New York (Platts)--13May2009

Natural gas will become an increasingly important part of the US supply
picture in the coming years, which is good news for gas-oriented companies
such as Tulsa, Oklahoma-based Williams, its CEO said Tuesday.

"We think that there's a very bright future for natural gas" because of
its clean-burning properties and its abundance in the US, CEO Steve Malcolm
said during an analyst conference in New York.

As such, Malcolm said he believes that, over time, "natural gas will have
a favored position among the hydrocarbons."

At present, however, "fundamentals are driving a very weak 2009" for
natural gas prices. Malcolm estimated a US production overhang this year of
between 2 and 3 Bcf because of high storage levels and economic difficulties
that are curtailing demand, but Malcolm anticipated that lower hydroelectric
power generation and coal-to-gas fuel switching could help absorb some of that
supply imbalance.

Hydro generation should fall about 400,000 Mcf/d below 2008 levels, while
coal-to-gas switching could reach 2 Bcf/d this summer if gas prices remain
below $4.50/MMBtu, he said.

Yet, even though the US rig count has dropped to 741 -- or about half its
2008 average -- and production should continue to weaken this year and next,
Malcolm said he nevertheless expects weak gas prices throughout 2009, thanks
to a lag between rig-count reductions and associated production cuts.

By early 2010, market factors should return the gas market to a rough
balance, although the pace of economic recovery, production levels, and
weather events could alter that timing somewhat, Malcolm predicted.

Over the longer term, as the US diversifies its energy supplies with more
gas, nuclear and renewables, Malcolm said he sees particular opportunities for
gas in the power generation sector. Environmental concerns, including worries
over greenhouse gas emissions, should keep coal-fired generation limited,
while more nuclear generation is not yet viable and renewable sources are not
likely to contribute significantly anytime soon.

In addition, gas could potentially become more important as a
transportation fuel and, as the global economy recovers, demand is almost
certain to rise in the industrial, commercial and residential sectors.

Malcolm noted that the three-year strip for nominal Henry Hub gas prices
is running at around $6.00/MMBtu, while the five-year strip is running at
about $6.80/MMBtu. Such prices "can be very attractive for someone who's in
the business," Malcolm said, and Williams "continues to be blessed with many,
many organic opportunities to expand and invest."

--Melanie Tatum, melanie_tatum@platts.com