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Canadian Natural expects gas prices to remain low

Canadian Natural Resources, one of Canada’s key energy producers, expects that natural gas prices will continue to sag for a very long time.

The recently-gained access to shale-gas deposits has cause gas supply to surge, creating a significant glut in the market and depressing gas prices for the past few years. At prices below US$4/mBtu, a considerable number of wells see losses creep up.

“We now expect gas prices to be low for the next five to 10 years,” Steve Laut, president of Canadian Natural Resources (Toronto: CNQ.TO), said Thursday, when the company reported 3Q2011 earnings of US$836m, up 40% YoY, but down 10% from 2Q2011. “We hope we’re wrong,” he said.

Enormous volumes of gas have been discovered with new drilling techniques such as horizontal wells and underground fracturing. Some estimates indicate that the region has now sufficient gas supply for this century.

The forecasts have prompted Encana Corp (Toronto: ECA.TO), the largest independent producer, to retreat from a five-year plan to double its output and is selling billions of assets this year to avoid a cash-flow pinch. In addition, gas companies are looking at alternative markets, planning the construction of LNG terminals to ship gas to the lucrative Asian market. Encana, Apache Corp (NYSE: APA), EOG Resources (NYSE: EOG), Royal Dutch Shell (LSE: RDSA.L) and Petronas (Kuala Lumpur: 6033.KL) are all considering such a move.

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