehman's estimate were the approximate 4.8% decline forecasted in U.S. production in 2004, a 3% decline in 2005, followed by 2% declines in 2006-2008. It also based its estimate on a 2.4% increase in estimated imports from Canada in 2004, a 1% increase in 2005, followed by a 1% decline in 2006-2008. The analyst also estimated that LNG imports will represent roughly 65% of currently available regasification capacity in 2004.
The Lehman survey covered 59 North American oil and natural gas producers that account for about 66% of U.S. and Canadian gas production volumes. Lehman's estimated production for 45 companies totaled 25.8 Bcf/d after royalties in 4Q2004. Production before royalties averaged 31.6 Bcf/d for the group, using an 18.5% royalty rate. In Canada, production for the 14 companies showed the country's gas production up 1.6% sequentially and 1.7% over 4Q2003.
For 4Q2004, Lehman estimated LNG imports dropped about 350 MMcf/d over 4Q2003 to 1.75 Bcf/d, mostly because of a temporary shut down at the Lake Charles, LA, LNG facility for construction.
"Despite the sequential decline, we estimate 4Q2004 LNG imports rose almost 150 MMcf/d versus 4Q2003 (excluding Puerto Rico). The increase was led by about a 250 MMcf/d rise at Elba Island."
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