Natural gas prices, reacting from historic highs last winter in some areas of North America, have slipped back to levels producers find barely tolerable, but there's nothing wrong with this picture. That's how prices are supposed to act under cyclical economics, according to David A. Pursell, vice president of upstream research at Simmons & Co. International. The drilling that high prices encouraged led to record storage, he told industry decision-makers at Andersen's annual energy symposium recently. Anadarko Petroleum Corp. senior vice president Richard Sharples seconds Pursell's contention that fundamentals remain strong for higher gas prices. Supplies also can grow with improved technology and more access to land that is off limits now, he says. Prices in the $2-per-million-Btu (MMBtu) range will not make marginal plays economic and they will not encourage companies to explore for new sources of gas, he warns. Sharples also doubts the U.S. would reach the much-touted 30-trillion-cubic-foot annual consumption level by 2010. The prediction assumes prices of $2.69 to $2.90 per MMBtu, and that price range won't encourage producers to find and produce new gas, he says. While the U.S. has been able to import supplies from Canada in the past, that country increasingly is less able to ramp-up production to meet the demand, he adds. Current low prices will reduce drilling and production, which will tighten supplies, and prices will rise again, probably before the second half of 2002, he expects. He suggests that fundamentals will remain in place for stronger gas prices in the future. -Don Lyle

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