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EIA: hurricane recovery slips to 2nd Q ‘06 Energy Information Administration sees refinery recovery by end of ’05; expects energy demand growth to be flat from ’04 to ‘05 Petroleum News
The U.S. Department of Energy’s Energy Information Administration said Nov. 9 that it expects recovery from hurricanes Katrina and Rita to take longer than it projected in October.
The agency said it expects total U.S. energy demand to be relatively flat between 2004 and 2005, compared to 1.5 percent growth from 2003 to 2004, but by 2006 it expects energy demand to recover and grow at a rate of some 2 percent. Tight international supplies and supply losses from the hurricanes should keep crude oil, petroleum products and natural gas prices high through the remainder of this year and 2006. EIA expects West Texas Intermediate to average $57 per barrel in 2005 and $64-$65 per barrel in 2006, retail regular gasoline to average $2.29 per gallon this year and $2.43 in 2006 and Henry Hub natural gas prices to average $9.15 per thousand cubic feet in 2005 and $9 per mcf next year. More detailed damage information The agency said that in October it expected there would be considerable recovery from the Gulf of Mexico hurricanes by the end of the year, but said in November that “more detailed information on damage to production wells, pipelines and natural gas processing plants from the hurricanes” has led it to extend the recovery period to the end of the second quarter of 2006, extending the recovery by about three months from the previous projection. EIA noted that the Minerals Management Service reports more than 150 offshore platforms heavily damaged or destroyed, and not expected to be fully operational for several months.
By March shut-in federal Gulf production is expected to fall to 22.6 percent of pre-hurricane production levels and shut-in natural gas to fall to 20.6 percent of pre-hurricane level. Refinery capacity, on the other hand, is expected to be fully restored to pre-Katrina levels by the end of February.
Onshore oil and natural gas production in Louisiana, less than 50 percent of capacity at the end of October, is expected to be fully restored by the end of March. Global markets tight through 2006 EIA said many factors driving world oil markets in 2005 will continue through 2006, including low spare oil production in the Organization of Petroleum Exporting Countries. In 2005 OPEC spare production capacity reached a historic low level of 1 million to 1.5 million barrels per day. EIA said it “forecasts a slight increase in OPEC spare oil production capacity” in 2006 to 2 million to 2.5 million bpd, “which should allow for some easing of tight oil market conditions in 2006.”
EIA expects crude output from OPEC to be flat in 2006 at about 30 million bpd, while non-OPEC production outside the United States is expected to grow by about 700,000 bpd in 2006, with some 400,000 bpd coming from the Caspian region (Azerbaijan and Kazakhstan), some 450,000 bpd from the Western Hemisphere (particularly Canada and Brazil) and some 150,000 bpd from West Africa.
EIA said supply growth will be dampened by natural production declines from mature fields in the North Sea, Mexico and the Middle East.
The agency projects worldwide petroleum demand growth to slow from 2004 levels, but remain strong in 2005 and 2006, averaging 1.8 percent per year over that two-year period, down from 3.2 percent in 2004.
U.S. natural gas markets remain tight
Natural gas demand in the United States is projected to fall by 0.8 percent in 2005 compared to 2004, and then increase by 2.8 percent in 2006, “assuming a return to normal weather and a recovery in consumption by the industrial sector.”
U.S. dry natural gas production is expected to decline by 4.2 percent in 2006 due largely to Gulf infrastructure disruptions, then increase by 4.7 percent in 2006.
EIA expects net total liquefied natural gas imports for 2005 to remain at about 650 billion cubic feet, the volume for 2004, and rise to more than 1 trillion cubic feet in 2006.
The Henry Hub natural gas spot price averaged $13.82 per mcf in October, and EIA said “the monthly average spot price is likely to remain above $10 per mcf until peak winter demand is over.”
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