Record levels for production, power burn and storage injection will make 2015 a record year for natural gas, Jeff Moore, senior energy analyst at Platts unit Bentek Energy, told attendees Friday at the 38th annual Coal Marketing Days conference in Pittsburgh.

Moore said that while coal plant retirements have helped fuel an increase in natural gas generation, the real driver behind in the rise in demand is the commodity's continued low price.

With the Henry Hub price staying below $3/MMBtu, natural gas generation is deployed ahead of coal, Moore said.

Bentek data shows that natural gas demand has remained above five-year highs for the entire year and it predicts that trend will continue through the end of 2015.

Moore said the only time natural gas demand for power generation was near these levels was in 2012, the year the Henry Hub price dipped to about $2/MMBtu in May.

While there was baseload growth in both those years, gas' price was the key to utilities dispatching their gas units, Moore said.

Efficiencies in horizontal drilling and a drastic increase in the initial production rate from wells in the Marcellus and Utica shales, which is up 158% in the last three years to 6.6 MMCf/d from 2.5 MMcf/d, will push gas production to a new high in 2015, Moore said.

Natural gas production is averaging 72-72.5 Bcf/d this year, down from 73 Bcf/d at the end of 2014, but will ramp up to near 74 Bcf/d by the end of 2015, Moore said.

Gas inventory levels are predicted at an all-time high at the end of the year, Moore said, but the volumes depend on winter weather.

If there is a mild winter, Moore expects a higher inventory will put more pressure on gas prices entering 2016.

Bentek sees the Henry Hub price rounding out in 2015 at an average of $2.68/MMBtu and increasing to $2.84/MMBtu in 2016. From 2017 to 2020, Bentek expects the Henry Hub price to average $3.38/MMBtu, $3.85/MMBtu, $4.23/MMBtu and $4.42/MMBtu, respectively.
Source: Platts