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6

Man shot at gas station remains critical

Houston police are investigating the Friday night shooting of a man...

Houston police are investigating the Friday night shooting of a man who was reported in critical condition today at Ben Taub General Hospital.

The shooting occurred shortly after 11:30 p.m. at a service station in the 4900 block of the North Freeway.

Police said the victim, who has not been identified, was in his car at the service station when he was shot by another man who was standing in the driveway.

The man fled the scene after the shooting and remained at large today, police said.

The victim drove away until his car struck a guard rail about 300 feet from the station. Other drivers who who saw the wrecked car flagged down a passing police officer.

chron.com

Natural gas producers fear short-term surplus, long-term shortage

Mike Sumrow
Drilling Editor
OGJ Online

NEW ORLEANS, Oct. 2 -- The US natural gas industry will be hammered by low commodity prices this winter because of an even worse industrial recession than the government will admit. But it faces serious supply constraints through 2007, said two independent executives.

At the moment, the US gas market is oversupplied as a result of a 1 bcfd supply growth and 3 bcfd demand loss, said Mark Papa, chairman and CEO of EOG Resources Inc.

"What we're in today is clearly the most severe industrial recession we've seen in the last 20 years," said Papa at the annual meeting of the International Association of Drilling Contractors (IADC) in New Orleans last week.

"It is a lot more severe, in my opinion, than the government is letting on," he said. "If you look at total demand for gas in the US, 40% of the demand is in the industrial segment and that's where we get clobbered right now."

The problem could be tracked in the rapid fall of gas futures prices on the New York Mercantile Exchange this summer, said John Schiller, executive vice-president of operations for Ocean Energy Inc. at that same meeting.

"We weren't supplying that much more gas, and prices were falling anyway, due to lower demand from the industrial sector," he said.

With virtually every gas well at full production in the US and Canada, Papa said, "Storage is getting jammed packed. During October, it will get worse, and we expect gas prices to get worse."

The solution is for producers to start operating "like a business," he said. "We're going to reduce our rigs. Currently we're running about 45 rigs and by yearend, we're likely to drop 10 rigs."

Papa predicted, "Rig activity will fall to yearend. We [producers] will drop another 200 rigs, with the Gulf of Mexico shelf proportionately hard hit compared to land rig activity. In our opinion, the remaining prospects on the gulf shelf absolutely do not work [at prices] below $3.25/Mcf."

Reducing drilling activity will accelerate current production declines. Then when industrial production rebounds, there will likely to be a step change in gas prices from $2/Mcf to $3/Mcf, instead of smaller incremental increases, Papa said.

Meanwhile, EOG Resources plans not to push its gas production so hard in the fall and spring shoulder months. "We don't see any reason to hurry and hook up recently completed wells, so we can sell for current prices of $1/Mcf in the Rocky Mountains, particularly if we think the price will go up in 6 months," Papa said.

US demand for gas as the preferred fuel for future power generation is real, he said.

"The biggest growth area for natural gas over the next 10 years will be for power generation," said Papa. "Our guess is that the long-term stabilized gas price will be $3.25-$3.50/Mcf. Anything above $4/Mcf destroys too much industrial demand. Prices at $2.25/Mcf will cause production supply to fall 1.5%-2%/year, which is not going to work either."

With smaller discoveries and rapid production declines, Papa and Schiller said, the US gas market will be supply-constrained until a pipeline is built to bring gas from Alaska's North Slope to the Lower 48 states in about 2007.

Until then, any new incremental supplies of gas will have to come from hydrocarbon basins in the Gulf of Mexico, South Texas, and western Canada.

Production decline rates in virtually all of those areas are getting steeper every year because of new and imaginative well completion technology developed during the past decade that allows the industry to produce reserves quicker, said Papa.

As a result, Schiller said, "The wells we're drilling today, are not going to be here 12 months from now."

Texas, which produces 26% of US gas, saw its drilling activity increase by 57% from Jan. 1999 through September 2001. Yet its gas deliverability declined 1% this year, even before the recent rig count reductions, said Papa.

Oklahoma, onshore Louisiana, and New Mexico all show the same trend. The only US bright spot is Wyoming. Producing about 8% of US gas, it's the only state where deliverability has increased, up 13% with a 51% jump in drilling activity, Papa said.

"We're not going to solve the problem on the supply side," Schiller said. "In the Gulf of Mexico, we're down to the 5 bcf prospects. We can no longer find wells with 25 bcf reserves that flat line at 40 MMcfd after they're drilled. Everything we're drilling now is tight gas."

He said the only long-term solution is to open new areas to exploration, such as government lands in the Rocky Mountains, the eastern Gulf of Mexico, and Arctic National Wildlife Refuge in Alaska.

ogj.pennnet.com