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11 March 2010

CERA Week: Natural Gas Industry Looks To Shore Up Demand

By Jason Womack 
HOUSTON (Dow Jones)--The natural gas industry is grappling with a big problem: trying to find an outlet for vast new supplies of the fuel.
The boom in domestic natural-gas production from onshore natural-gas fields known as shales has dominated much of the discussion at the IHS Cambridge Energy Research Associates conference. And while many industry executives and experts agree that a global economic recovery will eventually lead to the long-term demand growth needed to absorb excess supply, near-term demand remains stunted.
"We need to be better about the facts and hopefully, over time, that will build more support for gas," said Helge Lund, president and chief executive of Statoil ASA (STO), which is investing billions in U.S. shale-gas development.
Over the course of the conference, executives have promoted the fuel as a secure and robust domestic energy source that provides a low-carbon alternative to other fossil fuels, and they encouraged attendees to do the same.
"It's a no-brainer," Steven Farris, chief executive of Apache Corp. (APA), said during a panel discussion at which he advocated wider use of natural gas as a transportation fuel. "I truly believe that we are going to use more natural gas in this country."
The pressure to peddle the commodity comes after the economic downturn undermined demand - particularly among industrial users, which account for about a third of domestic consumption. Prices have plunged more than 65% from their 2008 summer highs above $13 a million British thermal units.
However, some see price volatility falling away as producers continue to tap new fields and secure low-cost supplies that will compete more effectively against coal, a staple fuel source for electricity generation in the U.S.
"We should expect relatively low prices for the long term," Chad Deaton, chief executive of oilfield-services provider Baker Hughes Inc. (BHI).
Still, Deaton said during a panel discussion that industry participants--from those developing technology to producers, to utilities--need to agree on a pricing framework to make the economics of the business work.
-By Jason Womack, Dow Jones Newswires; 713-547-9201 jason.womack@dowjones.com

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