CEO Says Natural-Gas Supply Won't Increase

The CEO of a large Canadian energy company says the production of natural gas has already peaked in North America. Gwyn Morgan, CEO of Calgary-based EnCana Corporation, made the comment following an April 7 speech to the Vancouver Board of Trade.

"It appears that all of North America's natural-gas production peaked in 2001, both in the U.S. and Canada," Morgan told the Straight. "It looks like we're going to have to have a very strong continuing exploration-and-drilling program in this country to stay even now, as we go forward."

The U.S. government's Energy Information Administration has forecast U.S. natural-gas demand to rise from 23.6 trillion cubic feet in 2002 to 34.8 trillion cubic feet by 2020.

As the Straight went to press, the New York Mercantile Exchange future contract price for natural gas in October 2004 was just below $6 per 1,000 cubic feet, which is less than half the price peak during the winter of 2000--01.

Morgan predicted continued "strong" prices for natural gas. He also said that some natural-gas-dependent industries, such as fertilizers and methanol producers, will move overseas, where natural-gas prices are cheaper.

"Ultimately, we're going to have to move natural gas up the value chain in how we use it," Morgan said.

In a December 2003 study published in the journal Natural Resources Research, Oregon-based consulting geologist Walter Youngquist and Seattle energy researcher Richard Duncan predicted a "steady strong market" for natural gas with possible price spikes from local shortages.

"Natural gas prices in North America seem to have risen to a new plateau, caused by a demand-supply gap which cannot be adequately filled, at least in the near term," they wrote.

Youngquist and Duncan noted that natural-gas production in Canada declined by 1.8 percent in 2002 and a further 1.6 percent in 2003. "This is important to the United States as Canada is by far its largest gas supplier, shipping 56% of its production to the United States, making up 15% of United States 2002 supply," they wrote.

In the United States, 60 percent of all homes are heated with natural gas, and according to Youngquist and Duncan, more than 90 percent of new electricity-generation plants are fuelled by natural gas.