As might be expected at a Calgary conference where producersdominated attendance and the first day’s panels, bullishness onfuture gas prices ran rampant despite the current week’s slump.Emphasizing the challenges and opportunities in reaching aprojected 30 Tcf/year market by the 2010s, speakers at Ziff EnergyGroup’s “North American Gas Strategies” conference agreed Mondaythat Canadian gas is well positioned to benefit both volume-wiseand price-wise in the coming years.

The first major pipeline expansions out of western Canada infive years came last year with Northern Border’s 700 MMcf/dextension to Chicago and a 400 MMcf/d expansion by TransCanada. Andon tap for late next year are the 1.3 Bcf/d Alliance project fromnortheastern British Columbia to Chicago and the Sable IslandProject/Maritimes & Northeast Pipeline into two Atlanticprovinces and the U.S. Northeast. All those deliverability optionswill be needed to keep pace with U.S. demand rising 2%/year whileits supply growth will only be 1.5%/year, creating a shortfall ofabout 5 Bcf by 2019, said Joe Blount, senior vice president ofUnocal Global Trade. North American supplies rose from 18 Tcf in1987 to more than 24 Tcf this year, he said, with most of theincrease coming from Canada and the western U.S.

Ziff sees 1999 as a record year for gas drilling in Canada withabout 5,900 well completions compared to the previous peak of 5,375in 1994. Even more gas wells will be drilled next year, Ziffpredicted. Canadian producers continue to benefit from lowerdiscovery and production costs than those in the U.S do.

In 40 years of doing supply/demand projections, Canada’sNational Energy Board has been conservative in estimating theultimate size of the resource base, said NEB Chairman Ken Vollman.”We have underestimated the market’s response to price [and] haveunderestimated supply response to technology,” Vollman said.Calling NEB’s crystal ball murky, he added veteran analysts shouldhave learned “a proper degree of humility.”

Gas producers, meanwhile, were warned not to count out nuclearcompetition yet. Rumors of the demise of nuclear plants have beenill-founded, according to John Brons, special assistant to thepresident of the Nuclear Energy Institute. Defying most forecasts,U.S. nuclear output increased to near-record levels this year,reversing a downtrend from the mid 1990s. “Emission-free nuclearplants are key to generation growth under air emissionrestrictions,” Brons said. In addition to constantly diminishingnuke “significant events” [accidents] during the 1990s, theinterval between refueling outages is growing, approaching twoyears in some cases, he said.

Nor is coal going to fade from the power market despite ahandicap in meeting air emissions regulations, said Anthony Armor,technical executive and director, generation marketing of theElectric Power Research Institute. Despite higher operation andmaintenance costs, coal plants still have a major advantage inlower fuel costs, Armor said. He noted that the top 10 lowest-costpower plants, mostly in the Midwest, are all coal-fired. Andregarding the “merchant plant phenomenon,” the leading regions forannounced gas combined-cycle additions (New England, Texas,California and Florida) happen to have more oil and gas plants thancoal plants, Armor said.

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