Producers predicting gloom and doom for gas supply based on 1997reserve replacement estimates are being way too pessimistic,according to Tom Woods, Ziff Energy Group vice president for U.S.gas services. He told attendees at GasMart/Power ’98 Wednesday inNew Orleans the reason gas prices have been so high is that themarket is spooked. “How much of what we are seeing is the substanceof what is occurring and how much of what we are seeing is reallythe form it is taking because of some change maybe in industrybooking practices? I would suggest to you that industry bookingpractices are beginning to resemble a more traditional inventoryapproach to life rather than the very long-term reserve toproduction ratios that we traditionally used to have in terms ofrecovery…”

Measuring production relative to well completions is misleading,Woods noted, because modern drilling technology has changed thedefinition of what constitutes a well. “I don’t think mostcompanies drill wells in the offshore Gulf of Mexico anymore. Theyput holes in the ground. They do all kinds of wonderful, marvelousthings with these holes. They sidetrack them. They deviate them.They deepen them. They put horizontal arms on them so that one holein the ground begins to resemble a platform, not the traditionalwell, and what we call the well may not be exactly the same.”

Weighing in on the producer side of the debate over reservereplacement was Jack Lewis, vice president of exploration andproduction for CNG Producing Co. He said the fact that mostintegrated oil and gas companies have reported lower earnings forthe first quarter of 1998 could herald budget cutbacks that wouldthreaten drilling plans. “In sharp contrast, the oilfield servicecompanies all are announcing record earnings for the first quarterof ’98. This imbalance in earnings between the oil and gascompanies and the service companies will not last. I guarantee it.It never has in the past, and it won’t in the future.”

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