Estimates

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…”

Although the most recent estimates from the Energy InformationAdministration show gas consumption so far this winter to be up1.7%, or 1.28 Bcf/d, from the same period last winter (Novemberthrough February), the warming effects of El Nino continue to put adamper on gas and energy use. Since the beginning of November,population weighted heating degree days as calculated by theNational Weather Service have averaged about 10% fewer than normaland 7.6% fewer than last winter. But since Jan. 1, there have been20% fewer heating degree days than normal (1,438 HDD compared to1,801 HDDs) and 15% fewer than last year (1,683 HDDs). Heatingdegree days are calculated by measuring the differences between themean daily temperatures in 200 cities across the U.S. and 65degrees. Every region of the country has had fewer HHDs than normalduring the months of January and February.

In the official launch of the $3 billion Sable Offshore EnergyProject (SOEP) in Halifax earlier this week, project owners raisedexpectations for gas reserves and production. “Our ongoingtechnical studies and interpretation of the 3-D seismic informationgathered in 1996 and 1997 show that the potential exists for morethan the 3.1 Tcf we estimated as the basis for our development planapplication,” said Mobil Oil Canada President Jerry Anderson. “Thegood news is that we might expect to recover more than 3.5 Tcf.This larger potential resource base will enable us to increaseinitial production rates to more than 500 MMcf/d, depending on suchfactors as markets, well performance and operating efficiency.” Theowners originally expected 460 MMcf/d. The additional production,however, will be within the facilities design capacity of 554MMcf/d, they said.