Better times for the hard hit natural gas industry remains two to three years away as a seemingly intractable supply bubble continues to depress sales and prices industry officials said. An uncertain regulatory environment disputes over Canadian pricing policies and unusually warm winters are working against a quick recovery in the sector a number of corporate and government speakers told an energy conference here. We see a tough tough short-term market both as to price and volume said Michael Phelps vice president of &lt;Westcoast Transmission Co Ltd> a major Canadian natural gas carrier. But Phelps predicted a fall in U.S. supply -- caused by a sharp drop in exploration -- and a slight demand increase should help to burn off the excess supply by 1990. As a result Canadian gas exports to the U.S. market should rise to up to 1.5 trillion cubic feet a year by the end of the decade nearly double 1986s total. The health of the Canadian industry is heavily dependent on the U.S. market where nearly one third of Canadas gas production is sent. Cuba Wadlington a vice president at Northwest Pipeline Corp of Salt Lake City shared the view that markets could be in balance by 1990. He said while North American demand for natural gas has flattened at about 18 trillion cubic feet a year a return to more colder winters in the next few years could quickly tighten supplies. Things are clearly working towards a shrinking of the bubble Wadlington tolds in an interview. However recent decisions by the U.S. Federal Energy Regulatory Commission (FERC) were sharply criticized by Canadian delegates who suggested the moves could prevent the country from participating in the markets recovery. The key dispute known as the as billed issue involves a ruling last December by FERC which effectively bars U.S. pipeline companies and consumers from paying certain Canadian shipping expenses. The Canadian government believes the ruling could severely weaken the countrys gas producers. Besides the extra-territorial effect there is the potential that Conadian producers and consumers may end up subsidizing the cost of transportation services originally incurred on behalf of U.S. customers said Robert Skinner an assistant deputy minister in Canadas energy department. But FERC Chairman Martha Hesse told the conference the ruling was really intended to assure equal fair and open competition in the pricing of natural gas sold within our country -- whatever the source of the gas. Hesse maintained Canadian gas was crucial to the emergence of a freely competitive continent-wide energy market. Speaking to concerns in Canada that the U.S. is seeking to limit Canadian gas shipments Hesse said such a move would work against the long-term interest of American consumers. We truly constitute a North American market she said. Natural gas moving through pipelines recognizes no boundries.
NORTH AMERICAN GAS MARKET RECOVERY YEARS AWAY