Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : KOB.TO - East Lost Hills & GSJB joint venture -- Ignore unavailable to you. Want to Upgrade?

To: Dave E. who wrote (2123)	4/3/1999 2:11:00 PM
From: Salt'n'Peppa	Read Replies (1) \| Respond to of 15703

Timing for ELH coming online could be perfect...read on: (Excerpt from Kerm Yerman's daily newsletter - April 03, 1999) "For the past year Oklahomans have been concerned about low crude oil prices even while enjoying cheap gasoline," Bell said. "Less obvious, perhaps to consumers is the fact that natural gas prices also have been at critically low levels during this period. "That may be about to change. There are strong indications both crude oil and natural gas prices will see an upsurge in the coming months. It will be good news for the nation's producers, but consumers could see a sharp spike in the cost of natural gas to heat their homes and fuel industrial activity, as well as at the gasoline pump." Natural gas is becoming an increasingly important factor in the nation's energy needs. Bell says the increased demand will be fueled by a number of circumstances. "It has a clear environmental advantage because it is much cleaner than other fuels, and is among the most dependable," he said. "Also, contrary to previous policies, the federal government is now pushing its use." The U.S. Department of Energy is predicting use of natural gas will go from 22 trillion to 30 trillion cubic feet annually in the next decade. "While these things are happening, other conditions will contribute to shortages, and resulting higher prices," Bell said. "An important factor is the rate of production decline for new gas wells coming online." Several years ago it was normal for production from new wells to decline about 20 percent in the first year. Today, production from new wells in the Gulf of Mexico and Canada is declining at over twice that rate, he said. In Oklahoma, gas production is at a 30-year low. Preliminary figures from the Oklahoma Corporation Commission indicate that 1998 oil production in the state was 76.36 million barrels, down 8.5 percent from 1997. Although actual 1998 production may vary from the preliminary figures, oil production is expected to be the lowest since 1914 when Oklahoma produced 73.6 million barrels of oil. Oklahoma oil production has declined for 14 consecutive years from 168.6 million barrels in 1984. Preliminary gas figures indicate 1998 production of about 1.6 trillion cubic feet, down 6 percent from 1997. It was the fifth consecutive year of declining gas production in the state from 2 trillion cubic feet in 1993, according to the Oklahoma Corporation Commission. "This is not to suggest we are running out of natural gas, even though consumption has been greater than the replacement of gas reserves for more than 10 years," Bell said. "Reserve-consumption lines crossed paths in 1988 and have been going in opposite directions ever since." During the last five years, proven gas reserves increased only slightly, while the usage rate went up much more dramatically. "What this means, is there is an urgent need for increased drilling activity," he said. "Without it there will not be enough natural gas to meet the increased demand. Simply put, without higher prices there will be shortages. "The current low natural gas prices do not provide incentives for drilling." The March spot market price is around $1.60 per thousand cubic feet. "It will take much higher prices, some believe in the $3.50 to $4 per mcf range, to create the kind of deep gas drilling that is needed," he said. Bell says consumers should take a long-range view of accepting higher prices rather than shortages. "In the past, every shortage was blamed on industry plots to artificially cause such shortages," he said. "The next shortage will be a direct result of recent low prices which have mandated low exploration and drilling budgets.