As the output from many of the natural gas producing basins in the United States declines and energy players focus overseas, the industry remains short on answers as to how North America will continue to feed its voracious appetite for gas.

Speaking at CERAWeek 2004 in Houston, Robert W. Esser, CERA’s Global Oil and Gas Resources senior consultant and director, said that while Canadian production continues on an upswing, Lower 48 gas production appears to be on the decline through 2010.

“In general, our trend is a…flat line for North America between now and 2010,” said Esser. “What the Gulf of Mexico has done is continually discourage us and underperform,” he added, noting that the Rocky Mountains in the U.S. and a few other plays around the country are the only ones showing growth between now and 2010 with all the other regions in various states of decline.

However, he said that the decline rates are “a lot lower” than one would expect. “Production is holding in there very well,” he said. Even though drilling is down in a number of areas such as Texas, the Permian Basin, the San Juan Basin and the Midcontinent, “production is not falling apart,” Esser said. “We are surprised how well areas are holding up.”

CERA’s figures show North American dry gas production is expected to remain relatively flat for the rest of the decade. While North America produced 69 Bcf/d of dry gas in 2003, CERA looks for that figure to drop slightly to 68.9 Bcf/d in 2004, but rise again to 69.2 Bcf/d by 2010. Wet gas production is also currently on the decline, expected to continue through 2010.

While the Gulf of Mexico will show some of the largest production declines in the United States during the time period, Esser said he expects the Rocky Mountains will step up production, especially in Wyoming in the Powder River Basin. Other areas that show promise of an uptick in production include the Green River Basin, the Piceance Basin, Gulf of Mexico Deepwater, Denver Julesburg Basin and the Fort Worth Basin Barnett Shale.

“The decline that we see taking place is in the United States…and it is equal to about 2 Bcf/d,” he said. “In the Canadian area, however, we expect a slightly larger than 2 Bcf/d increase.”

Even with the Ladyfern field decline, which is down from its initial 700 MMcf/d to under 100 MMcf/d, CERA is forecasting a reversal of this decline by the Western Basin.

One of the major problems Esser sees in the United States is that the country is seeing “exploitation at the expense of exploration. There’s no exploration going on in the United States. We are seeing infield drilling, well rehabilitation, field rehabilitation, drilling deeper, drilling into shale layer after shale layer and tighter and tighter” spots.

“In summary, our outlook is very dull,” said Esser. “It calls for a slight slowdown in North American production as Canada offsets the decline of the United States. We don’t see the Lower 48 as being able to reverse this” due in part to the increasing decline rates.

Janine McArdle, vice president, for Apache Corp.’s World Oil & Gas Marketing, acknowledged that while Apache is an exploiter in the United States, the company is largely an explorer everywhere else.

“We have been spending a lot more exploration dollars overseas” in order to kick start some of the company’s new projects, she said. McArdle added that Apache is still “very tied” to the United States, but in recent years its production has trailed off. “Fifty-five percent of our production comes from outside of the United States. Five years ago that was not even close to the case.

“The U.S. markets are on a treadmill, we are struggling to keep up with…demand,” said McArdle. Going forward, she said the industry is going to have to look at other options such as stranded gas areas in the United States.

As for the impact liquefied natural gas (LNG) imports could have on the U.S. production equation, Marie N. Fagan, CERA director, said LNG imports would likely affect the domestic market, but if we see an LNG overbuild in two to three years, she noted that domestic production would definitely decline more rapidly as LNG prices went down and drilling economics turned sour.

McArdle noted that additional LNG capacity arriving in the United States is likely three to four years down the road. “I think it will come,” she said. “If it comes, we are Americans, we will overbuild, we won’t stop.”

McArdle added that while an overbuild of LNG capacity would affect drilling, it won’t collapse domestic production. “Will you see some lower dips [in domestic production] when the LNG comes in? I believe so, but will it last…, I don’t think so.”

©Copyright 2004 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.