The “huge” amount of global liquefied natural gas (LNG) coming onstream, coupled with new sources of gas being unlocked in North America, has created “a new world…and I do not know how this world is going to work out,” Schlumberger Ltd. CEO Andrew Gould said Friday.

“We can turn the taps on gas very fast,” Gould said during a conference call to discuss the oilfield service company’s 3Q2009 earnings. “And I think that it is significant, and it’s really interesting to watch how this is going to play out, but the ratio of gas to oil prices has not been so wide for the last 10 years. And this can have all sorts of implications on demand, but it can also have all sorts of implications on our index to oil.”

Gould said he believes “the equation has changed for gas” because of LNG and because of the capacity of the industry to unlock unconventional sources of gas. “I think North American gas activity will recover to a certain extent at some stage, but the sanctioning of large new LNG developments overseas is likely to go a bit slower than maybe we thought a year ago. A lot of them will get done anyway because they, you know, we’re talking 25-year projects.”

Gould cautioned that “there may be some hesitation to sanction some” of the overseas LNG projects “until there is a clearer view on gas. If demand for gas evolves, as all the forecasting agencies says it will, this surplus gets reabsorbed by about 2013 or 2014.”

Specifically in North America, the Schlumberger chief said he doesn’t anticipate “any substantial increase” in gas prices “until the second half of next year…A lot of the capacity I think will overhang the market for another year and a half or so, but…these large fracs [fractures used in completing shale gas wells] eat up capacity fairly fast and actually increase the cost of maintaining the equipment fairly dramatically.

“So…there is the possibility, though it’s only a possibility, that we actually work down the backlog of pumps or frac equipment, perhaps faster than we’ve done in previous upturns, but I still think any significant tightening of the market is toward the end of next year.” Some of Gould’s comments echoed those last week by Halliburton chief Dave Lesar (see related story).

Most likely the recovery will be seen first in the Haynesville and Marcellus shales, he said, “because I think that’s where the highest initial production index is coming and will continue to come, and until gas prices get much higher, you’re not going to have a return to the [Outer Continental] Shelf in the Gulf of Mexico and things like that,” Gould said.

He added that Schlumberger’s presence in the Gulf of Mexico deep water is extremely significant to the company’s margin performance in North America, noting that with the extent of the hurricane precautionary measures in 3Q2009, “the volume of work in the Gulf of Mexico declined considerably, and all things being equal is likely to increase considerably in the fourth quarter [4Q2009], so that can have a positive effect on the overall North American margins; on land, we think we saw the bottom…

“In volume terms, don’t forget U.S. land is by far the largest volume and therefore, until that pricing moves, they are not going to be hugely significant.”

Despite Schlumberger’s negative short-term outlook for its North American business, Gould said, “I don’t think we have any desire…to decrease our position in North America. On the contrary, I think that if we were able to do it at a reasonable capital cost, we would increase it, because it’s an extremely important market in the way that both technology and operational capacity develops.”

The CEO was asked whether he thought more regulations will be enacted in the United States to require producers and oilfield service companies to disclose the kinds and amounts of chemicals they use in hydraulic fracturing.

“Well, I think that like everything else that surrounds this sort of issue, where there is a public concern which reaches the regulators, then eventually some form of regulation is going to emerge,” he said. “And therefore, it seemed to us very important to be part of the discussion rather than to, if you like, not cooperate in the, in the process of establishing what a regulation might be. Now, what the final form of it will take, I actually don’t think we know yet.”

Gould said he is “pretty sure” that there will be some form of new regulation in order to satisfy the authorities and the public’s desire to know that what is being done is safe, adding that it “seems to me a perfectly natural thing to want.”

Schlumberger Friday reported 3Q2009 revenue of $5.43 billion versus $7.26 billion in the year-ago period. Pretax operating income was $1.04 billion, which was 39% lower than in 3Q2008. In North America “the positive impact of a recovery in rig count in Canada following the spring break-up was offset primarily by a slowdown in the U.S. Gulf of Mexico…due to operator caution during the hurricane season and by continuing pricing erosion” onshore, the company said.

North American revenue for 3Q2009 was $823 million, down 45% year-on-year. Pretax operating income of $27.6 million was up 253% sequentially from 2Q2009 but it fell 91% from a year ago.

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