WASHINGTON: Natural gas pipeline exports to Mexico have risen in 2016, and the Energy Information Administration expects growth to continue because of growing demand from Mexico’s electric power sector and because of flat natural gas production in the country. Gross pipeline exports are expected to increase by 0.7 Bcf/d in 2016, and 0.1 Bcf/d in 2017, to an average of 5.7 Bcf/d. EIA projects LNG gross exports will rise to an average of 0.5 Bcf/d in 2016, with the startup of Cheniere Energy’s Sabine Pass LNG liquefaction plant in Louisiana, which sent out its first cargo in February 2016. EIA’s Short-Term Energy Outlook (STEO) projects gross LNG exports will average 1.3 Bcf/d in 2017, as Sabine Pass ramps up capacity, Kallanish Energy reports.
With expected growth in gross exports, net imports of natural gas declined from 2.6 Bcf/d in 2015, to a small amount of net exports in 2017. The U.S. is expected to become a net exporter of natural gas during the second quarter of next year. Natural gas inventories in March ended at 2,496 Bcf, the highest end-of-withdrawal-season level on record. As of July 29, natural gas inventories were at 3,288 Bcf. Even with lower-than-average storage injections, EIA forecasts natural gas inventories to be 4,042 Bcf at the end of October 2016, which would be a record high level for that time of year. The Henry Hub natural gas spot price averaged $2.82 per million Btu (MMBtu) in July, up 24 cents/MMBtu from the June average. Price increases reflected warmer-than-normal temperatures in July, which led to increased demand from the electric power sector.
Despite the increase in spot prices, prices still remain low enough to support significant natural gas-fired generation. EIA/STEO expects natural gas prices to gradually rise, with forecast Henry Hub prices averaging $2.41/MMBtu in 2016, and $2.95/MMBtu in 2017. Current options and futures prices imply market participants place the lower and upper bounds for the 95% confidence interval for November 2016 contracts at $2.12/MMBtu and $4.28/MMBtu, respectively. That’s up from $2.08/MMBtu and $4.06/MMBtu one year ago.
