NORTH AMERICAN NATURAL GAS UPSTREAM COSTS: WHERE IS THE MARGINAL PRODUCER?

Upstream (finding, development, and production) costs are a key component of the exploration and production (E&P) investment decision. CERA's latest analysis of upstream costs for the major US and Canadian gas supply regions shows that in some cases imports are cheaper than homegrown supplies. This has important implications for the upstream industry and for wider market participants:

- North American gas producers will ""avoid the edge"" of the North American supply curve in developing their E&P strategies.
- Market prices for North American gas will reflect a cost floor through 2007 at least, established by the continent's marginal resources in the shallow Gulf of Mexico and US Gulf Coast.
- After about 2007, the North American market will increasingly incorporate a price dynamic based on the cost, the contracting terms, and the worldwide supply and demand for liquefied natural gas.

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CERA Reports Online, a wholly owned subsidiary of IHS Energy, is a leading advisor to international energy companies, governments, financial institutions, and technology providers. CERA delivers critical knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA's expertise covers all major energy sectors--oil and refined products, natural gas, and electric power--on a global and regional basis.