Natural gas flowing from the Rockies could soon suffer from a price decline due to oversupply. That's the conclusion that was reached in a recent study by consulting firm Bentek Energy LLC. A price drop of as much as 50% for Rocky Mountain gas may be looming at the end of 2005. Prices could sink to as low as $3 per million Btu, the Golden, Colorado-based firm reports. Although new pipeline capacity will improve the region's access to Midwestern markets, that boost will be overshadowed by growing supplies from Texas and Oklahoma. A surplus is likely as the increase in production combines with slow demand growth, thanks to an expected anemic economic recovery. Bentek's conclusion is hinged on a basin-by-basin analysis of gas production. The company noted that during the first quarter of 2004, production in 19 of the 32 major U.S. basins was up, relative to the same quarter in 2003. During early 2004, Rockies gas production rose 4% and increases were posted in such mature Midcontinent provinces as the Anadarko, Arkoma, ArkLa, East Texas and Fort Worth basins. This trend of production growth is expected to continue, and Bentek predicts that by late this year, the North American market could be oversupplied by almost 1.9 billion cubic feet (Bcf) of gas per day. Farther into the future, robust production growth is projected as well. U.S. gas supply will grow 3.2% per year between 2005 and 2010, the firm projects. Declines in the offshore Gulf of Mexico, onshore Gulf Coast and the Overthrust Belt regions will be more than offset by burgeoning gas volumes from such basins as the Fort Worth, Powder River and Greater Green River. During the same period, demand is not projected to grow at an equal pace, however. Average annual growth rates will be just 1.2% per year for residential demand, 1.5% for commercial demand, and 1.8% for industrial demand. Power-generation facilities will be a bright spot, expanding at an annual rate of more than 5%. Nonetheless, total demand growth will average only 2.5% per year, lagging the blossoming supply. The wild card in the analysis is the role of liquefied natural gas. LNG imports will hit 1.8 Bcf per day in 2004, up sharply from the 0.6 Bcf per day imported in 2002. Currently, more than 30 proposals for new LNG terminals are in various stages to serve the U.S. markets. If all these come to fruition, the nation would be rolling in LNG import capacity of more than 40 Bcf per day. Bentek has taken a conservative view of these developments, and forecasts that LNG imports will grow from 2.2 Bcf per day in 2005 to 4.8 in 2010. -Peggy Williams

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