Gas Supply Conclusions
Downside for the gas price has come primarily from weakening demand, not burgeoning supply.
Structural obstacles are limiting the supply response
Reduced rig efficiency hamstrings production as activity ramps up
Canada can no longer provide cheap gas to meet the U.S. shortfall
In 2001, new wells in U.S. must produce over 8 Bcf/d, annual average, to hold production flat
Supply response works in both directions
- High drilling costs and lower prices will pressure companies to reduce drilling activity
- Historic activity levels will lead to production decline
- Strong oil prices will encourage competition for rigs