Analysts have differing views on US summer gas supply, demand
 

Washington (Platts)--23Apr2007

Two noted natural gas analysts took a look at the same numbers and came
to opposite conclusions Monday on gas supply, demand, and prices this summer.

Analyst Ron Denhardt, vice president for natural gas and power at
Winchester, Massachusetts-based Strategic Energy and Economic Research, said
he expects US supply to grow 1.5% in 2007, while demand grows 0.8% assuming
summer weather is 5% warmer than normal.

"The projected looser supply/demand balance is more than offset by lower
working gas storage which is currently 217 Bcf below last year," Denhardt said
in his monthly report on natural gas. "Working gas storage is projected to end
October 2007 at 3,347 [Bcf] versus 3,452 [Bcf] last year."

Denhardt's base case of a 5% warmer summer has Henry Hub prices averaging
$7.33/MMBtu.

US production growth is the largest contributor to the growth in supply,
Denhardt said, noting that Houston-based Enterprise Product Partners'
Independence Hub should begin flowing in the third quarter and ramping up to 1
Bcf/d. Also adding to US production growth are volumes from Texas' Barnett
Shale, as well as other shale and unconventional plays in the MidContinent and
Rocky Mountains.

While liquefied natural gas imports will also grow, Denhardt said the
increase will only make up for what will become a 1 Bcf/d drop in Canadian gas
imports by mid-year. More of Canada's gas production will flow to Alberta's
oil sands projects, Denhardt said.

Taking a more bullish stance Monday was investment bank Raymond James'
energy analyst Marshall Adkins, who said he believes US gas production is
dropping at 1.5%/year and demand is increasing at 1.25%/year. "While this does
not mean that gas is grossly under-supplied, it does mean that the market is
not as over-supplied as current perception may indicate," Adkins said.

Key to Adkin's thesis is his contention that new US wells are seeing 30%
declines in their first year of production.

--Bill Holland, bill_holland@platts.com