Gas prices should drop, but it'll be awhile, experts say

"Unfortunately, the situation I am about to address is a very grave one," said Bill Eliason, vice president of gas strategy for Oklahoma Natural Gas Co. "Our consumers are being faced with some very difficult decisions as a result of natural gas prices."

Eliason and other industry officials spoke before the House Energy and Utility Regulation Committee, which has been hearing from energy industry executives to prepare for legislation in the new legislative session.

Because demand has exceeded supply in recent months, ONG customers are paying $8.27 per thousand cubic feet -- far more than the $3.10 they paid a year ago. But Eliason said equilibrium eventually should stabilize prices in about 18 to 20 months.

Others in the industry suggested that the price could settle at about $4 or $5 per thousand cubic feet -- or about the price in the last half of 2000.

Eliason said that ONG customers used 20 percent less gas in January than in December, and that helped with the price.

"The moderate weather we've seen this past month has really lessened a very dire situation in regard to gas supply," he said.

"As a matter of fact, we're starting to see prices subside.

They're still at very, very high levels."

E.R. "Dick" Brewster, director of governmental affairs for BP, the largest natural gas producer in North America, told committee members that the federal government has promoted the use of natural gas as an environmentally clean fuel but has done little to promote its production and delivery.

Brewster said one reason for the present high prices is very low prices since the mid-1980's, which served as a deterrent for companies to drill for natural gas or provide for more storage facilities. He said the federal government is being urged to lift natural gas drilling restrictions in Alaska, the Rocky Mountains and off the coasts of Florida and California.

Mark Monroe, chief executive officer of Louis Dreyfus Natural Gas Corp., said the gas-price average in the 1990s was $2.19, "which is an insufficient price level to encourage the drilling that is needed to maintain production capacity."

Monroe said the average for 2000 was $3.55. The 2001 average is expected to be about $6.

"If you look farther in the market, you can see prices are expected to moderate more in the $4 range," he said.

Bruce Bell, chairman of the Oklahoma Division of the Mid-Continent Oil and Gas Association, said projections are that the country will need one-third more natural gas over the next 10 years.

To reach that goal, Bell said, "you're going to have to have $3.50, $4 gas, maybe $5 gas."

Eliason said gas producers are very resourceful and "with the right incentives, they will find gas. Right now they have more than ample incentive at $9 and $10 (per thousand cubic feet)."

Eventually, prices "will moderate at a level, perhaps a little higher than what we're used to but certainly much, much less than they are right now," he said.