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UPDATE 1-EIA sees U.S. natural gas production up in 2012, 2013

Wednesday, 10 Oct 2012 | 12:44 AM ET

(Adds consumption, LNG and price data, background)

* EIA sees 2012 gas output at record-high 68.85 bcfd * 2012 gas demand seen up 4.7 pct from 2011

NEW YORK, Oct 10 (Reuters) - The U.S. Energy Information Administration said it expects domestic natural gas production in 2012 to be up nearly 4 percent from 2011's record levels.

In its October Short-Term Energy and Winter Fuels Outlook, the EIA on Wednesday said it expects marketed natural gas production in 2012 to rise by 2.6 billion cubic feet per day to a record 68.8 bcf per day, little changed from its September outlook.

The agency sees a small drop in production in coming months, reflecting recent declines in the gas-directed rig count.

EIA sees output growth slowing in 2013, gaining just 0.4 bcf per day as a reduction in drilling activity is offset by rising production from liquids-rich producing areas like Eagle Ford in Texas and Marcellus in Appalachia. Average daily output will still hit a record for the third straight year.

The agency left its growth estimate for consumption this year nearly unchanged from its September outlook, forecasting demand will climb 3.1 bcfd, or 4.7 percent, from 2011 to 69.76 bcf daily.

Large gains in gas use by the electric power sector this year have more than offset declines in residential and commercial consumption.

Gas demand from the electric power sector was expected to average 25.4 bcf per day in 2012, a 22 percent jump from 2011, primarily driven by the relative cost advantage of natural gas over coal for power generation in some regions.

Coal consumption this year was expected to fall 6 percent as gas replaced coal for power generation. But coal exports remained strong, with expectations for a record 125 million short tons to be exported from the United States in 2012.

In 2013, EIA sees total gas demand slipping about 0.2 bcf per day, or 0.2 percent, to 69.6 bcf daily, as expected declines in the electric power sector offset increases in residential, commercial and industrial consumption.

Although projected higher natural gas prices will contribute to a 10.4 percent decline in gas consumption from the electric power sector in 2013, power sector demand next year is expected to be about 1.9 bcf per day higher than 2011 levels and high by historical standards.

On the supply front, pipeline imports are expected to fall by 2.3 percent in 2012 as growing supplies of domestic shale gas replace some imports from Canada. Pipeline exports, mostly to Mexico, are expected to remain flat in 2012 and grow very slightly in 2013.

EIA expects imports of liquefied natural gas (LNG) to halve in 2012 to about 0.5 bcfd and remain near that level in 2013, as global shippers send more gas to higher-paying markets in Europe and Asia.

EIA expects Henry Hub natural gas prices in 2012 to average $2.71 per million British thermal units, up 6 cents from last month's outlook but about 32 percent below 2011's estimated average of $4.

Roughly 50 percent of U.S. households heat their homes with natural gas. They are expected to pay, on average, $89 more this winter, an increase of 15 percent, the EIA said. This winter is expected to be colder than last year's warmer-than-normal winter.

In 2013, the EIA sees prices rising 64 cents, or 24 percent,

to $3.35 per mmBtu.

(Reporting By Joe Silha and Jeanine Prezioso; editing by John Wallace)

((joe.silha@thomsonreuters.com)(+1 646 223 6071)(Reuters Messaging: joe.silha.reuters.com@reuters.net))

Keywords: EIA OUTLOOK/NATGAS