According to 400 oil and gas executives and investors, the largest issue currently facing the U.S. energy industry is the shortage of domestic sources of natural gas. The poll — taken at an industry conference in Houston held by RBC Capital Markets — found that more than half of the respondents likened the situation to being as bad as or worse than the oil crisis of the 1970s, while 48% said this crisis would be manageable.

On top of that, 92% of the respondents said that foreign sources of natural gas will increasingly supply the United States within five years. However, results were mixed as to whether the United States will become as dependent on foreign gas as it is on foreign oil, with 54% believing it will. Along the same topic, 55% of the respondents said they do not think that foreign gas-producing nations will form an OPEC-like cartel to control supply and prices.

As for prices, the energy executives said that gas prices will continue to trend higher and remain above their more historical levels. On average, RBC Capital Markets found that those surveyed feel that gas will hit $5.03/Mcf at the end of this year; $5.16/Mcf at the end of 2004; and still higher, $5.32/Mcf, at the end of 2005.

“It’s interesting to note that when we conducted this survey last year, the group ended up being cautious in their prediction for natural gas prices,” said Joe Allman, an E&P analyst at RBC Capital Markets. “So if that trend holds true again this year, it’s good news for the leading suppliers but bad news for the consumer.”

Allman noted that when the survey was last conducted in November 2002, respondents predicted the price to be $3.89/Mcf at the end of 2002, while the actual price ended up at $4.59/Mcf.

Looking to where the foreign gas would come from, almost one-third of the respondents cited Canada as the leading source going forward, while 19% said the Middle East; 15% tabbed Russia; and another 15% cited South Asia.

Noting that Canada is currently the largest exporter of natural gas to the United States at approximately 10 Bcf/d, Allman — referring to RBC Capital Markets’ research model which projects out to 2010 — warned that “We’re not looking at Canada to grow significantly above and beyond the current level. We think the most significant increase in U.S. imports will come from LNG.” He sees the survey’s modest enthusiasm for the Middle East, Russia and South Asia reflecting the turn towards LNG infrastructure, industrywide.

While LNG consumption in the United States was reported at 1.7 Bcf/d as of June 2003, RBC Capital Markets is projecting that number to climb to 7 Bcf/d by 2010, while Canadian natural gas exports to the United States will show just a slight increase of 0.5% per year.

On the Arctic National Wildlife Refuge (ANWR) issue, 52% believed that drilling in the refuge would significantly relieve the present natural gas supply crunch, while only 3% believed that Alaska would emerge as a leading source of natural gas going forward. “This suggests that few believe that Congress will ultimately allow drilling in the refuge and that other supplies of gas from Alaska would not make it to the lower 48 anytime soon,” Allman said.

The poll was taken of participants at the RBC Capital Markets’ North American Energy & Power Conference Sept. 15-17.

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