ABSTRACT

A review of North American natural gas reserve-production ratios and reserve replacement statistics over the past decade shows that supply and demand are becoming more balanced. Because Canadian supply/demand is an integral part of the total North American supply/demand relationship, there will be opportunities for significant increases in annual deliveries plus real growth in natural gas wellhead prices during the nineties.

The critical question, as always, is what will be the increase in demand and how will natural gas prices respond? A review of the past decade statistics of supply, demand, prices and reserve-to-production ratios suggests that real growth in natural gas prices may not be as aggressive as many industry forecasts project.

Based on a more conservative view of the historical relationships plus a consideration of seasonality of demand, three alternate price projections have been prepared and are presented for review. The price forecasts reflect the sensitivity of future gas prices to increases in supply and demand, as well as a general relationship to future crude oil prices. It is suggested that a review of project economics using the three forecasts may assist with assigning priority to specific natural gas exploration projects.

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