After estimating last month that total Canadian natural gas production would fall or rise by year-end within a margin of -1% or +1%, Lehman Brothers analysts scuttled those predictions and now forecast a “worst-case scenario,” which drops annual production by at least 1% and as much as 3% over 2001. The loss compares to the 6% annual increase experienced in 2001, and is attributed to the striking falloff in production at the once prolific Ladyfern discovery.

Analysts Thomas Driscoll and Philip R. Skolnick just a few weeks ago had forecast a basically flat production year in Canada, but noted that the year rested on the back of Ladyfern, located in northwest British Columbia, about 65 miles northeast of Fort St. John (see NGI, Aug.12). In a worst-case situation, that is, if Ladyfern production continued to drop, production overall would fall up to 2% more.

Ladyfern’s total pool is producing an estimated 550 MMcf/d, down from the estimated peak rate of 700 MMcf/d achieved in the second quarter.

“Estimated total Canadian natural gas production year-to-date July was about flat with last year’s levels,” the analysts said. in their latest “Oil & Gas Update” of large-cap exploration companies. “Without Ladyfern, we estimate that volumes would have been down about 2% from the same period last year. Estimated western Canadian production year-to-date Sept. 9 is down 0.7% from the previous year. Excluding Ladyfern, we estimate that production is down 3%.” Western Canada production was up 4% for the same period a year ago.

Gas storage inventories, meanwhile, remain above historical levels, they said. On Aug. 30, storage levels stood at 433 Bcf. “This is 41 Bcf higher than last year, and 27 Bcf higher than the five-year average. The storage overhang, however, is less than 1% of 2001 total Canadian natural gas production.”

There was no good news to report for Canada’s natural gas well completions, exports or rig utilization. The Lehman analysts reported that Western Canadian natural gas well completions in July were down by 58 wells, or 8% from July 2001. Net gas exports also remained low, with year-to-date August showing a fall off of 6% from the record levels of a year ago. Also, rig utilization is down. For the week ending Sept. 3, oil and natural gas rig utilization was down 25%, or 90 rigs, from the same period a year ago.

“We estimate that net exports for the full year 2002 will be 2-6% below 2001.”

However, the declines were not found in Canada’s gas demand, which was up 3% in June year-to-date. According to Statistics Canada, natural gas consumption stood at 218 MMcf/d, a 3% jump year-to-date in June from the same period of 2001. “This could partly explain declining net exports to the U.S., which were down 612 MMcf/d, or roughly 6.5%, during the second quarter from the previous year,” said the analysts. In line with the rise, they forecast that by the end of the year, total gas consumption this year will be 1-3% higher than the numbers for 2001.

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.