American Oil and Gas Reporter - December 2016 - 41

SpecialReport: Natural Gas White Papers

La Niña Conditions
On Nov. 10, the National Oceanic &
Atmospheric Administration issued a report noting that La Niña conditions with
below-average sea temperatures were
present in most of the eastern and central
Pacific Ocean. According to NOAA, La
Niña conditions were forecast to continue

through winter, influencing temperatures
and precipitation across the United States.
NOAA's seasonal outlook favors below-normal temperatures and above-normal precipitation in northern parts of the
country, but moderately warmer and drier
than normal weather in southern states.
Changes in winter weather can have a
significant impact on gas demand in the
residential and commercial sectors. For
example, the difference in gas demand
for the winters of 2013-14 and 2011-12
was 1.855 Tcf, or 16 percent. The longrange forecast is 12 percent colder than
last winter, but still relatively mild in
comparison with the 30-year average (3
percent warmer).
Last winter ranked as the secondwarmest on record with only 3,042 heating
degree days (13.4 percent below the 30year average). This winter is expected to

have 3,408 heating degree days, or 12
percent more than last winter (3.1 percent
below the historical norm). As a result,
the residential and commercial sectors
are anticipated to consume 575 Bcf more
gas this winter than last, averaging 4.0
Bcf/d in increased demand (Figure 2).
In addition to weather-related demand
growth in the residential and commercial
sectors, industrial demand is projected
to expand by 700 million cubic feet a
day (2.4 percent) this winter, thanks to
the startup of new-build facilities and
capacity expansions to plants in the natural
gas-intensive petrochemical, fertilizer and
methanol industries.
Between 2010 and 2014, 38 fertilizer,
petrochemical and methanol projects costing a total of $19 billion commenced operation, adding 1.1 Bcf/d in demand. Another nine projects came on line in 2015.

FIGURE 1
Winter Natural Gas Demand for All Sectors
95
Mild Weather

Cold Weather

Normal Weather

91.2

91.1

87.5
85.9
Great Recession

83.7

Bcf/d

81.2
80

77.3

78.7

77.5

76.2

73.2

70
65
60
2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Source: Images courtesy of Energy Ventures Analysis Inc.

FIGURE 2
Winter Gas Demand for Residential and Commercial Sectors
6,500
6,258
Normal Weather

Mild Weather

Cold Weather
5,964

6,000
5,702
5,500

5,449

5,511

5,468

5,436

5,404

Bcf

These are among the key findings of
the Natural Gas Supply Association's assessment of the natural gas market as the
heating season gets under way. Using
published data and independent analyses,
NGSA evaluated the combined impacts
of weather, U.S. economic growth, customer demand, storage inventories and
supply on the direction of natural gas
prices this winter.
The picture that emerged for the upcoming winter is one of a flexible natural
gas market that is able to respond to
changes in weather and customer demand
with ample supply and storage facilities.
Because of colder weather and increased
demand, NGSA anticipates upward pressure on prices, compared with last winter.
Figure 1 contrasts the natural gas demand forecast for winter 2016-17 with
actual consumption over the past decade.
While demand should be significantly
higher than last winter, a winter-time
forecast calling for temperatures averaging
normal to slightly warmer than historical
averages will keep demand below the
levels set during the colder-than-normal
winters of 2013-14 and 2014-15.
Even with the greater seasonal consumption, reduced natural gas imports
and slightly reduced domestic production
expected this winter, supplies are ample
to meet winter-time demand. Reliability
of supply is enhanced further by the
record amount of natural gas in storage
at the start of the heating season. In fact,
for the week ending Nov. 4, the U.S. Energy Information Administration reported
4.017 trillion cubic feet in total inventory,
ranking as the highest volume ever recorded in EIA's weekly database.
It also is important to keep in mind
that the upward pricing pressure is in relation to last winter, when wholesale
prices averaged $1.98 an MMBtu, which
was the lowest average winter wholesale
price since the 1990s.

5,000

4,893

4,768

4,500

4,000
07-08

08-09

09-10

10-11

11-12

12-13

13-14

14-15

15-16

16-17

HDDs

07-08

08-09

09-10

10-11

11-12

12-13

13-14

14-15

15-16

16-17

vs Norm

1.7%

3.2%

6.5%

-14.9%

-1.2%

10.0%

4.9%

-13.4%

-3.1%

DECEMBER 2016 41

American Oil and Gas Reporter - December 2016

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