Tulsa World, Okla. - March 6, 2002
Mar. 6--Natural gas supplies are depleted to the point that some storage operators have run out of inventories,
Texas oilman T. Boone Pickens said Wednesday.
"They told me they can't get anything else out," said Pickens, the featured speaker at a luncheon hosted by the
International Society of Energy Advocates in Tulsa.
Pickens, an Oklahoma native who now lives in Dallas, is perhaps best known for his attempt to take over
Phillips Petroleum Co. in the 1980s. Mesa Petroleum Co., the company he founded in 1956, was one of the
largest independent oil and gas companies in the nation. He now heads BP Capital, an investment firm based
in Dallas.
Pickens warned that if gas supplies keep falling at the present rate, more storage operators will lose the ability
to pull supplies from underground storage facilities. The situation could lead to supply shortfalls this winter.
"We could find ourselves with real problems," Pickens said.
As gas supplies fall, the pressure inside storage facilities declines. If gas supplies drop below a certain level,
the capacity to withdraw inventories from storage will be limited due to insufficient pressure.
U.S. supplies are nearing that point, which is around 600 billion to 700 billion cubic feet, Pickens said.
Extremely cold weather has sapped the nation's inventory of gas, which is used to heat most American homes.
A lack of drilling activity has also contributed to the shortfall.
As a result, gas prices have skyrocketed. Last month, gas prices soared to $18 to $19 per thousand cubic feet
(mcf) in some markets. Gas close Wednesday on the New York Mercantile Exchange at $7.02 per mcf, up
from $2.46 on the same day last year.
"I don't think I'll ever see gas prices below $4 again," Pickens said. "We're in a new world."
Pickens said higher gas prices are good for domestic producers, but added that unreasonably high prices could
kill demand for the commodity. The supply-demand imbalance must be repaired, Pickens said.
"You can't keep going up to the edge of the cliff and looking over," he said.
Despite the more lucrative prices, producers are reluctant to drill for new supplies because they question the
stability of today's prices, Pickens said.
He pointed to December 2000, when gas prices soared to $10 per mcf. Many producers made big investments
in drilling projects only to see prices plummet shortly thereafter.
Pickens also said gas producers are not responsible for replacing the nation's supply with new production each
winter.
"What I'm responsible for is my shareholders," he said.
The recommended storage level for the winter heating season, which begins Nov. 1, is 3 trillion cubic feet. By
season's end, which is April 1, the industry prefers to have 1 tcf left in storage, enough to rebuild supplies for
the next season.
U.S. gas supplies are down 48 percent from last year, according to the U.S. Department of Energy. With 1 tcf
left in storage, experts say supplies will likely fall to 600 bcf by April |
