Oct. 1--Which way are natural gas prices headed?

In North Texas, that's an especially relevant question.

The price of natural gas affects Barnett Shale natural gas producers and their employees, oilfield service companies and many thousands of mineral leaseholders who are reaping--or eventually hope to reap--royalties from gas wells drilled in the area. And because natural gas is burned to generate electricity and heat homes, its price affects virtually everyone who pays electric or gas bills.

Two speakers at an energy conference in Fort Worth expressed confidence Wednesday that natural gas prices are headed upward in 2010, in the wake of a deep plunge over the past 14 months.

David Pursell, a managing director for research for Tudor, Pickering, Holt & Co., said the Houston-based energy investment firm is predicting that natural gas prices will rebound to $7.50 in 2010--more than double what prices have been for much of this year. Gas prices are expressed in terms of a volume of 1,000 cubic feet or an energy level of 1 million British thermal units, which are roughly similar in price.

On a longer-term basis, prices could moderate to the $6 to $6.50 level, Pursell said in a speech at the Unconventional Gas International Conference & Exhibition at the Fort Worth Convention Center.

Don Warlick, president of Warlick International, an energy intelligence firm, was also bullish.

He said future demand should increase as a result of an ample supply and the movement toward cleaner energy, increasing its desirability as a fuel for electric power generation compared to more-polluting coal.

By the end of the first quarter of 2010 -- only six months from now -- gas prices could rebound to $6, Warlick said.

The commodities research unit of Barclays Capital was less bullish, however, lowering its 2010 gas-price forecast to an annual average of only $5.05 per million BTU.

In futures trading on the New York Mercantile Exchange, gas closed Wednesday at $4.84 per million BTU in contracts for November delivery. On Tuesday, the price had hit $4.88, the highest level this year for such contracts.

That's nearly double this year's lowest futures closing price, but far below the peak of 2008. That's when prices soared above $13 in July before going into free-fall as a result of slackening gas demand resulting from both the recession and successful drilling in "unconventional gas" plays.

Unconventional gas includes shale gas, so-called "tight gas" from reservoirs with low permeability and coal-bed methane. Unconventional gas plays require extra measures such as horizontal drilling and hydraulic fracturing to extract sufficient volumes of gas to make them economically feasible.

With gas prices having tumbled dramatically since last summer, the number of U.S. rigs drilling for natural gas totaled only 710 last week, less than half last year's count of 1,559, according to the Houston-based oilfield services firm Baker Hughes. Natural gas producers say a sustained price in the range of $6 to $8 is needed to revive drilling activity.

Gas supply has outstripped demand as a result of the economic recession and "shalemania"--an explosion of drilling activity in shale gas plays such as the Barnett Shale, Pursell said.

As of July 1, there were approximately 13,500 producing wells in the Barnett Shale, according to Gene Powell, publisher of the Powell Barnett Shale Newsletter. He estimated that there are 750,000 holders of mineral leases in approximately 20 counties. In Tarrant County, 322,436 mineral leases have been filed with the county as of Wednesday , Powell said.

Purcell said that more gas-drilling rigs are needed nationally today. "We just don't need as many as we had a year ago," because that could produce another gas glut, he added.

JACK Z. SMITH, 817-390-7724

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