Gas analysts shy away from predicting prices,
supply, demand
Chicago (Platts)--16Sep2009/1256 pm EDT/1656 GMT
A panel of natural gas analysts on Wednesday shied away from
providing any solid predictions of where the US gas market, supply
and demand are headed in the near future, blaming the ambiguous
nature of any economic recovery from the recession.
"Today's supply-and-demand dynamics are poised for a
radical change this year," panel moderator Jim Stilling, Lead
Director of Gas Origination for marketer Integrys Energy Services,
said at the beginning of the LDC Forum's panel on supply and demand
in Chicago.
BP's Manager of Fundamental Analysis, Dawn Constantin, came
the closest to any certainty with a prediction that drastic cuts in
North America's rig counts could tighten the US supply situation
next year as production falls.
But then she threw a wrench in that observation by noting
that global liquefied natural gas supplies still are growing in a
down economy and that gas may have to come to the US.
While "it appears we are starting to turn around" the
global economy, the wild card in gas forecasting is LNG, Constantin
said.
"Where is this gas going to go? We could be in a
potentially tight situation next year," as US production drops, she
said. But rather than make any specific price predictions,
Constantin instead projected that gas-on-gas competition in the US
will heat up as new supplies from shale formations displace Canadian
and Gulf of Mexico production.
"Take any price forecast with a grain of salt. Our track
record for forecasting isn't very good," Constantin said.
"Everything I say today could be wrong next week," said
Proliance Energy's Vice President of Sales and Marketing Dave
Pentzien, noting that macroeconomic dynamics and the scale of new
gas supplies create too many variables for a reliable prediction.
Pentzien then showed how forecasting has performed over
time. "Canadian imports were going to be 9 Bcf/d forever," he said,
although now forecasters are predicting that Canadian gas coming to
the US would drop by a range of 1.5 Bcf/d to 5 Bcf/d.
"LNG imports four years ago were 4 Bcf/d and predicted to
go to 12 Bcf/d by 2015," he said, noting that LNG has stayed steady
but low.
"The one thing they fortunately got wrong--we were
forecasted to be a dying industry. The prediction was for supply to
be flat and declining. Actually, it's increasing," he said.
Pentzien said US gas production should continue to climb
"but growth falls well below potential" in the coming year.
Constantin and Pentzien agreed that the return of gas
demand is linked to the economic recovery and the jury remains out
on how quickly the US economy comes back from recession.
Constantin said the gas market is still performing its
function of balancing supply and demand with prices.
"Higher prices [in the past] led to increased production,"
she said, adding that producers responded to double-digit prices of
the past two years with a 35% increase in the amount of potential
gas available for recovery, primarily from shale development. --Bill
Holland, bill_holland@platts.com
