Despite slightly lower wellhead deliverability this yearcompared to last and the growing need for producers to increasedrilling just to maintain production because of steep declinerates, Natural Gas Supply Association President Skip Horvathinsisted yesterday there will be no gas supply “shortfalls” thiswinter. As long as buyers are willing to pay the price, the gaswill be there.

“We see that word [shortfall] used commonly in our industry. Itis left over from our regulated days. Shortfalls, in economicterms, means that someone willing to pay for gas cannot get gas. Wenow have clearing mechanisms in place to ensure that shortfalls donot happen, such as capacity release, the secondary market, thegrey market and merchant plants,” he told attendees of the EnergyInformation Administration’s Winter Fuels Conference.

Nevertheless, Horvath provided information showing U.S.deliverability is down to 52.8 Bcf/d this year compared to 54 Bcf/dlast year. Meanwhile, gas consumption is expected to average awhopping 81.9 Bcf/d compared to 73.8 Bcf/d in 1998.

Producers are having to drill much more today than in the pastjust to keep production flat because decline rates are growing10%/year, he noted. The new wells being drilled have much steeperfall-offs in production that old wells. Part of the reason is thattechnology is improving producers’ ability to find smaller fieldsand the older fields being tapped are more mature.

Currently U.S. producers have to add 12.2 Bcf/d just to maintainflat production, compared to 11.3 Bcf/d in 1998 and 10.3 Bcf/d in1997, said Horvath. The number of rigs drilling for gas mustcontinue to accelerate in order to meet demand over the next fewyears. But that brings up another problem producers are facingright now: labor shortage. Skilled rig operators are in shortsupply, he added.

Nevertheless, the market “will clear this winter and natural gassupplies will be sufficient to serve the market,” he said.

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