Monday April 15, 6:58 pm Eastern Time
Reuters Business
Diverse supplies needed to meet U.S. natgas demand
biz.yahoo.com
By Andrew Kelly
HOUSTON, April 15 (Reuters) - Producers will have to develop a diverse range of new supply sources to meet a steady rise in U.S. demand for natural gas over the next 10 to 15 years, industry executives told a conference in Houston on Monday.
``Arctic gas, Eastern Canadian supply and LNG (liquefied natural gas) will probably all be needed to balance demand by the end of the decade,'' Doug Whisenant, President of Williams Cos. (NYSE:WMB - news) unit Williams Gas Pipeline, told the gathering.
U.S. demand for natural gas is projected to grow at an annual rate of about 2 percent, while the growth rate from traditional sources is expected to be half that, said Tim Holt, Vice President of U.S. onshore gas production for BP Plc (BP.L).
Production from the Gulf of Mexico, for example -- where the United States gets about about one quarter of its gas -- would remain more or less flat, Holt said, as growing deepwater supplies were canceled out by declining output from shallow waters.
New supply sources may have to deliver as much as 15 billion cubic feet per day of gas by 2015, an amount that represents roughly one quarter of current U.S. gas consumption, Holt told the Ziff Energy North American Gas Strategies Conference.
Several speakers said Canadian imports have played a growing role in meeting U.S. gas demand over the last decade.
FIGHTING NATURAL DECLINE RATES
Getting more gas out of Canada will take some effort.
David Boone, an executive vice president with Canadian energy company EnCana Corp. (Toronto:ECA.TO - news) said producers in the Western Canadian Sedimentary Basin were facing annual decline rates of around 20 percent from the shallow wells which account for most production there.
``It will be increasingly difficult to replace, let alone, grow production,'' he said.
To boost output in Western Canada, producers would need to drill deeper wells, but these would be riskier and more costly, requiring gas prices of $2.50 to $3.00 per thousand cubic feet to sustain drilling programs, he said.
Offshore eastern Canada is seen as a promising new source of gas supply, possibly producing 2 billion cubic feet per day by 2010, according to BP's projections. Fields in that area are handily located for deliveries to the U.S. northeast.
EnCana plans to start first production from its Deep Panuke field east of Nova Scotia in 2005, with production peaking at a daily rate of 400,000 million cubic feet.
Jay Holm, Chief Executive of El Paso Corp's (NYSE:EPG - news) Eastern Pipelines Group, said his company planned to have its Blue Atlantic pipeline project moving gas to markets in New York and New Jersey by late 2005.
The pipeline, with a planned initial capacity of 1.1 billion cubic feet per day is expected to cost up to $1.8 billion.
GROWING ROLE SEEN FOR LNG
Whisenant of Williams said U.S. imports of liquefied natural gas -- deep frozen gas that is shipped long distances in liquid form -- could reach 3 billion cubic feet per day by the end of the decade while Holm estimated they could hit 5 billion.
El Paso Corp (NYSE:EP - news). has proposed several new LNG import terminal projects in the United States or neighboring territories to complement the nation's four existing terminals. LNG imports currently account for less than one billion cubic feet per day of U.S. supplies.
BP's Holt said there was no doubt that LNG was rapidly becoming a globally traded commodity, much like crude oil.
By the end of the decade industry executives expect pipelines to be built to move natural gas from Alaska and the Mackenzie Delta in northern Canada to markets in the lower 48 states.
Holt - whose company is one of the three big owners of over 30 trillion cubic feet of unexploited gas reserves at Prudhoe Bay in Alaska - said Mackenzie Delta gas would most likely be produced and marketed first.
``The Alaska pipeline project has got some economic hurdles that need to be overcome. The producers are working hard with others trying to figure out how to make that project commercially viable,'' he said.
Industry executives agreed that U.S. natural gas prices would have to stabilize at levels of $3.50 per thousand cubic feet or higher to make the Alaska pipeline project work. |
