Independents Say U.S. Gas Production to Grow
The CEO of Denver-based Barrett Resources Corp. said last week
that producers are already worrying about how they will transport
future supplies of natural gas out of the prolific Rocky Mountain
basin and surrounding areas, and warned that they need to "step up
and take some risk" in an effort to move along pipeline proposals
to do more than transport the gas regionally.
Peter A. Dea, who also chairs Barrett, shared investors' time
with forecasters from Newfield Exploration Midcontinent Co. and
Pioneer Natural Resources Co. at UBS Warburg's 13th Annual Energy
Conference in New York City. Dea said that the Denver market now
takes most of the natural gas produced in the region, but he
predicted that within a few years, the production would surpass
"Denver's about it, and it can't consume all of the gas expected
to be produced there," he told analysts. "We've got firm
transportation. And producers will always be able to sell gas, but
if you can't get the gas sold in the Rockies, you've got to be able
to send it somewhere else."
Dea said the "answer needs to be addressed right now. Pipeline
projects haven't gotten a lot of support" and he said it was "time
for producers to step up and take some risk." He said there's
always been a hesitation on the part of producers because of the
costs involved and they tend to be more interested in "interbasin"
Barrett's strategic focus has always been on Rocky Mountain
natural gas, and currently the company is leveraged about 96% to
natural gas. It holds lease plays throughout the Rockies, and is
one of the largest leaseholders in the Powder River basin, with the
highest coalbed methane production in the United States. Dea said
that overall, he expects the company to have about a 60% growth in
production this year and currently, there is "plenty of pipeline to
take our gas out of the Powder River basin." However, with growth
coming not just for Barrett but for other producers, he predicted
that transportation problems would escalate.
David Trice, CEO of newly named Newfield Exploration
Midcontinent, thinks the opportunities in North American
exploration and production of natural gas have never been better.
His company, which is leveraged about 75% to natural gas, broadened
its focus and its name following its acquisition of Lariat
Petroleum Inc. last month.
With former Lariat CEO Randy A. Foutch running part of the
Newfield show from Tulsa, Trice said the company now is expanding
its focus on the U.S. Gulf Coast, using investments that have "paid
off" internationally in Australia and China.
"All of our projects are additive to the Gulf of Mexico," Trice
said. "We will not dilute our effort in the Gulf of Mexico
whatsoever. We'll continue to have a very active exploration
program there. Watch us closely as we move methodically to deeper
Trice said that the company has had "many discussions
internally" about adding new focus areas. In 1998, he said Newfield
was a "single basin" company, completely tied to the Gulf. "Today,
we have more flexibility," and he said the company also has more
capital to "shift spending to onshore areas."
Trice said Newfield now can "choose areas where the costs aren't
as high and production is better. We can choose the right wells at
the right time. The complexion of Newfield has changed, but the way
we run our business has not changed."
Pioneer Resources CEO Scott D. Sheffield also pointed to "great
success" in West Texas, Kansas and the Gulf of Mexico, along with
international growth in Africa, Argentina and Canada. With a growth
rate of about 10% a year, Sheffield said the company's most
important focus is "growing natural gas production."
Pioneer drilled more than 300 wells in 2000 with a 90% success
rate and it replaced 150% of its reserves, said Sheffield. With the
"obviously high" gas prices, he said the company would use its
newfound wealth to grow its exploration and production base and
reduce debt. Carolyn Davis
Anadarko Chief Predicts Slow,
No U.S. Production Growth
Like other producers last week who pointed to flat growth (see
related story) despite ramped up exploration and production
programs, Anadarko Energy Services president Richard Sharples
predicted U.S. domestic gas production may rise only slightly this
Sharples, who addressed a record crowd at the Cambridge Energy
Research Associates' CERAWeek 2001 in Houston last week, called for
domestic energy producers to continue their quest for new gas
reserves to offset the sharp declines in production from mature
Just maintaining the "current high level of activity," Sharples
said the mature basins would grow 1 Bcf/d, but producers have to
find 8.5 Bcf/d "just to stay even." However, he held out only a
small hope that mature basins could grow that high. Anadarko now is
running about 350 rigs for natural gas, mostly in the Bossier play,
and it expects to see a "slight increase," he said. Other basins
won't do that well.
The outer continental shelf of the Gulf of Mexico has seen a
sharp decline in its production, and he said the Midcontinent "so
mature" that it wouldn't matter how much drilling was done. Even
ramped up deepwater drilling in the Gulf will not make up for the
overall decrease, he said.
In the '70s and '80s, Sharples said the North American surplus
gas supplies were depleted, and U.S. markets depleted Canada's
surplus supplies more quickly. Today, several things are slowing
domestic gas production, including an aged rig fleet, too-few
workers and marginal drilling sites.
Rig efficiency has gone down because the producers are working
to obtain the last bit of gas from their mature basins, which
forces drills to go deeper and in tighter formations. Because fewer
rigs are now being constructed, Sharples noted that inventory is
now pushed "beyond its capabilities."
Another problem is a severe personnel shortage, especially on
the professional level, which he said was a critical issue. The
boom-and-bust cycles, coupled with the Internet age, have sent
prospective graduates to other types of employment.
Also on his list of problems in the industry were the federal
restrictions, which have depleted prospective drilling sites both
onshore and offshore. Most criticized was the lockup of land in the
Rocky Mountains, which he said has kept nearly 200 Tcf of potential
gas reserves from development.
Carolyn Davis, Houston