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Gas Production Making Small Gains

Gas Production Making Small Gains

Now that most of the production data for the third quarter is in, analysts generally are saying they "told you so" because U.S. gas production is barely making desperately needed gains. Production is, however, growing slightly more than expected, and some observers see huge gains to be made next year.

According to a sample of 28 production companies compiled by J.P. Morgan analyst Waqar Syed, the change in North American gas production during the third quarter compared to 3Q99 was a 0.4% decline, while compared to 2Q2000 production rose 1.3%.

Despite being a little more than he expected, Syed said the current growth of gas production is "far less than what is required to meet the expected long-term natural gas demand growth rate." His recent tally, which was adjusted for acquisitions, mergers and divestitures, shows 3Q North American gas production for 28 large producers at 23,723 MMcf/d compared to 23,409 MMcf/d in 2Q2000 and 23,820 MMcf/d in 3Q1999.

Salomon Smith Barney's (SSB) tally of the 40 largest gas producers showed 0.1% growth in the third quarter compared to 3Q1999 and 1.6% growth compared to the second quarter of this year. SSB calculated that 26,272 MMcf/d of gas was produced by the top-40 companies in 3Q2000 compared to 25,863 MMcf/d in 2Q2000 and 26,258 MMcf/d in 3Q99.

"Domestic natural gas deliverability is clearly on the upswing at this juncture given the sharp rise in drilling activity this year," SSB said in its Nov. 8 recent report on gas fundamentals. "In fact, our models previously indicated that third quarter domestic production should have been up around 1% compared with the second quarter," but the increase was somewhat greater. "Looking ahead we continue to project that domestic natural gas production will increase 5.7% in 2001 after dropping roughly 2.6% this year. Nonetheless, even a record warm winter would still leave operators scrambling next summer in an attempt to refill storage, while a 'normal' winter this season could see the 'heat' turned up even further on natural gas prices."

Rocco Canonica

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