No one can really predict the weather, “but at the rate winteris setting in, by the middle of February we’ll be where we usuallyare in April” in regard to natural gas in storage, according toThomas A. Petrie, chairman of Petrie Parkman & Co. in Denver.
“By March 15 we will be in a very serious situation. We’ll bedigging into pad gas, and who knows how far you can dig into that,”Petrie said. If the industry is able to tap into the cushion gas atthe bottom of the storage cavern, “you’re just going to have toreplace it. The shoulder months are going to be unrecognizable.”
Petrie said the market would allocate supplies as it already hasstarted to do, with industries such as ammonia and glass opting outof the market. For the long-term he predicts “it will be a two tofive year work-out, if you have good policy responses,” beforethere is an optimum supply-demand match.
One of the policy responses that is critical, the veteran oiland gas analyst believes, is building the Alaska pipeline. “There’sa good chance it will be built with Bush as president.” Unless thepolicy responses are forthcoming, the nation faces “asupply-induced recession. We’ve been living off surplus for a longtime.” Petrie likened the current situation to 1970 “when we ranout of oil. It took us 10 years to work out of that one.”
Petrie’s forecast comes on the heels of predictions by analystsat Raymond James Associates, that “given the cold start to thewinter, our model now tells us that normal weather from here onwould leave U.S. consumers short of gas by 500 to 1,000 Bcf duringthe last 90 days of winter.” (see Daily GPI, Dec. 19)
Also, a report from the Supply and Demand Committee of theIndependent Petroleum Association of America said earlier this weekthe severity of the 1998-99 recession in the U.S. oil and gasindustry has left the industry without an adequate rig and drillingworkforce. This translates to “a long haul back,” and problemsrefilling storage next year (see Daily GPI, Dec. 19).
Things aren’t that much better in Canada. Recently, the NationalEnergy Board cut in half its growth projections for westernCanadian production over the next two years, absent a very strongdrilling response to current prices (see Daily GPI, Dec. 18).
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