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To: Frank who wrote (66908)	5/24/2000 10:38:00 AM
From: Tomas	Respond to of 95453

US faces creeping lack of gas - Financial Times, May 24 By Matthew Jones The head of one of the largest natural gas producers in the US has warned of continuing price volatility and increasing risk of power outages because of a "creeping lack of supply" in North America. US natural gas prices have risen to all time highs over the last six months, driven by the high world price of crude oil and a tightening of the natural gas market. The New York Mercantile Exchange 12-month Henry Hub strip closed at $3.78 per million British thermal units on Tuesday compared with prices of about $2.40 a year ago. In the US, gas prices are no longer indexed to crude oil being traded on spot and futures markets. But there is linkage as the two fuels compete and, in the case of associated gas, are tied at the point of production. Mark Papa, chairman and chief executive officer of EOG Resources, said environmental considerations and a strong construction programme for gas-fired merchant power plants would continue to push up demand. However, annual domestic natural gas production has been static at around 19.6 trillion cubic feet for the last six years and is expected to fall in the future as accessible reserves are depleted. Mr Papa said: "At the moment we are talking about a stealth tightening of demand rather than a crisis, but this situation is set to move higher up the political agenda. The crunch will be how much new demand for power generation will be met." Natural gas demand increased from 19.3 trillion cubic feet a year in 1990 to 22 TCF in 1998. According to the National Petroleum Council, a club of energy companies and consultants set up to inform the US energy secretary on industry matters, demand is likely to increase to 29 TCF in 2010 and 31 TCF in 2015. The US has started to import Liquified Natural Gas from Trinidad and Tobago and plans are in place to increase production from Canada and the Gulf of Mexico. But gas producers believe this will not be enough to bridge the gap unless access restrictions are lifted to hydrocarbon reserves on federal lands in the Rockies, Gulf of Mexico and offshore California. In December the NPC called on Bill Richardson, US energy secretary, to push for the access restrictions to be lifted. However, Mr Papa said: "From what we hear on the political winds it is highly unlikely that new access will be granted." Graham Freedman, a gas expert with Wefa Energy, a consulting company not linked to the NPC, said the demands of US gas producers could be political gamesmanship to gain favourable fiscal terms for exploration and production. But he added: "There is no doubt that there is a big increase in gas demand so the amount of accessible resources might well have to be increased."