He didn't crow about it, but Keith Rattie, CEO of Rockies producer Questar Corp., had to be feeling vindicated, at least, addressing the Wachovia Securities 2007 Liquefied Natural Gas Conference in Houston last week.

After all, it was less than two short years ago that general industry consensus had domestic gas production from regions such as the Rocky Mountains and Midcontinent succumbing to insurmountable decline rates and facing a "tsunami" of liquefied natural gas (LNG) supplies about to land on U.S. shores.

"It's really amazing how frequently the conventional wisdom in this industry can shift over a relatively short period of time," Rattie said.

Indeed, he noted that in 2005 U.S. producers produced in the aggregate about 49 Bcf/d on average. "Some of the presentations at your first LNG conference...suggested that shortly after the turn of the next decade, U.S. gas production would have declined to the low 40 Bcf/d range. But not to worry because there was a tsunami of LNG about to land on the beach in the U.S.," Rattie said.

However, this year domestic production is up about 3%. "In fact onshore gas production, driven of course by the Rockies and the Midcontinent, is up 6% so far this year. That trend has been masked in recent years by declines in the shallow water Gulf of Mexico on the Outer Continental Shelf, a phenomena that looks like it's starting to flatten out," Rattie said, noting the promise of Independence Hub, which recently came on-line (see NGI, Sept. 10).

"The Rockies region has obviously been one of the two stars but a few years ago we we're also writing off the Midcontinent," Rattie said. "The Midcontinent growth has been stellar in recent years, and it looks like that trend is going to continue."

Rattie said he had long doubted the projections of a massive influx of LNG to the United States. "I do think that it's inevitable given the size of the global natural gas resource base that the LNG business is going to grow, grow rapidly and going to be an ever-increasing part of the total global natural gas supply equation," he said. "But I've always looked at LNG as a bit of the tail of the dog."

While it was once thought that LNG could be landed anywhere in the world at $3.50 from Qatar, "LNG costs of course have skyrocketed in the last years and we're no longer talking about LNG at $3.50," Rattie said. This is particularly true when Asian markets, especially Japan, are willing to pay much more for the gas supply, particularly in a world of $90/bbl oil.

"With $90 oil, LNG is a heck of a lot cheaper than oil in Japan," he said.

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