Now that most of the production data for the third quarter isin, analysts generally are saying they “told you so” because U.S.gas production is barely making desperately needed gains.Production is, however, growing slightly more than expected, andsome observers see huge gains to be made next year.

According to a sample of 28 production companies compiled byJ.P. Morgan analyst Waqar Syed, the change in North American gasproduction during the third quarter compared to 3Q99 was a 0.4%decline, while compared to 2Q2000 production rose 1.3%.

Despite being a little more than he expected, Syed said thecurrent growth of gas production is “far less than what is requiredto meet the expected long-term natural gas demand growth rate.” Hisrecent tally, which was adjusted for acquisitions, mergers anddivestitures, shows 3Q North American gas production for 28 largeproducers at 23,723 MMcf/d compared to 23,409 MMcf/d in 2Q2000 and23,820 MMcf/d in 3Q1999.

Salomon Smith Barney’s (SSB) tally of the 40 largest gasproducers showed 0.1% growth in the third quarter compared to3Q1999 and 1.6% growth compared to the second quarter of this year.SSB calculated that 26,272 MMcf/d of gas was produced by the top-40companies in 3Q2000 compared to 25,863 MMcf/d in 2Q2000 and 26,258MMcf/d in 3Q99.

“Domestic natural gas deliverability is clearly on the upswingat this juncture given the sharp rise in drilling activity thisyear,” SSB said in its Nov. 8 recent report on gas fundamentals.”In fact, our models previously indicated that third quarterdomestic production should have been up around 1% compared with thesecond quarter,” but the increase was somewhat greater. “Lookingahead we continue to project that domestic natural gas productionwill increase 5.7% in 2001 after dropping roughly 2.6% this year.Nonetheless, even a record warm winter would still leave operatorsscrambling next summer in an attempt to refill storage, while a’normal’ winter this season could see the ‘heat’ turned up evenfurther on natural gas prices.”

Rocco Canonica

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