The increasing U.S. thirst for electricity is widely expected to turn a 30-trillion-cubic-foot-per-year natural gas market into reality during the next 10 years. However, traditional supply basins are showing signs of fatigue, the infrastructure to tap new gas sources is lacking, and price volatility presents a potential stumbling block to an industry seeking new capital investments. This is according to speakers at Ziff Energy Group's North American Gas Strategies recent conference in Houston. Producers working in this challenging environment must take a long-range view if they're going to prosper, they said. Companies and their investors must take on the risks of launching long-term projects and have the conviction to ride out the short-term price cycles. "The nature of these major new projects is that they are lumpy. The lead times are long. They take major new capital commitments," warned David Posner, vice president of marketing for Santa Fe Snyder Corp. "Often, the incentives to undertake these types of projects come at a point in time when market signals are saying that the project is too late. If producers can position to make the next increments of supply available in anticipation of market growth, the potential for destructive market cycles could be diminished. To accomplish this, companies will need to make major commitments to the next tier of projects soon." That next tier of projects will have a sizeable gap to fill. Assuming a decline rate of 14%, North America's existing gas basins will be producing less than 10 Tcf annually by 2010, or just one third of the projected demand, according to Brian E. Frank, vice president of BP Amoco Gas and Power Canada. He suggested that northern gas may be able to help fill the gap, citing a resource potential of more than 30 Tcf in Alaska and more than 6 Tcf in the Mackenzie Delta. BP Amoco Plc currently produces 8 billion cubic feet of gas per day from its Prudhoe Bay oil field that is re-injected into the reservoir, he said. The company is investigating liquefied natural gas, gas-to-liquids and pipelines as options to monetize that gas production, with a pipeline being the first option. Walter van de Vijver, president and CEO of Shell Exploration & Production Co., said that the industry needs to develop "new, more remote, more technically challenging" gas sources such as Alaska, liquefied natural gas, the deepwater Gulf of Mexico and Arctic Canada. However, companies should find the right balance between these and more traditional sources. "We must resist the temptation to overinvest in marginal projects," he said. Such overinvestment could result in "another boom-bust cycle that helps no one." Traditional gas sources examined at the conference included western Canada, the Rockies and the Gulf of Mexico. Together, the three areas account for 55% of the continent's current gas supply. According to Gerard J. Protti, senior vice president of planning and new ventures for PanCanadian Petroleum Ltd., Canada contains 51 Tcf in remaining reserves, 44 Tcf in unconnected reserves and 464 Tcf in undiscovered reserves. Future Canadian production could come from places such as the East Coast, which could provide more than 1 Bcf per day by 2005 and maybe even 2 Bcf per day by 2010, Protti said. He added that infrastructure development is critical to developing this area, however. -Jodi Wetuski