NEW YORK After weak prices in the 1990s due to
oversupply, natural gas production in North America will
probably continue to decline unless there is another big
discovery, Exxon Mobil Corp.'s (XOM.N) chief executive said on
"Gas production has peaked in North America," Chief
Executive Lee Raymond told reporters at the Reuters Energy
Asked whether production would continue to decline even if
two huge arctic gas pipeline projects were built, Raymond said,
"I think that's a fair statement, unless there's some huge find
that nobody has any idea where it would be."
Exxon is a major player in the two multi-billion dollar
pipeline projects that could bring stranded arctic gas to
Canada and the lower 48 states.
The Mackenzie Valley pipeline. which includes partners
Imperial Oil (IMO.TO), Shell Canada (SHC.TO), ConocoPhillips
(COP.N) and the Aboriginal Pipeline Group, has been stalled due
to land access issues with native groups in Canada.
At a cost of some C$7 billion (US$5.6 billion), the
Mackenzie line could by 2010 bring up to 1.9 billion cubic feet
per day of much needed arctic gas in Canada to fuel steadily
The larger Alaska Highway Pipeline, also stalled as Exxon,
BP (BP.L) and ConocoPhillips seek fiscal terms with the state
of Alaska and regulatory clarity from the Canadian government,
could tap as much as 6 bcfd of gas from the Alaska North Slope
by 2012 at a cost of $15-20 billion.
"In terms of those two projects, I think Mackenzie is
somewhat ahead of Alaska. Obviously both of them have to go
through Canada and to that extent the Canadian government has a
significant impact on the timing of both projects," he said.
"The facts are that gas production continues to decline,
and will start to decline even more rapidly. By the time we get
to that period (2010-2012), we'll need it badly."
Stranded natural gas reserves on the Alaskan North Slope
and in the Canadian arctic could total more than 40 trillion
cubic feet, according to analyst estimates.
While the number of U.S. rigs drilling for natural gas has
climbed about 20 percent over the last year and prices are at
record highs, producers have been struggling to raise output.
Experts said easy onshore and shallow water basins have
been mostly tapped or are off limits for environmental reasons,
and new technologies like horizontal drilling have been
draining wells in two or three years, a much faster rate than
the five years or more during the 1990s.
The U.S. Energy Information Administration estimates that
natural gas production will be flat this year and increase only
one-half percent next year.
At the same time, demand for the cleaner burning fossil
fuel is expected to grow by two percent this year and almost
2.5 percent in 2006, according to EIA, the statistical arm of
the Department of Energy.