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

(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 InformationAdministration said it expects domestic natural gas productionin 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 gasproduction in 2012 to rise by 2.6 billion cubic feet per day toa record 68.8 bcf per day, little changed from its Septemberoutlook.

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 bcfper day as a reduction in drilling activity is offset by risingproduction from liquids-rich producing areas like Eagle Ford inTexas and Marcellus in Appalachia. Average daily output willstill hit a record for the third straight year.

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

Large gains in gas use by the electric power sector thisyear have more than offset declines in residential andcommercial consumption.

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

Coal consumption this year was expected to fall 6 percent asgas replaced coal for power generation. But coal exportsremained strong, with expectations for a record 125 millionshort tons to be exported from the United States in 2012.

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

Although projected higher natural gas prices will contributeto a 10.4 percent decline in gas consumption from the electricpower sector in 2013, power sector demand next year is expectedto be about 1.9 bcf per day higher than 2011 levels and high byhistorical standards.

On the supply front, pipeline imports are expected to fallby 2.3 percent in 2012 as growing supplies of domestic shale gasreplace some imports from Canada. Pipeline exports, mostly toMexico, are expected to remain flat in 2012 and grow veryslightly in 2013.

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

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

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

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 JohnWallace)

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

Keywords: EIA OUTLOOK/NATGAS