Increasing liquefied natural gas (LNG) imports are “not really your biggest risk” over the next few years, an energy analyst told Rocky Mountain producers Monday, rather it is the $5-6/Mcf price environment that could further erode demand in the industrial and power generation sectors.

Power generators are starting to look at nuclear and coal, rather than natural gas, in light of $5-$6 prices, said Michael Zenker, senior director of North American Natural Gas for Cambridge Energy Research Associates (CERA), at the Rocky Mountain Natural Gas 2004 conference in Denver, CO.

He predicted that gas prices could move beyond $6/Mcf, causing further demand erosion, without new LNG import terminals and regasification facilities.

Zenker sees gas prices remaining high in the United States until at least 2008-2009, when he expects LNG to make a bigger presence in the nation. The U.S. is in for a “record long price run” until then, he noted.

For producers, “it’s going to be a great market” over the next couple of years.

But he said LNG growth in the U.S. is inevitable. Even improved land access in the Rocky Mountains and the construction of a long-line pipeline from Alaska’s North Slope will not “forestall” LNG growth.

“LNG is coming our way and we must prepare ourselves to be a key player,” agreed Scott Urban, group vice president for exploration and production at BP plc.

“There’s not a global gas market” yet, Zenker told attendees at the conference sponsored by the Colorado Oil and Gas Association (COCA). “It’s an industry, not a market in terms of a fully tradable commodity.”

But he believes the United States will “jump start” a worldwide gas market. For the doubters, Zenker noted that seven of the top 20 U.S. natural gas producers were pursuing LNG projects. By the end of the decade, the U.S will outstrip the current largest LNG importer — Japan.

“We think North America will be the missing link to [a] global gas market.”

The country is “basically at the threshold of a methane economy,” said William L. Fisher, director of the Jackson School of Geosciences & the Geology Foundation at the University of Texas at Austin.

He expects crude oil demand to peak in about 20-25 years due to the phasing out of internal combustion. Coal already has reached its peak and will continue to decline as a percentage of global energy, he said.

In the meantime, Fisher said he expects global gas production to grow 4% a year, reaching 500 Tcf a year by mid-century. Domestic natural gas resources are “really quite widespread,” he noted, adding there’s “still a lot to be explored.”

Still, Fisher doubts the U.S. will be able to be self-sufficient in gas, although he said “we can give a good run at it.” He estimates that U.S demand could reach 40 Tcf in about 20 years, with 70% being met by domestic supply and the remainder filled by LNG.

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