Arledge: Price Expectations Support 30 Tcf Market
The North American natural gas industry can deliver 30 Tcf of
gas annually by 2010, but it will take over $50 billion to do it,
according to Coastal Chairman David Arledge.
Speaking to shareholders at Coastal's annual meeting last week
Arledge said it will take between $32 and $34 billion to build the
needed pipeline and storage infrastructure to reach that market. In
addition, a 30 Tcf market will require drilling investment of $26
billion by 2010, double recent industry-wide expenditures, he said.
"There is no question that the demand for natural gas will
steadily grow in the years ahead. And accompanying that growth will
be higher prices.
"In fact, prices have strengthened substantially from the
five-year lows we experienced in the first quarter. This reflects
the market reality of falling production, reserve declines, and
rising demand. While prices could weaken this year, prices are
likely to be significantly higher toward the end of the year."
Arledge said Coastal expects prices to average between $2.25 and
$2.50 for the next few years. "These prices are sufficient to
support the necessary returns for reaching a 30 Tcf market, and
will balance supply and demand over the long term."
"I believe the unique regional characteristics of the North
American natural gas market offer the best investment opportunity
of any energy market in the world. North America contains a vast
amount of undeveloped natural gas resources which will provide an
economic source of energy for the foreseeable future."
Coastal plans to continue increasing its reserve base and
boosting production. To that end, acquisitions are favored over
"higher risk" exploration, Arledge said.
In the Gulf of Mexico, Coastal has grown its gas production 636%
over the last three years. "We now have an ownership position in
145 blocks and 58 platforms, and operate 41." By the end of the
year, he said Coastal expects to have ownership interests in at
least 62 Gulf producing platforms. "That's a long way from the
eight that we had in 1993.
On the pipeline side, Arledge touted a number of projects to
move gas into growth markets, as well as ongoing integration of
pipelines into the company's gathering and processing operations.
Areas of interest include the Rocky Mountains, the Powder River
Basin, as well as Canada (through the Alliance Pipeline) and the
eastern United States (through SupplyLink, which will move gas
eastward from the Midwest).
Coastal also is active in power generation. "In 1994, we had
ownership interests in four electric power plants with a capacity
of 337 megawatts net to Coastal. By the end of this year, our net
equity capacity will be almost 1,320 megawatts worldwide."
Joe Fisher, Houston