US Energy Information Administration said that US natural gas production will hit a record high level in 2012, though at a slightly lower level than originally anticipated.

In its January Short Term Energy Outlook, EIA said that it expected marketed natural gas production in 2012 to rise by 1.4 billion cubic feet per day to a record 67.34 billion cubic feet per day, down slightly from its December 2011 outlook that had output next year at 67.72 billion cubic feet daily.

The EIA said marketed production grew by 4.5 billion cubic feet per day or 7.4% in 2011 to a record high 65.92 billion cubic feet per day. The gain in 2011, the largest year over year increase in history, easily eclipsed the previous record of 62.05 billion cubic feet per day hit in 1973.

Strong production growth was driven largely by increases in shale gas output, but the EIA said output gains in 2012 and 2013 should slow as low prices reduce new drilling plans. However, high initial production rates from new wells, associated gas produced from oil drilling and a backlog of uncompleted or unconnected wells should keep production growing this year, albeit at a lower rate than in 2011.

The agency also slightly lowered its estimate for consumption this year but still expects demand to climb 1.3 billion cubic feet per day or 2%, from 2011 to 68.23 billion cubic feet daily. The largest demand increase this year is expected to come from the electric power sector as gas remains a relatively inexpensive option for generators.

The EIA expects LNG imports in 2012 to drop about 26% to 0.69 billion cubic feet per day, unchanged from its December outlook, as higher prices in Europe and Asia steer cargoes away from US shores. The agency expects Henry Hub natural gas prices in 2012 to average USD 3.53 per million British thermal units, down nearly 12% from 2011's estimated average of USD 4.00.

In 2013, the EIA sees prices rising USD 0.61 or 17% to USD 4.14 per million British thermal unit.

(Sourced from www.upstreamonline.com)