Producers' Struggle Expected to Continue in 2001
The IPAA's Supply and Demand Committee said a rig and drilling workforce
shortage is seriously hindering a supply response to soaring gas prices,
and the problem is likely to continue in 2001.
In a new supply and demand forecast, the committee noted producers are
aggressively exploring for and producing gas to meet burgeoning demand;
the gas rig count is at a record high. However domestic gas production
probably will grow by only 1.5% next year to 19.01 Tcf, with most of that
growth occurring in the Gulf of Mexico. Meanwhile, consumption will jump
3.4% to 22.77 Tcf/year.
"The incentives to produce certainly are there," the IPAA
committee said in a statement. "But in order to produce more gas quickly,
producers need to find yet more drilling rigs and competent personnel to
operate those rigs. Many highly qualified people left the industry during
the oil (and natural gas) price crisis of 1998-1999 and not all have returned.
Many rigs were idled on service company premises and cannibalized for spare
"The depth of the 1998-99 depression means a long haul back. Many
independents say they got back on their feet this summer, a full 18 months
after an OPEC pact to curtail petroleum production began to be felt. Recovery
in the oil and natural gas production industry does not happen overnight."
As a result, the committee foresees only a "gradual recovery"
in production. The committee also believes storage inventories will be
very low next year, so low in fact that the industry will have "another
uphill battle to replace enough gas in storage to meet the established
target level of 3 Tcf by the start of the next withdrawal season around
November 2001" (see related story this
Storage is increasingly being used to capture short-term pricing differentials
in addition to its traditional role of serving winter demand. Consequently,
the committee believes the gas market will remain tight for the rest of
the winter and into the summer storage injection season.
Real economic activity, as measured by inflation-adjusted Gross Domestic
Product (GDP), is projected to increase at an annual rate of 3.2% in 2001.
Economic growth, electricity demand and normal weather are expected to
drive U.S. total energy consumption in 2001 to an anticipated 95.77 quadrillion
Btus (quads), an increase of 1.8%. Gas consumption by electric utilities
is expected to increase 4.7% next year to 2.92 Tcf.
To compensate for the absence of sufficient domestic supply growth,
the committee forecasts imports will rise 8.6% next year to 4.07 Tcf. However
increased Western Hemisphere trade opportunities also will boost gas exports
to 252 Bcf in 2001, up 7.2% from 2000, IPAA predicted
Copies of the IPAA Supply and Demand Committee's forecast are available
on request. Call Brigid Gartland at (800) 433-2851.
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