US summer natural gas demand seen slightly below 2005: NGSA

US summer natural gas demand seen slightly below 2005: NGSA

Washington (Platts)--31May2006

After four straight summers of dramatically increasing costs, US
wholesale natural gas markets are expected to be more stable this summer,
although "multiple threats," including hurricanes and volatile world energy
markets could upset that forecast, the Natural Gas Supply Association said
Wednesday.

In its annual summer outlook, the Washington-based industry group that
represents integrated gas producers and marketers said that despite some
forecasts calling for a "somewhat cooler summer this year" than last,
projected gas demand will be relatively close to what it was last summer.

"Cooler weather this summer will likely result in lower demand for
electricity and, consequently, lower levels of gas-fired generation, leaving
room for the return of some industrial demand," NGSA Chairman Chris Conway
said in a statement.

As a result, NGSA is forecasting that gas consumption this summer will be
only 0.2% below last summer's.

The organization added that the industrial sector's summer demand for gas
is expected to increase 1.3% from last year, according to a forecast prepared
for NGSA by Energy Ventures Analysis. The growth, NGSA said, reflects a
recovery from hurricane outages and increases due to continued economic
growth. Without hurricanes Katrina and Rita, NGSA said natural gas demand in
the industrial sector in the summer of 2005 would have averaged 17.5 Bcf/d
rather than the actual 17.3 Bcf/d.

The organization also predicted that average weekly injections of gas
into storage will decrease only slightly to 59.7 Bcf from last summer's 64.8
Bcf. When the storage injection season ends on November 1, NGSA forecast that
storage levels will hit a new high of slightly more than 3.5 Tcf, or about 190
Bcf above the record for storage entering the winter season and about 290 Bcf
above last year's levels.

"Although there will be a reduced rate on injection, it appears storage
demand during the summer period will actually be off by only about 0.8 Bcf/d,
not quite enough in our estimation to result in downward pressuring during the
entire season," Conway, who also is president of gas and power for
ConocoPhillips, said.

Beyond uncertainties related to hurricanes and world markets, NGSA also
said it is watching whether any Western electric utilities may need to use
more gas-fired generation during off-peak demand hours to "preserve
constrained coal stockpiles." Depending on competing fuel prices in the East,
as well, some additional gas-fired generation may also displace some coal
unit, according to the EVA analysis.

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