U.S. natural gas demand is expected to increase steadily, reaching 25.4 trillion cubic feet (Tcf) per year by 2004 and 30.6 Tcf by 2015. At the same time, production growth will fall from 1.9% this year to average annual growth of 1.3% through 2005, according to the latest Independent Petroleum Association of America supply and demand committee long-term forecast. While its production-growth forecast is slower than its prediction for demand, the committee expects domestic gas production to hit 20.5 Tcf annually by 2005 and 24.8 Tcf per year by 2015. The forecast suggests that gas demand growth could drop from an annual rate of 2.2% during 2001-05 to 1.7% between 2005 and 2010 before rebounding to 2.1% in the 2010-15 period. "Price is a huge variable," says Frederick J. Lawrence, IPAA economics and international projects director. "If it stays high, there could be a lot of switching to alternative fuels. A lot of forecasters downgraded their estimates, especially for industrial and chemical plants. Residential and commercial demand probably is not as elastic. Other fuels, such as coal, could come into play in generating electricity." The forecast, which the IPAA released during its annual Oil and Gas Investment Symposium in New York, calls for domestic gas production to increase 1.3% year-to-year in 2001 and fall slightly to an average 1.3% annual increase through 2005. "On the one hand, there have been record rig rates," Lawrence says. "Production delays have come off in the Gulf of Mexico and production has increased in many of the Lower 48 states. But production has not kept pace with rig totals because decline rates have grown the last few years. Although activity is moving deeper in the Gulf of Mexico, these fields primarily will produce oil, not gas." The IPAA expects total gas imports-mainly from Canada-to rise to 4.95 Tcf annually by 2005, from 3.73 Tcf in 2000. It anticipates that imports will supply 6.05 Tcf, or almost 20% of total annual U.S. gas demand, by 2015. Lawrence considers pipeline capacity one of the big gas-import questions. "Nova Scotian production could add capacity," he says. "But the only other significant project is the Alliance Pipeline, which apparently can't expand its size significantly." Oil forecast When it comes to petroleum, the IPAA expects total U.S. demand to continue rising 1.3% to 1.8% annually during the next 15 years, based on economic factors and tight oil markets. Its latest long-term supply and demand forecast calls for total U.S. crude and products demand to reach 22.3 million barrels per day by 2005 and 25.4 million by 2015. "It's hard to know what the oil market is going to do," Lawrence says. "The relationship between producers in and out of the Organization of Petroleum Exporting Countries will continue to evolve. But non-OPEC production is rising. Producing countries like Iraq certainly make the balancing act harder." While domestic crude production decreased by about 50,000 barrels per day year-to-year to average 5.83 million barrels per day in 2000, the IPAA anticipates the decline will reverse through 2005 and reach an average 6.55 million barrels per day that year. Gains in Alaska, the Gulf of Mexico and the Lower 48 states through 2005 should taper off thereafter. "Price also will play an important part in production growth, particularly if it stays around $27 or $28 per barrel." The IPAA expects the U.S. crude production decline to resume during the next decade at an average 2% annually, with output dropping to 5.63 million barrels per day in 2010 and 5.34 million in 2015. "Looking at the triad of the Gulf of Mexico, Alaska and the Lower 48, you have delays and mergers of companies involved in Alaskan production that had a negative effect up there the past few years. Sorting out details following mergers and acquisitions certainly will have an impact there. Producers continue to have deepwater success in the Gulf of Mexico, with bidding pretty active. We think this will continue."