Williams sees natgas output lagging demand

NEW YORK (Reuters) - Williams Cos. Inc. (WMB.N: Quote, Profile, Research, Stock Buzz) said on Monday that it expected future growth in North American natural gas production to lag gains in demand for the cleaner-burning fuel.

"It's going to be difficult to come up with net gains in production. There are a lot of wells being drilled but the numbers don't suggest we're making much headway. Productive capacity is stressed," Williams CEO Steve Malcolm said, speaking at the Reuters Global Energy Summit in New York.

But Malcolm said he expected to see strong production growth from Williams, predicting the company will grow output by 15 percent to 20 percent annually at least through 2008.

"We've identified some 4,500 drilling locations. We know where we're going to drill and where we're going to get the growth," he said, adding the strongest gains were expected from the Piceance and Powder River basins in Colorado and Wyoming.

When asked how the growing gap between supply and demand will be closed, Malcolm said more offshore drilling, drilling in the Arctic National Wildlife Refuge (ANWR) and faster permitting to drill in key basins in the Rockies would help.

He also said imports of liquefied natural gas will play an important role in meeting future gas needs, but Williams was not pushing in that area, adding the company's capital will be better deployed in its key core businesses.

Instead, he said Williams will continue to expand its midstream businesses that gather and process gas and its pipeline capacity to handle growing supplies including LNG.

"We are doing what we can to attract LNG to our midstream and pipeline facilities," Malcolm said.

"I think it will be difficult to site LNG capacity in heavily populated market areas. I think most of the capacity will ultimately be built in the Gulf Coast and that will be a good thing for Transco because it will create a new prolific gas source that Transco can tap into," he added, referring to the company's huge Transco pipeline, a key gas supplier to major markets in the Northeast.