All signs point to continued high natural gas prices, and continued challenges to adding gas supply, three speakers said in a wide-ranging, Q&A-style discussion at the IPAA's midyear meeting last month. Natural gas supply is decreasing in Canada, said John Richels, president, Devon Energy Corp. 2007 daily production could be down by as much as 1 billion cubic feet, as the year-over-year rig count is only half what it was in 2006, and the heavy-oil-sands projects are using more gas. "A number of companies, including our own, have scaled back by a significant amount," he said, given competition for, and the high costs of, personnel, supplies and services. "This is having an almost immediate effect on gas supply. It's a fairly mature basin-unlike what we said back in the 1990s, when we thought it was under-developed. If we don't see a significant increase in drilling activity this winter, the supply decrease will be all that much greater." Richels said it looks like the MacKenzie Valley pipeline project is "just a pipe dream for now. The Canadian government has dropped the ball and the industry can't make the economics work." For more on this, see the July issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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