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EIA: Oil production loss from moratorium Agency projects Interior’s 6-month hold on deepwater drilling will cost 26,000 barrels in 4th quarter, up to 70,000 bpd next year Petroleum News
The six-month moratorium on deepwater drilling imposed by the U.S. Department of the Interior in late May will result in a 26,000 barrel-per-day loss of U.S. production in the fourth quarter of this year, rising to 70,000 bpd in 2011.
That was the preliminary estimate the U.S. Energy Information Administration included in its June short-term energy outlook, released June 8.
The estimate is part of EIA’s projection of a 20,000 bpd fall in U.S. crude oil production in 2011, down about 110,000 bpd from the agency’s May projection. EIA said its preliminary estimates show a cumulative 2.4 million barrel reduction of output from the deepwater Gulf of Mexico this year due to the moratorium and a 25 million barrel reduction in 2011, with the reduction averaging 9,000 bpd in September and 80,000 bpd by December 2011.
Crude oil prices fluctuated in May, the EIA said, with the West Texas Intermediate spot price hitting a high of $86 per barrel May 3 and a low of $65 May 25; WTI ended the month at $74. The agency said market analysts credit the crude price decline to uncertainty over the global economic recovery, particularly with respect to Europe’s debt crisis and the tightening of credit by China, and liquidation of futures contracts.
EIA is projecting WTI spot prices to average $79 per barrel this year and $83 in 2011; both estimates are about $3 lower than the agency projected in May.
The Henry Hub natural gas spot price is expected to average $4.49 per million British thermal units this year, a 54 cent increase over the 2009 average. EIA said the spot price in 2011 is expected to average $5.08 per million Btu, down 28 cents from the agency’s May forecast.
Crude oil supplies EIA is projecting non-OPEC supply to increase by 500,000 bpd this year, 160,000 bpd lower than the agency’s May forecast.
“A more pessimistic outlook for supply growth in Brazil and Central Asia is the principle source of the downward revision, though these two areas (along with the United States) still constitute the bulk of expected non-OPEC growth supply in 2010,” EIA said.
The Organization of the Petroleum Exporting Countries is projected to keep its crude oil production levels largely unchanged for the remainder of the year. EIA said countries with the bulk of OPEC’s spare capacity — Saudi Arabia, Kuwait and the United Arab Emirates — “have maintained their quota discipline at current levels for an extended period and are expected to continue doing so barring significant changes in the world market outlook.”
OPEC production is expected to increase by 500,000 bpd in 2011 as new capacity is added in countries such as Angola.
EIA said OPEC data show that surplus crude oil production capacity is not expected to increase significantly in 2010-11 over first-quarter 2010 levels.
Commercial oil inventory held in the Organization for Economic Cooperation and Development, the world’s industrialized nations, was 2.7 billion barrels at the end of the first quarter, about 58 days of forward cover, and roughly 102 million barrels more than the five-year average for the corresponding time of year.
“Although OECD oil inventories are still projected to maintain at the upper end of the historical range over the forecast period, they are falling as a result of a combination of higher oil consumption and OPEC production restraint,” EIA said.
Natural gas EIA said U.S. natural gas consumption is about 0.5 billion cubic feet per day higher in this forecast than in May, averaging 64.9 bcf per day this year and 64.6 bcf in 2011.
Consumption growth is projected to increase by 2.4 bcf per day in 2010 “led by strong growth in the electric power and industrial sectors.”
EIA said its projection of natural gas consumption for 2011 fell slightly as growth in the industrial sector is expected to slow to 0.2 bcf per day, a growth more than offset by an expected 0.5 bcf per day decline in natural gas consumption in the electric power sector.
Total marketed natural gas production in the U.S. is projected to increase by 1.2 bcf per day in 2010 to 61.2 bcf. EIA said natural gas production grew steadily in the first quarter, as the number of working natural gas rigs reported by Baker Hughes increased from 759 to 941. The agency said it increased its production forecast based on a projected increase in working gas rigs to 970 at the end of May.
NOAA hurricane forecast “The increase in production is partially offset by new estimates of shut-in production based on NOAA’s latest hurricane forecast,” with tropical storm activity and accompanying production outages expected to be “significantly higher this year than last year.”
EIA is estimating a median for projected total shut-in production due to tropical storms from June through November of 166 bcf, compared to an estimate for shut-in production last year of 19 bcf.
In 2011 natural gas marketed production is expected to fall almost 0.5 bcf per day to 60.8 bcf, a forecast which includes the agency’s preliminary estimates of reduction in Gulf of Mexico production due to the moratorium on deepwater drilling of 8 bcf this year and 74 bcf in 2011.
Liquefied natural gas imports are projected to increase by 0.27 bcf per day in 2010 and by 0.16 bcf next year, although high prices in Europe and Asia relative to the U.S. will continue to draw LNG cargoes, with the U.S. serving as a secondary market.
EIA said it has increased its forecast for pipeline imports by 0.29 bcf from May, and said those imports are expected to play an important role in offsetting hurricane-related production outages in the Gulf of Mexico.
Working gas in storage was 2.357 trillion cubic feet on May 28, 306 bcf above the previous five-year average and 38 bcf above the corresponding week in 2009. EIA said it expects inventories at the end of October to be 3.805 tcf, slightly below the level last October and the 3.837 tcf peak inventory in November 2009.
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