AJM Petroleum Consultants

AJM Petroleum Consultants

April 06, 2010 11:00 ET

Domestic Gas Price Woes to Continue: AJM Forecaster Warns of Similar Fate for Crude Oil Prices If Canada Doesn't Develop International Markets

CALGARY, ALBERTA--(Marketwire - April 6, 2010) - In its quarterly Canadian Domestic oil and gas price forecast dated March 31, 2010, Calgary-based AJM Petroleum Consultants predicts continued price woes for domestic natural gas prices – the result of steady US gas production volumes and a relatively warm spring that has reduced North American gas withdrawals. In his accompanying international oil and gas price forecast, AJM economist and Vice President Operations Ralph Glass warns of a similar fate for Canadian domestic crude oil prices if Canada does not begin actively pursuing international markets for its growing crude oil production volume.

"In the fall of 2009, with natural gas prices at 8-year lows, it seemed like there was nowhere to go but up," stated Mr. Glass. "US rig counts were half what they had been in previous years, early winter was cold and that cold extended far south. But warming trends reduced withdrawals and US production volumes actually climbed slightly in January, putting an end to the optimism we felt in late 2009."

AJM has lowered its forecast NYMEX gas values to US$5.00/Mcf and US$5.80/Mcf for 2010 and 2011 respectively. The drop in the Canadian AECO price is even more drastic as more and more Canadian natural gas is backed out of the US market. AJM's AECO forecast for 2010 is Cdn$4.80/Mcf, down Cdn$1.00/Mcf. For 2011, the forecasted price is also down Cdn$1.00 to Cdn$5.60/Mcf. The forecasted price for 2012 is down Cdn$0.50/Mcf to Cdn$6.30/Mcf. In the subsequent seven years AJM's forecast has been reduced by an average of Cdn$0.30/Mcf returning to the long-term real price of Cdn$7.50/Mcf in 2019.

Perhaps more disturbing than the continued natural gas price doldrums is Mr. Glass's contention that Canada could experience similar troubles with crude oil pricing without some decisive action to develop markets outside of the United States. "Our current oil sands production, along with the planned expansions over the next fifteen years, will allow Canada to satisfy US imports for the next few decades," says Mr. Glass. "But we've been down this road with natural gas. Expanded oil sands production volumes, coupled with new advancements in horizontal drilling and fracturing techniques that are opening up tight oil opportunities, could lead to a North American oversupply and falling prices as we see with natural gas. We simply must start to develop the ability to serve international markets like China, where demand is currently 8.9 million barrels per day and growing. "

Complete forecast tables, commentary and documentation for AJM's March 31, 2010 Price Forecast are available for download at www.ajmpetroleumconsultants.com.

AJM Petroleum Consultants, a privately owned Calgary‐based oil and gas consulting firm, has extensive experience in exploration prospect reviews, basin evaluation studies, and reserve evaluations including evaluations of the unconventional reserves and resources of tight gas, shale gas, coalbed methane, bitumen and heavy oil. With a staff of more than 55 engineers, geologists and technicians, AJM consults for clients including active oil and gas exploration and production companies, natural gas transmission companies, regulatory bodies, financial houses, banks and investment analysts in Western Canada, North America and around the world.

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