Using historical trends and assuming the once-prolific Ladyfern production remains flat, Canadian natural gas production through 2002 will be down between 1% and 2% from last year, according to research by Lehman Brothers’ energy and power analysts. The downtrend this year compares with the 6% annual increase experienced in 2001. At the same time, Canadian demand was up 2% year-to-date April over the same period a year ago.

Analysts Thomas R. Driscoll and Philip R. Skolnick, in their latest Canadian Natural Gas Insight report, found that total Canadian natural gas production year-to-date May increased 1% above last year’s levels, but without Ladyfern production, “we estimate that volumes would have been down about 3% from the same period last year. And, while Western Canadian production year-to-date June 29 was up almost 1% from a year ago, excluding Ladyfern, production would be down almost 3% as well.

“Ladyfern production will decline sharply over the remainder of this year,” the analysts noted. “Production is expected to decline 30%-70% over the remainder of the year. We believe production recently peaked at roughly 700 MMcf/d.” Companies continue to drill in the Ladyfern area without “material success,” said the Lehman analysts. They also noted that “without another Ladyfern-size field,” total gas production growth “could continue to suffer.”

Following the trend, rig utilization also was down nearly 28% for the same period a year ago for the week ended June 25, and natural gas well completions declined “sharply” in May. Surprisingly, said the analysts, Western Canadian gas well completions experienced a large 60% year-over-year decline in May.

Also down are exports, which fell 6% from the record levels of 2001. Exports were weaker in May than in April; and year-over-year, the decline was 6% in May, versus 10% for January and February; 3% for March; and 2% for April. Meanwhile, gas inventories remain at record levels, noted the analysts. “At June 21, storage levels stood at 347 Bcf. This is 74 Bcf higher than last year and 84 Bcf higher than the five-year average. The storage overhang is about 1% for 2001 total Canadian natural gas production.”

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