Nat Gas

Natural gas reserves fall to 11-year low; Wyoming may benefit

Production should increase, but so will next winter's utility bills
2014-03-21T08:00:00Z Natural gas reserves fall to 11-year low; Wyoming may benefitBy BENJAMIN STORROW Star-Tribune staff writer Casper Star-Tribune Online

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."

Reach energy reporter Benjamin Storrow at 307-335-5344 or benjamin.storrow@trib.com. Follow him on Twitter @bstorrow

Copyright 2015 Casper Star-Tribune Online. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(6) Comments

  1. Sage52
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    Sage52 - March 21, 2014 2:46 pm
    I concur.
  2. Sassy
    Report Abuse
    Sassy - March 21, 2014 10:42 am
    Like
  3. jc45
    Report Abuse
    jc45 - March 21, 2014 10:36 am
    Sorry for the multiple posts, I don't know what happened.
  4. jc45
    Report Abuse
    jc45 - March 21, 2014 10:32 am
    The web site edited out the first sentence of my post the first time.
    The state of Wyoming may benefit two fold from this. First, the price of natural gas will go up and so will Wyoming's share of the profits in the form of increased tax revenues. Second, with the price of natural gas going up it will be more economical to use coal to produce electricity thus helping the coal industry in Wyoming. The down side, isn't there always one, is the price of heating with gas will go up for our citizens.
  5. jc45
    Report Abuse
    jc45 - March 21, 2014 10:25 am
    1.The state of Wyoming may benefit two fold from this. First, the price of natural gas will go up and so will Wyoming's share of the profits in the form of increased tax revenues. Second, with the price of natural gas going up it will be more economical to use coal to produce electricity thus helping the coal industry in Wyoming. The down side, isn't there always one, is the price of heating with gas will go up for our citizens.
  6. rigrat
    Report Abuse
    rigrat - March 21, 2014 10:06 am
    BS,I know of many capped gas wells,especially in the Jonah Field,there is no shortage of NG,they just want to prop up the price.
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