NEW YORK (Reuters) - Independent oil and gas producer Devon Energy Corp. (DVN.N) expects natural gas prices to remain high in the next couple of years as little new supply will reach the market, the company’s president said on Thursday.
Devon’s John Richels said he expects natural gas prices to fluctuate between $6.50 and $9 per million British thermal units.
“We are fairly bullish,” Richels told the Reuters Global Energy Summit in a phone interview. “We don’t see any large amounts of natural gas coming on in the near term.”
New York Mercantile Exchange natural gas futures were trading at about $7.87 per million British thermal units on Thursday afternoon. But current prices are much higher than historical averages for the commodity, which sold for $2 to $3 per million British thermal units for most of the 1990s.
Devon produced 814.6 billion cubic feet of natural gas and 55 million barrels of oil in 2006.
Even though U.S. exploration and production companies have been drilling a lot of natural gas wells, Richels does not expect production levels to surge because many of these wells will have relatively low production rates.
He does not see dramatic growth in the gas supply anytime soon from liquefied natural gas and said pipelines to transport gas reserves that could be exploited in Canada and Alaska would not be completed until some time in the next decade.
Richels also said he believes oil prices will stay between $55 and $75 a barrel over the same period.
He said new oil wells being discovered around the world are coming from very complex plays that require considerable skill and expense to produce oil.
“Prices have seemed to settle and be pretty stable in that mid-$60s range,” Richels said. “That seems to be something that provides a reasonable return in the industry to allow more drilling and exploration to take place. At the same time, it seems to be (a price) that the world economy can deal with.”
For summit blog: summitnotebook.reuters.com/