Sawhill's Forecast Generates Some Heat
John Sawhill, director of McKinsey & Co.'s energy-consulting practice, has the gas industry in a tizzy over his new forecast that America may face a natural gas shortage as early as next winter.</br></br>"Wrong. Wrong. Wrong," answers George Lawrence, president of the American Gas Association. "There will not be a shortage," says Ray O'Connor, Citibank's senior banker for utilities and former chairman of the Federal Energy Regulatory Commission.</br></br>But the 52-year-old Mr. Sawhill, who is based in Washington, is sticking to his guns. The former energy official in the Nixon, Carter and Ford administrations says flatly, "This is something the gas industry needs to face up to."</br></br>This isn't some egghead debate. To fuel U.S. economic growth in the 1990s without polluting the environment or greatly increasing dependence on foreign oil, U.S. energy officials and private experts say natural-gas consumption must grow substantially, especially in the electric-utility sector. Recent federal analyses show there is up to 50 years' worth of natural gas reserves still in the ground in the U.S., which ought to do the job.</br></br>But, Mr. Sawhill argues, gas "deliverability" is rapidly declining. Deliverability is a measure of how quickly gas is explored for, found and hooked up to a pipeline. Partly, he says, deliverability is in trouble because the current price of gas (only about $1.60 per thousand cubic feet), is too low to entice enough drillers into the fields. Also, he says, in the Rocky Mountains and other areas without a deliverability problem, the problem instead is insufficient pipeline capacity.