Natural gas production could slow down this year as supply is approaching its highest levels.
Not drought-spawning heat, a slowdown in well production, or the increasing use of peaking plants by electric utilities could prevent the nation’s natural gas supplies from growing this year to the point where they are expected to reach their highest levels ever by the end of October.
That is excellent news for consumers, who, barring an unforeseen event, should enjoy low-cost heat throughout the winter.
“We are projecting some drop in production in the next couple of months,” said Jose Villar, an underground gas storage expert for the U.S. Energy Information Administration. “But if we have a mild winter again, we could wind up in the neighborhood of where we were last year. And we already have a recent example of what mild weather can do to inventories.”
Where the nation was last year in terms of its natural gas supplies was record territory at the start of April, which marks the end of the 2011-2012 winter period.
Inventories at the end of March totaled 2,477 billion cubic feet of gas, substantially above the five-year average for March of 1,727 billion cubic feet.
Natural gas inventories now stand at 3,576 billion cubic feet — the highest they have ever been through the third week of September, according to the EIA, whose weekly natural gas data extends back to 1994. The high inventories allowed Columbia Gas of Ohio, Inc., on Thursday to set another low rate for its upcoming October billing season.
The gas utility plans to charge customers 46 cents per hundred cubic feet in October, which is four cents higher than the September rate but 10 cents lower than the rate it charged in October, 2011. The rate is based on the Nymex closing price of 31 cents per hundred cubic feet plus 15 cents for a state-approved service fee.
At 46 cents per hundred cubic feet, which is Columbia Gas’ lowest rate for October since 1999, the utility said the average customer bill will be $35.61.
Mr. Villar said it is interesting to note that the amount of natural gas going into storage sites across the country has actually slowed over the summer, yet inventories are still at a record high. “The reason it slowed, I would say, is a combination of somewhat higher consumption during the summertime and a slowdown in production,” he said.
According to oil exploration equipment maker Schlumberger Smith, the number of natural gas rigs operating as of Sept. 14 totaled 412, a decrease of 156 rigs since April 27, and down 53 percent from 2011. Countering that, however, was a growth in the number of oil rigs, which also can extract natural gas. Oil rigs totaled 1,383 as of Sept. 14, up 60 percent from 2011.
Seeing a cost advantage in natural gas over higher-priced coal, many electric utilities this summer opted to increase their use of natural-gas fired turbines to generate electricity.
In July, the EIA found that natural gas consumption by utilities using it to generate electricity totaled 1.1 million cubic feet, up 15.8 percent from July 2011.
Contact Jon Chavez at: firstname.lastname@example.org or 419-724-6128.