Natural gas price hikes expected despite increased drilling

Tuesday, March 25th 2003, 12:00 am
By: News On 6

OKLAHOMA CITY (AP) _ Increased demand for natural gas could drive prices to record highs despite an increase in production, petroleum engineers were told in a symposium.

Natural-gas drilling is expected to increase over the next two years, but supply shortfalls will still be experienced, Henry G. ``Buddy'' Kleemeier, executive vice president and chief operating officer of Tulsa's Kaiser-Francis Oil Co. told participants of the Society of Petroleum Engineers' Production and Operations Symposium in Oklahoma City Monday.

Demand for natural gas has outpaced production by 4.6 billion cubic feet a day in 2003, forcing the nation to draw its reserves to record lows. But Kleemeier said he expects even larger shortfalls in 2004 and 2005.

``But I don't think there will be a shortage,'' he said. ``I think there will be some users who will choose to use other fuels. I don't think there will be a shortage of gas, but the prices will be higher.''

Natural gas traditionally averages less than $3 per thousand cubic feet. It peaked above $11 this winter.

Production levels have fallen to about 8 percent below the five-year average while the cold winter weather caused demand to jump.

Drilling has increased only in recent weeks even though prices have been above average since November, and most experts predict that gas prices will not fall below $4 over the next two years.

``It's been a quandary for a lot of us to try to explain the situation,'' symposium chairman Michael L. Wiggins said. ``In the past, when we saw strong oil and gas prices, we saw strong activity. But we haven't seen that this time.''

Wiggins, associate professor at the University of Oklahoma's Mewbourne School of Petroleum and Geological Engineering, said the slumping stock market wiped out investment dollars and large production companies are waiting to increase drilling until they know prices will meet expectations.