Natural gas inventories nationwide reached an 11-year low during the second week of March, the U.S. Energy Information Administration reported Thursday, in what industry analysts said could be a boon for Wyoming.
Nationwide natural gas storage fell to 953 billion cubic feet, the lowest level since May 2003 and almost 50 percent below last year. Natural gas stocks were about 47 percent, or 876 BCF, below their five-year average of 1,829 BCF, the EIA said.
Producers will need to ramp production to meet the increased demand, said Wyoming Public Service Commission Administrator Darrell Zlomke.
He estimated companies will need to produce an additional three to four billion cubic feet per day to meet the 3.6 trillion cubic feet needed for storage next winter. Much of that production is likely to come from the Marcellus shale formation in the eastern United States and the Eagle Ford formation in Texas, Zlomke said.
"If they can grow that production enough, it will lessen upward pressure on prices," Zlomke said.
Still, he said it is likely consumers will receive higher utility bills come next winter.
"[Prices] are starting from a higher floor this fall than last fall," Zlomke said.
Wyoming as a state stands to benefit from the increased demand, said Brian Jeffries, executive director of the Wyoming Pipeline Authority. Natural gas production in the Cowboy State has declined in recent years. While higher prices may not be sustained enough to reverse that trend, it may moderate the decline.
And with much of the state's gas exported out of state, tax receipts should increase as producers sell their gas for higher prices, he said.
Jeffries cited a Legislative Service Office calculation that found a $1 increase in natural gas over the course of a year translates into an additional $270 million into Wyoming's coffers.
The nation's inventory decline came as the country began to escape one of the coldest winters in recent memory. The cold temperatures resulted in increased demand for natural gas and utilities drawing from the gas kept in underground storage for winter use.
Natural gas prices over the winter months ticked up as a result, with Henry Hub prices trading as high as $8 per million British thermal unit and hovering between $5 and $6 throughout much of January and February. Henry Hub never traded at more than $4 per MMBtu during the same time last year.
Prices should remain strong going forward as industry works to replenish inventories, analysts said.
"The more you deplete storage in a given winter, the more you gotta next replace it during the summer," said Jeffries. "All things being equal, it makes gas next winter cost more because gas in storage costs more."