As natural gas supply from traditional North American basins and production regions continues to decline, new sources — especially unconventional resources — and liquefied natural gas (LNG) imports will be critical to keep up with the country’s continuously growing demand, said a panel of industry experts Thursday.

Speaking at the 19th annual GasMart in New Orleans, Byron Wright, vice president of strategy and rates for the El Paso Pipeline Group, joined executives from Anadarko Petroleum Corp., Duke Energy Gas Transmission (DEGT) and AGL Resources to talk about how producers and suppliers are working to find and exploit new gas resources.

Wright said that “declining [production] basins do not equal declining supply” because liquefied natural gas (LNG) and frontier supply will keep the pipelines full. “We are relatively optimistic about supply,” he said.

Wright said supply from Western Canada, the Midcontinent and Gulf of Mexico are expected to decline from a combined 55.5 Bcf/d in 2000 to an estimated 52.7 Bcf/d by 2014. However, he believes that combined supply from Alaska, the Arctic/Mackenzie Delta, the Rockies, Mexico, Eastern Canada and LNG imports will pick up the slack and help meet increased demand by jumping from 10.4 Bcf/d in 2000 to an estimated 37.9 Bcf/d by 2014.

“Supply growth has traditionally come from the frontier areas,” said Wright, but “the traditional supply basins are lucky to hold their own.”

The El Paso executive said that power demand will continue to drive gas demand, with U.S. gas consumption for electricity projected to increase from 6 Tcf in 2004 to 10.8 Tcf by 2015. During that same time frame, combined gas consumption by U.S. residential, commercial and industrial users is only expected to increase from 14.3 Tcf to 15.6 Tcf.

Wright also noted that in areas such as the Rockies, supply growth will far outpace local demand. He expects Rockies exports to other regions of the country to increase from the 2001 level of 3,463 MMcf/d to 6,324 MMcf/d by 2010.

In fact, “production alley” gas demand growth, which includes the entire central United States from the Gulf Coast through the Rockies, is only expected to increase from the 30 Bcf/d recorded in 2000 to 33.3 Bcf/d by 2014, a 0.8% increase. However, demand growth east and west of the alley is expected to grow from 2000 levels of 34.2 Bcf/d and 7.9 Bcf/d, respectively, to 44 Bcf/d (1.8% growth) and 9.9 Bcf/d (1.7% growth) by 2014.

Panel member Karl Kurz, vice president of marketing for Anadarko, said the “buzzwords today are ‘new, unconventional resources.'” However, Kurz noted that it will take a lot of time and money to exploit tight gas and coalbed methane resources.

Despite the high price of gas, Kurz noted that production remains flat or is falling. Exploration and production companies are swimming in cash, but he said there continues to be a lack of investment activity.

Instead of looking for new supplies, “producers are exploiting old fields,” said Kurz. “And that means lower production and a higher decline rate.” Other barriers include a lack of workers and infrastructure limits, such as service company equipment. Regulatory barriers, which delay permit processing, also continue, especially in the Rockies.

Going forward, said Kurz, “We need a phase of super investment to counter chronic underinvestment. Now we are faced with a cycle where it’s going to take a lot of dollars.”

“We have infrastructure limits. Finding new resources is difficult. It also takes a lot of time. Alaska and Canadian frontiers won’t be ready for eight years. There is a challenge of finding new resources. The past 20 years we have focused on purchases and redevelopment of assets. Most of the known, large assets are at or near development.”

Despite the forecasts about declining production, Kurz said, “North America is resource rich,” with an estimated 1,002 Tcf in onshore reserves — 70% of them unconventional. However, “it will take a lot of equipment, a lot of investment.”

LNG also will be a major factor for future supply. “We need LNG. It has to come,” said Kurz.

Greg Rizzo, group vice president of DEGT, said LNG is one of Duke’s three regional strategies to increase gas supply. Duke expects to see new LNG coming to the Northeast from Canada and from Gulf of Mexico terminals. “There is no doubt LNG will come…It provides a balance and will help to meet customer demands.”

Because it will be difficult to site LNG terminals onshore, Rizzo said the concept used by Excelerate Energy LP to site offshore terminals would be “very competitive.” Excelerate’s Gulf Gateway terminal offshore the Gulf Coast was permitted and constructed under the Deepwater Port Act, and is the first new LNG import terminal to be built in the continental United States in more than 20 years.

Still, how many terminals are eventually built onshore or offshore remains a question. While the Gulf Coast appears to be the easiest place to site terminals, El Paso’s Wright said there will likely be a “high death rate” among the 50-plus terminals now proposed.

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