“Business was in overdrive at the Apache Corporation earlier this year. Apache, one of the largest independent natural gas and oil companies in the United States, committed to spend close to $900 million this year to find and develop energy resources in North America,” writes Richard Oppel in today’s New York Times.

But now, in the wake of a recent sharp drop in demand for oil and gas — a decline that is likely to accelerate after the terrorist attacks undermined an already weak economy — the company is sharply scaling back. Apache reckons it may spend only $300 million for exploration and development in North America next year.

” ‘We could do next year what we did this year, but I think we’d be brain dead if we did,’ said Raymond Plank, Apache’s chairman and chief executive.

Just five months ago, homeowners in California and elsewhere were shocked by the soaring price of electricity and natural gas. The White House warned of a looming energy crisis and called for expanded drilling for oil and gas, even in wildlife reserves, and the construction of one new electricity plant each week for the next 20 years.”

Now energy demand and prices have tumbled. Nowhere is that more evident than in what used to be called the nation’s ‘oil patch’ and now more accurately the ‘energy patch.’ In Texas, Oklahoma and elsewhere, drilling activity is plunging as a shrinking economy, milder weather and competition from other fuels throttle demand for natural gas, causing prices to drop as quickly as they shot up last year.”

“The decline in spending on exploration and development has many experts worried that the United States will face another supply squeeze when economic growth — and gas demand — returns.”

“Oil prices have also fallen, for some of the same reasons that natural gas prices have tanked. But increasingly, natural gas is more important than oil to the Southwestern “oil patch.” While major oil companies invest in large oil projects in West Africa and other sites abroad, the emphasis at home has shifted. In the 1980’s, two out of three drilling rigs operating in the United States were drilling for oil; today four out of five are drilling for natural gas.”

“By and large, natural gas is a continental market — almost all the gas consumed in North America is produced here — and there is no OPEC to curtail production when prices drop.”

“Major oil companies invest long- term to drill in big deepwater oil fields or remote areas like Kazakhstan, where many can make a profit as long as oil costs more than $15 a barrel. (It closed in New York today at $22.79 a barrel.) But much of the gas in the United States and Canada is produced from shallow wells that cost less to sink, so investment is more speculative — and drillers are quicker to shut them down when prices fall.”

“That is what is happening now. Across North America, upstream capital spending on natural gas and oil is roughly expected to fall 25 to 40 percent next year, said Art Smith, chief executive of John S. Herold Inc., an energy research and consulting firm in Norwalk, Conn. ‘Everyone is taking a more cautious view of things,’ he said.”