Anadarko CEO Sees Long-Term Gas in $4-6 Mcf Range

Anadarko CEO Robert J. Allison, speaking at last week's Rocky Mountain Natural Gas Strategy Conference, said he believes that in the long term, natural gas prices will stabilize in the $4-$6 Mcf range, although he noted that "$3 is still a pretty darn good gas price" in the overall scheme of things.

The oil and gas veteran, CEO of Houston-based Anadarko for nearly two decades, said the industry has learned that "$8 gas is too high" ... and $2 gas "isn't sustainable" to encourage production or investment lending. Offering his perspective on natural gas into the future, Allison stressed that Anadarko is "very bullish on gas for the next several years," but added that there were concerns that the industry needed to address to move forward.

"We learned a good lesson from the high prices of last winter," Allison said. "But the most important lesson is that we learned that the market worked." He said no schools or hospitals went without gas despite the price spikes a few months ago, because the free market system worked as it was supposed to work.

However, Allison sounded a wake-up call for his energy industry peers, who he said were not delivering their messages the right way to the American consumers. "We should be talking about how the lack of access hurts consumers, and not how it hurts the industry," he said. "We need to do a better job of explaining."

Three issues were touched on during his 40-minute keynote, which centered on Anadarko's plans in the Rocky Mountain region in the future. Access, better communications and a push toward a cohesive national energy policy are issues that Allison believes will move not only Rockies exploration and production forward, but the rest of the country as well.

While right-of-way access to explore and produce on restricted lands continues to plague the U.S. energy industry, Allison said the industry also needs to push for pipeline rights-of-way. Referring to a nickname given the region, that of the "Persian Gulf of Gas," Allison compared the Rockies to the Middle East, and said that "just like the Persian Gulf, we have no access." While Anadarko itself is in "real good shape" as far as land access in the Rockies, "as an industry, we have a problem to avoid a shortage in the future."

The CEO said Rockies producers need more takeaway options, and criticized the lack of access and the "arduous" permitting process as two areas that needed to be changed. He said, however, that the "other side of the access issue is more troubling," and detailed that producers were not allowed to drill, or had too many stipulations that prevented them from drilling.

As he has said before, Allison is not too optimistic that the total industry's domestic production by the end of 2001 will rise more than 1% over 2000 levels. "I'll be shocked," he said, if production figures are higher on average than that. To raise production levels, Allison said that the Rocky Mountains were "the place to look, certainly onshore."

Allison criticized a recent move by the Bush administration to scale back the proposed Lease Sale 181 by the Minerals Management Service in the Eastern Gulf of Mexico (see NGI, July 9), and railed against those who protested drilling in a small portion of the Alaska National Wildlife Refuge (ANWR).

"The growth of our economy depends on a plentiful supply of energy. If we want more milk, we've got to get more cows," he said. ANWR's coastal plain is "not an awesome creation;" there are no mountains and mostly mosquitos. He called the cutback on the 181 lease sale a "tragedy," because it cut exploration areas almost 80%.

"That's (the Eastern lease sale) been on the schedule for eight years...it's ridiculous that Florida can control your and my fuel prices. They love the gas from Alabama and Mississippi," but don't want any drilling in their state.

But he didn't lay all of the blame on lawmakers and environmental groups that have protested opening up more drilling areas. "The main message should not have been one of industry interests, but of consumer interests," he said, referring to news reports that the industry was upset because it could not drill more acreage in the proposed lease sale.

Instead, Allison said industry efforts need to begin at the grassroots level, not inside the "Beltway," referring to Washington, DC. The "message should have been that every time you vote against access, you vote against consumers."

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