Average prices for natural gas fell sharply in 2002, according to Natural Gas Annual 2002 from the Energy Information Administration. The average wellhead price of natural gas was $2.95 per thousand cubic feet (Mcf) in 2002--a decline of more than $1 from 2001.

Prices were also lower for imported gas, and prices for delivered gas fell by 18 percent or more in all consuming sectors. Cheaper natural gas stimulated demand, and consumption rose by 779 billion cubic feet (Bcf).

Supplies of natural gas (production and net imports) decreased by roughly 750 Bcf in 2002, so storage stocks were drawn down to meet the consumption increase.

	Natural Gas Supply - Differences Between Years, 1998-2002 (Trillion Cubic Feet)
	Source: Energy Information Administration.

Supply
The United States had almost 20 trillion cubic feet (Tcf) of marketed natural gas production in 2002, 3 percent less than in 2001.

Declining production in Texas, New Mexico, Oklahoma, Louisiana, and the Gulf of Mexico was partially offset by increases in Colorado and Wyoming, reflecting the growing prominence of unconventional sources such as tight sands, shales, and coalbeds.

Although natural gas imports increased, exports grew by an even larger amount, and net imports were about 3 percent lower in 2002 than in 2001, the first decline since 1986.

Pipeline imports from Canada rose for the 16th consecutive year, but U.S. exports to Canada rose faster, so that net imports of Canadian natural gas grew by less than 1 percent.

Exports to Mexico nearly doubled to 263 Bcf--the most natural gas ever exported to that country--while imports from Mexico remained negligible.

Liquefied natural gas imports, mostly from Trinidad, Qatar, Algeria, and Nigeria, have grown significantly in recent years but still accounted for only about 1 percent of total supply in 2002.

Cumulative net storage withdrawals in 2002 were about 470 Bcf, compared with net injections in 2001 that exceeded 1,100 Bcf. Total underground natural gas storage capacity measured 8,207 Bcf in 2002.

Consumption
Total natural gas consumption increased 3.5 percent to 23 Tcf in 2002, the second-highest level ever after 2000. The increase was driven primarily by increased deliveries in all end-use sectors.

Almost half the increase in deliveries was attributable to the electric power sector, the second-largest end user of natural gas, where consumption increased by 6 percent as a result of the continued build-up of gas-fired generation plants.

Approximately 93 percent of the electric generation capacity that came online during 2002 was fueled by natural gas.

Consumption increased 3 percent in the industrial sector, which remained the largest user of natural gas with 36 percent of the end-use total.

The residential and commercial sectors received 23 and 15 percent of deliveries in 2002. Transportation use is still less than one-tenth of one percent of total end use.

Prices
Measured in constant 2002 dollars, the national average wellhead price of natural gas was the lowest in 3 years but was the third-highest since 1985 when it averaged $3.77 per Mcf.

In nominal dollars, the average wellhead price declined 26 percent from the previous year. Prices decreased in each sector of the natural gas market.

Residential and commercial consumers continued to pay the highest prices for natural gas, at $7.91 and $6.64 per Mcf, respectively.

The average prices paid by the industrial and electric utility sectors were $4.02 and $3.77 per Mcf, respectively. This ended a 2-year pattern in which prices increased in each of the sectors, and a 3-year pattern of price hikes in the electric utilities sector.

Note: Revised data from the Natural Gas Annual 2002 will be incorporated into the next issue of the Monthly Energy Review.

Natural Gas Annual 2002, DOE/EIA-0131(2002); 172 pages, 79 tables, 19 figures.

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