American Oil and Gas Reporter - December 2016 - 43

SpecialReport: Natural Gas White Papers
one-third of the combined-cycle capacity
additions and nearly two-thirds of gasfired peaking capacity additions.

or warmer than forecast, it substantially
could impact the amount of gas in storage
and have a subsequent effect on pricing
expectations.
Because domestic production and net
imports both are projected to average below the levels attained last winter, more
gas is expected be withdrawn from storage
this heating season than during winter
2015-16. However, storage withdrawals
still should be 18 percent below the
average withdrawals during the three winters prior to 2015-16.
But if the winter turns out to be very
cold, similar to 2014-15, seasonal gas
demand could be 3.6 Bcf/d higher than
projected, when the additional structural
demand for the industrial sector is included. If this happens, storage inventories
likely would still be adequate, but season-ending storage levels would be reduced to below 550 Bcf by the end of
March, closer to 2015 levels.
Alternatively, a very warm winter
could reduce storage withdrawals about
1.9 Bcf/d, which would result in higher
season-ending storage levels, but below
prior end-of-season records.
In brief, NGSA's analysis shows all
individual natural gas pricing factors exerting either upward or neutral pressure.
No factors appear to place downward
pressure on prices.
The two factors with upward pricing
pressure are the weather forecast (12 percent colder than last winter with 366
more heating degree days) and 1.9 percent
winter-to-winter overall natural gas demand growth to 92.3 Bcf/d (punctuated
by major growth of 12 percent in the res-

Supply-Side Factors
Turning to natural gas supply fundamentals, NGSA projects a slight drop of
500 MMcf/d in winter-time production
from last year's record high. The shale
revolution has ushered in a remarkable
era, as evidenced by dramatic growth in
production over the past decade.
Despite the low rig count, this winter's
supply is expected to remain robust because of drilling efficiencies, high-graded
activity in the most productive sweet
spots in plays, and new infrastructure
coming on line to move natural gas to
consumers.
Shale plays are expected to represent
57 percent of total domestic production
this winter. However, growth in shale gas
production has slowed significantly over
the past three winters as a direct result of
the decline in drilling activity. Shale gas
production growth in 2016-17 is forecast
to be only half the rate of the previous
winter and more than 6.0 Bcf/d less than
during winter 2014-15.
Similar to the start of last winter's
heating season, storage inventories stood
at record levels in early November. On
average, 16 percent of winter supply
comes from storage withdrawals.
By far the greatest area of uncertainty
in any winter gas market outlook is the
weather, and storage withdrawals are the
supply component that is most susceptible
to changes in winter weather. Should
actual weather patterns prove either colder
FIGURE 3

Industrial Capacity Expansion Projects
Entering peak period for expansion projects

1.5

20
1.2

1.1
16

0.9

0.7

0.5

0.6

0.4
4

5
-

No.

Demand

2015

No.

Announced

Demand

2016

No.

Demand

2017

Permit Received

No.

Demand

2018

No.

Demand

2019

No.

Under Construction

0.3

0.2
Demand

2020

0.1

No.

Demand

2021

Online

0.0

Demand (Bcf/d)

No. of Projects

idential and commercial sectors, and
record seasonal demand in the industrial
sector).
Neutral pressure is anticipated in the
economy (U.S. gross domestic product
growth is expected to be similar to last
winter), storage (inventory volumes are
high, but similar to last winter), and
supply (production is down slightly, but
also is similar to last winter).
The important take-away from this
assessment is the strength and responsiveness of natural gas supply. When one
takes into account the expectation for
record storage, and the strength and flexibility of the natural gas pipeline system,
the industry is well positioned to meet
record demand this winter.
r
Editor's Note: The preceding article
was adapted from the Natural Gas Supply
Association's 16th annual "Winter Outlook" report, which was developed using
research from Energy Ventures Analysis
Inc., demand and supply projections from
the U.S. Energy Information Administration, and economic projections from
IHS. The analysis is based on publicly
reported data. NGSA does not project
wholesale or retail market prices.

BILL
GREEN

Bill Green is chairman of the Natural Gas Supply Association, which
represents integrated and independent
companies that supply natural gas in
the United States. Green is vice president of downstream marketing for
Devon Energy Corp., with responsibility for domestic natural gas sales
and transportation activities. He has
more than 30 years of experience in
natural gas marketing with Devon
and Mitchell Energy Corp., both pioneers and major developers of shale
gas. Green also is a member of the
National Energy Service Association
and the Texas Pipeline Association.
DECEMBER 2016 43

American Oil and Gas Reporter - December 2016

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