Producers in both the U.S. Lower 48 and Canada added reserves just slightly in excess of production in 2004, according to a new report by Ziff Energy that shows a reserve replacement rate of 115% in the U.S. and 108% in Canada.

In the Lower 48 that translates to a proved gas reserve life of 10.7 years and in Canada of 7.8 years. For Canada, 2004 was the first year since 2000 with more than 100% reserve replacement, the report by the international consulting firm said.

Producers just basically replaced production with “not a lot extra,” said Bill Gwozd, vice president of gas services for Ziff Energy. He pointed to the declining rate of productivity per well, saying the rate of decline may be accelerating. Despite increased drilling activity “infill drilling does not generally add new reserves. It means faster production and the producer can get his cash out faster.”

Among the top 10 producing companies in the Lower 48, ExxonMobil, second in production, led the replacement pack, adding more than 200% of its production in reserves. That figure was augmented, however, by 1.9 Tcf of positive revisions due to year-end pricing rules.

BP led production with 1 Bcf/d, just slightly ahead of Exxon, but replaced less than 50% of its reserves, Ziff’s report shows.

Anadarko and Chesapeake Energy replaced more than 200% of production, while Devon and ConocoPhillips both replaced about 100% of production. Shell replaced less than 50% of its production and Chevron’s replacement rate came in significantly below production.

Gwozd said Ziff Energy’s target average price for natural gas for this year is $6.10/MMBtu and the company believes it will be much lower next year. That is based on the company’s belief that there will be a settlement and stability in the Middle East and the price of oil will lose its $15 terrorist premium in the next year. Gas prices will follow oil down.

“We’re hearing whispers the peace process is accelerating,” Gwozd said, noting the new secretary of state has been traveling on diplomacy missions. “The United States can’t afford to continue to fund a war effort with its own economy falling.”

Ziff Energy’s main offices are in Houston and Calgary. Information on its reports can be obtained at www.ziffenergy.com .

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