The North American natural gas industry can deliver 30 Tcf ofgas 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 weekArledge said it will take between $32 and $34 billion to build theneeded pipeline and storage infrastructure to reach that market. Inaddition, a 30 Tcf market will require drilling investment of $26billion by 2010, double recent industry-wide expenditures, he said.

“There is no question that the demand for natural gas willsteadily grow in the years ahead. And accompanying that growth willbe higher prices.

“In fact, prices have strengthened substantially from thefive-year lows we experienced in the first quarter. This reflectsthe market reality of falling production, reserve declines, andrising demand. While prices could weaken this year, prices arelikely 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 tosupport the necessary returns for reaching a 30 Tcf market, andwill balance supply and demand over the long term.”

“I believe the unique regional characteristics of the NorthAmerican natural gas market offer the best investment opportunityof any energy market in the world. North America contains a vastamount of undeveloped natural gas resources which will provide aneconomic source of energy for the foreseeable future.”

Coastal plans to continue increasing its reserve base andboosting 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 in145 blocks and 58 platforms, and operate 41.” By the end of theyear, he said Coastal expects to have ownership interests in atleast 62 Gulf producing platforms. “That’s a long way from theeight that we had in 1993.

On the pipeline side, Arledge touted a number of projects tomove gas into growth markets, as well as ongoing integration ofpipelines into the company’s gathering and processing operations.Areas of interest include the Rocky Mountains, the Powder RiverBasin, as well as Canada (through the Alliance Pipeline) and theeastern United States (through SupplyLink, which will move gaseastward from the Midwest).

Coastal also is active in power generation. “In 1994, we hadownership interests in four electric power plants with a capacityof 337 megawatts net to Coastal. By the end of this year, our netequity capacity will be almost 1,320 megawatts worldwide.”

Joe Fisher, Houston

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