Canadian gas production was down 0.2% during the second quarter compared to the second quarter of 2001 and would have been down by about 3% without the benefit of production from the Ladyfern project in northeastern British Columbia about 65 miles northeast of Fort St. John, according to Lehman Brothers analyst Thomas Driscoll. He expects Canadian gas production to end the year either up 1% or down 1% assuming Ladyfern production remains flat at about 650 MMcf/d.

Canadian Natural Resources is the only company producing its allowable production at Ladyfern, about 200 MMcf/d. And Canadian Natural also appears to be the only producer expecting to maintain its production there through the end of the year. Murphy/Apache and EnCana expect production declines over the remainder of the year. “If Ladyfern declines 70% by year-end, the worst case scenario, then total Canadian production can be down an estimated 1-3% from the previous year,” said Driscoll. “By comparison, we estimated that average daily Canadian natural gas production in 2001 rose 6% over the previous year.”

Driscoll said the latest drilling statistics show rig utilization down 13% as of July 30 compared to the same week last year. Gas well completions dropped sharply in June. Western Canadian gas well completions declined 44% in June from a historical high last year. Net gas exports also are down about 6% from last year and Driscoll estimates they will be down 1-6% for the full year.

Meanwhile, Canadian gas demand was up 3% in May. According to Statistics Canada, gas consumption in Canada was up 237 MMcf/d or about 3% year to date over the same period in 2001.

“This could partially explain why net exports to the United States are down,” Driscoll noted. “We forecast that natural gas consumption this year will be up 1-3% from last year’s levels.”

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