While domestic supply concerns will make increased liquefied natural gas (LNG) imports necessary, David Morrison, chairman of Wood Mackenzie, said he doesn’t expect to see much of a change in domestic gas prices.

“I don’t see [LNG imports] driving the price down,” he said, noting that he expects LNG to be a “price-taker.”

Speaking at the Colorado Oil and Gas Association’s 17th Annual Rocky Mountain Natural Gas Strategy Conference and Investment Forum in Denver on Tuesday, Morrison noted that increasing production from the Rockies will be inadequate to lift domestic supply, which is expected to remain “broadly flat.” At the same time, demand will be increasing, which argues for the need for increased liquefied natural gas (LNG) imports.

Morrison said he expects the balance of production to swing towards unconventional resources going forward. By 2020, he looks for Rocky Mountain production to be 90% unconventional and 10% conventional. In order to economically produce these unconventional resources he estimated that gas prices would have to remain above the $3.50 to $4.00 per Mcf range.

For the overall oil and gas business, Morrison stressed the trend toward increasing international interaction, saying the new thrust in industry employment will focus on people with “political and relationship skills.”

This will be necessary since most of the remaining resources are in different countries, he noted. Questioned about the U.S. political opposition to the now retracted Chinese offer for Unocal, Morrison said it was “unfortunate that the U.S. took an anti-foreign, anti-Chinese line. The U.S. talks about free trade, but when it actually happens, they don’t like it.”

Morrison said the majors’ exploration results have been poor over the last four years. “Their reserve replacement has lagged significantly behind production,” he said. “It worries them.”

The exec said the majors’ top management is being told by its exploration chiefs that they shouldn’t increase the exploration budget because there are not enough quality exploration targets. The exploration departments also say that companies shouldn’t expect 100% reserve replacement from their exploration department. Instead, 75% would be more likely, Morrison said.

When asked what the majors should do with the large amounts of cash that they have been accumulating from higher prices, Morrison said, “My choice would be to pay it back to shareholders.” He added that he doesn’t see anything else that could conceivably be done with the money.

He added that some of the funds are likely being spent on more unconventional resources such as oilsands, stranded gas and things other than regular exploration.

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