Anadarko Petroleum Corp. chief executive Al Walker doesn't paint a rosy picture for the recovery of natural gas prices any time this decade—there is just too much supply without any imminent demand drivers.

“I don't have a lot of optimism,” he told an IPAA audience in Houston recently. “We are knee-deep in gas and there is a lot in the system” to come. “I'm not optimistic supply is going to be something we can overcome. No one imagined the impact of unconventional resources 10 years ago.”

The Marcellus shale is singularly capping natgas prices today, steadily producing an abundant supply below $4.50 per thousand cubic feet. “It's hard for me to imagine gas doing better than $4.50 in the next couple of years” as a result, he said. “That won't allow prices to appreciate greatly.”

Even as good as is the Marcellus shale, Anadarko has de-emphasized the gas play in its budget, trimming down to four rigs. “The Marcellus is the one place we can look to find the best equilibrium price to actually be able to outlay capital,” he said, “but that's really a maintenance capex.” Going below four rigs loses a lot of cost efficiencies.

“The Marcellus gives us an acceptable rate of return but, frankly, with natural gas in the threes, it doesn't compete well in our portfolio.”

Upside gas opportunities won't help prices either. As data points of what might come next, Anadarko has tested the Geneseo formation on its Marcellus acreage and the Pearsall on its Eagle Ford acreage and, for both, “there's a lot of gas in place,” he confirmed.

The one looming savior for gas prices per Walker: LNG exports.

“The only thing that can change this before 2020 is LNG (liquefied natural gas). Unless we get a new demand function from LNG, I don't know what the demand creation is going to be.”

The world awaits North American LNG, he believes. “Gas coming out of North America has a cost advantage over every other source of LNG in the world.” LNG will continue to be a major energy source for electrical generation for countries that don't produce hydrocarbons, such as South Korea and Japan. “We have a low-cost advantage, which makes a difference to Asian buyers of LNG.”

And though it will take some political will, “the US is well positioned once we get our energy policy associated with LNG.” The Department of Energy has permitted four US export projects so far.

LNG is near to Anadarko's heart, if not its Houston home base. The international explorer is co-developing its own LNG export facility in Mozambique, fed by its prolific offshore Rovuma Basin discoveries estimated to contain “north of 100 Tcf (trillion cubic feet) of gas in place.”

But what irks Walker most is the resistance of petrochemical companies to US LNG export. “It's surprising to me that the Dow Chemical CEO can continue to argue that LNG should not be shipped,” he said. “He has a perfect storm: low ethane prices and low gas prices for his feedstock.”

The US will always have a cost advantage due to the amount of natural gas in place, he argued. “If gas goes from $3 to $5 (in the US), that means Europe goes from $8 to $10. The delta is always going to be there for chemical producers.”

For natural gas liquids, Walker projects propane and heavier liquids will find equilibrium, as they are exportable. Ethane, though, will remain challenged through 2016. “Until the petrochem build-out occurs, we don't have much of a reason to feel good about that.”

Oil prices will remain range bound through 2020, he projected. “Even in a bull case, I don't think oil is sustainable above $120, nor do I think it has a lot of risk below $80.” Demand from China and East Asia will only increase, he said, but supply from non-OPEC production, including the US, could play to the bear side, ultimately balancing. He confessed that Anadarko's deep-water exploration needs the high end. “The reality is, the deepwater doesn't work at $80; it needs somewhere north of $100 for it to work.”

With an international portfolio in various developing countries, geopolitical risk is always on Walker's mind, but Anadarko's biggest risk is not in Mozambique or Algeria, he said. Rather, “it's the state of Colorado,” where Anadarko holds 350,000 acres in the Niobrara.

“If Colorado passes a two-year ban on hydraulic fracturing,” as is being proposed as a ballot item, “which state is going to be next? All of a sudden the way we produce oil and gas is going to change. The only way I can think to manage that is diversity of assets.”