Chicago (Platts)--10May2007

Producers are having an increasingly difficult time keeping up with
growing gas demand across North America, industry officials said Thursday at a
conference in Chicago.

     "We are on a treadmill to get supply going and consumption is outpacing
that," William Hussey, senior vice president of origination for ConocoPhillips
Gas & Power, told attendees at GasMart 2007.

     Even though US drilling activity is at an all-time high, as more than
30,000 wells are set for completion this year, overall output continues to
fall because newer wells are less productive and experience rapid decline
rates, Hussey explained.

     As traditional fields are depleted, forms of gas that are more costly to
produce--particularly gas from shale and tight sands--will assume a larger
share of the production pie. "In 2000, 65% came from conventional sources,"
Hussey said. "About 55% will be from unconventional in 2010 or so."

     The Barnett Shale of North Texas already is producing more than 2 Bcf/d
and drillers are flocking to the play to tap its potential, Hussey told the
conference, which is hosted by Intelligence Press. That trend comes at a
substantial price, however--for example, the so-called Bend Shale play in West
Texas will cost as much as $10/Mcf to develop, making it uneconomical under
current market conditions, Hussey said.

     North America can expect some relief in the form of liquefied natural
gas, as expansion of import capacity and storage facilities allows the US and
Canada to accept more LNG, Hussey said, but he noted that LNG supply growth
will be partially offset by a drop in gas shipped from Canada as the country
diverts more of its domestically produced volumes to Alberta's oil sands
development.

     David Slater, managing director of marketing at Nexen Marketing USA,
echoed many of Hussey's concerns, maintaining that "the supply warning lights
are flashing."

		--Cheryl Buchta, cheryl_buchta@platts.com