North America’s natural gas markets will continue to be supply-constrained for the next several years, which should result in strong prices for exploration growth and growing dependence on liquefied natural gas (LNG), an El Paso Corp. executive said Wednesday.

Byron Wright, vice president for corporate development, offered El Paso’s macro view of North American gas markets through 2015 during an analyst conference in New York City.

“Over the last 10 years, the United States has not been able to grow its [gas] volumes at all,” Wright said. “We see that as changing. As the economy grows, there will be a need for more electric power, more demand for gas.” El Paso is forecasting a “pretty significant supply shift, moving from the Rockies, MidContinent, and from LNG away from the Gulf of Mexico (GOM).” Combined with less anticipated imports from Canada, more gas will flow from west to east and from the south to the north, he said.

El Paso estimated that total North American gas demand reached 72.8 Bcf/d in 2005. It is forecasting that by 2010, gas demand will grow to 84.2 Bcf/d and by 2015 it will be 91.7 Bcf/d.

By 2015, the South is expected to have the biggest jump in demand, up 4.4% to 13.7 Bcf/d, and in the Northeast, El Paso expects it to be up 2.2% to 11.6 Bcf/d. Strong gains also are expected across the Rockies and the southwestern states, where an anticipated 5% growth in Arizona gas demand will push the region to about 6 Bcf/d by 2015.

Through all of this, El Paso expects that gas demand will rise faster than supply. El Paso estimated that 70.3 Bcf/d was produced in 2005; by 2010, output is expected to total 82.8 Bcf/d, and by 2015, it is estimated at 88.4 Bcf/d.

North American gas production is expected to be flat or lower in several key basins from 2005 to 2015: the San Juan Basin down 0.8% to 3.4 Bcf/d; the Permian Basin down 0.5% to 3.7 Bcf/d; the Midcontinent down 0.7% to 5.8 Bcf/d; Eastern Canada down 2.2% to 0.4 Bcf/d; and Western Canada down 0.1% to 17.8 Bcf/d. In the onshore GOM, gas output is expected to rise to 0.2% to 14.8 Bcf/d, and in the GOM, output is seen up 0.8% to 10.6 Bcf.

In the Rockies, El Paso is forecasting gas output to rise 4.4% to 11.2 Bcf/d — by far the largest domestic jump. The biggest gas supply gains, however, are expected from LNG imports. El Paso is estimating that LNG imports by 2015 will reach 14.1 Bcf/d, well ahead of 1.7 Bcf/d in 2005. LNG imports also are expected to accelerate from Mexico, which El Paso estimates will record a 2% rise by 2015 to 4.4 Bcf/d.

“A lot of areas that we have in the past considered our ‘go-to’ basins to look for supply growth are changing,” said Wright. “In the Gulf of Mexico on- and offshore, we think it will be challenged to maintain production. Our view is that resources in those areas have reached maturity and they won’t grow volumes.” Wright said the “real engines will be onshore in the Rockies, where the calculus is can we get access to the land.”

LNG also will become an ever-important domestic gas source by 2015, according to El Paso. Because the rest of the world also will be competing for supplies, Wright said that bodes well for gas prices in North America.

“The gas supply chain here is 800 to 1,000 miles long,” said Wright. “The LNG supply chain goes from a foreign country to here, and that’s going to introduce substantial variability day to day. It will drive the need for infrastructure and high storage.”

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.