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Meeting the Nation’s Natural Gas Needs:
Industry and Government Cooperation Needed*
By
Naresh Kumar1
Search and Discovery Article #10035 (2003)
*Online adaptation of presentation at AAPG Southwest Section Meeting, Fort Worth, TX, March, 2003 (www.southwestsection.org)
1Growth Oil and Gas, Richardson, Texas ([email protected])
Abstract
Natural gas supply and demand, unlike that for crude oil, is controlled by domestic and sometimes, regional market forces. Currently, natural gas provides 25% of our total energy needs. United States produces one-fourth and consumes one-third of the world’s daily supply. At current consumption levels, United States has a 9-year supply of proved reserves and almost a 60-year supply of potential resource. However, the supply and demand balance maintained by the market is such that a drop of less than three-week supply in the “system” can make the difference between markets being “flush” to markets being “short”. Local and regional imbalances have led to huge swings in prices during the last couple of years.
Demand for “clean fuels” throughout the world is only going to increase the demand for natural gas. Increase in US demand because of economic expansion and environmental considerations would require a national effort to make capital, rigs, personnel and technology available to meet the needs. Although we are importing approximately 15% of our natural gas, shortages in domestic production cannot be easily met through increasing imports. Nevertheless, the domestic environment has not been the most favorable for increasing supply. Almost a 10-year supply in places such as Rocky Mountain Basins, Alaska and the Outer Continental Shelf is either “off limits” or has severe restrictions against development. In order to meet the nation’s needs, a cooperative environment among industry, governmental agencies and the environmental community is required.
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uAbstractuResource, reserve, supply, demand
uAbstractuResource, reserve, supply, demand
uAbstractuResource, reserve, supply, demand
uAbstractuResource, reserve, supply, demand
uAbstractuResource, reserve, supply, demand
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With only 5% of the population and 25% of the total consumption, United States is the world’s largest energy consumer. Currently, we depend on hydrocarbons for 85% of our energy needs; and natural gas accounts for 25% of the total (AAPG, 2002). Our reliance on hydrocarbons is unlikely to change in the short term and the proportion of natural gas in nation’s energy mix is only expected to increase for the following reasons:
The objective of this paper is to review whether the nation will be able to meet the increased demand for natural gas as it becomes the fuel of choice and as the economy expands. The nation will have to develop appropriate economic, political, and technologic environment requiring cooperation among various “stakeholders”: general public, state and federal lawmakers, oil and gas industry, capital markets, academia and the environmental community. Resource, Reserve, Supply, and Demand
Figure 1
shows the Resources, Reserves, and Supply figures for the United States
for natural gas. Resources are estimated amounts of hydrocarbons
remaining to be discovered based on geological knowledge, Unlike oil, which is an international commodity- its price being set by the worldwide supply and demand outlook; gas is a domestic or even regional commodity. Because of the high utilization of the total capacity (demand exceeding supply), any excess demand on the supply (weather, natural disaster) can cause 50 to 100% swings in natural gas prices (Figure 2, EIA, 2002). During the last three years we have seen significant swings in the US natural gas prices. According to CERA (2001), even a 1tcf drop (about three-week supply) in “working gas” can cause the domestic markets to go from being “flush” to being “short”. According to EIA (2002), the nation would need 35.1tcf of natural gas per year in year 2020 and the domestic production may grow to 30tcf by then. The remainder, 5.1tcf, would need to be imported, again primarily from Canada. Thus, in order to meet the EIA projections, the domestic production would need to grow by almost 60% and the imports from Canada would need to jump by 70%. According to Attanasi (2002), even if all the Lower 48 resources could be converted to reserves, there is not enough gas to meet the projections for domestic production. Also, it is not likely that Canada has enough resources to provide US with the additional supply, and meet its own growing needs. Thus, at a minimum, the US would have to produce all it can from Lr.-48 and produce a significant amount from Alaska.
The primary requirement for maintaining
and increasing the domestic production is access, suitable regulatory
and tax climate, and availability of capital, equipment, and human
resources. Unfortunately, the political and economic climate in the
country has not been conducive to providing an ideal environment. The
total capital requirements to increase the production to 30tcf is
estimated to be 1.5 trillion dollars; and it would require the drilling
of twice as many exploratory and development wells per year than were
drilled yearly in late 1990s (NPC, 1999). In reality, capital available
for
The
U. S. must develop
a national energy policy that provides dependable, affordable, and
uninterruptible energy for the public and commerce, and is based on a
sound Energy policy must be strategic and long-term, not “quick fixes” to short-term “crises”.
The importance of natural gas in the nation’s energy mix will continue to increase. Besides being a “clean-burning” fuel, our nation is also endowed with ample resources of natural gas. However, in order to utilize natural gas to its full potential in our economy, a national effort is required to make capital, rigs, personnel and technology available to meet the future requirements. Many gas-rich basins in the country are either completely or partially “off limits” to the industry. In order to meet the nation’s needs, a cooperative environment among industry, government agencies and the environmental community is required. American Association of Petroleum Geologists, 2002, Home Page of Division of Professional Affairs, DPA Energy Facts. (http://www,aapg,org/) Attanasi, E.D., 2002, North Slope Natural Gas: Potential Markets and Future Development (abstract): AAPG Pacific Section/SPE Western Region Conference, AAPG Bull., v. 86, no. 6, p. 1135. Cambridge Energy Research Associates, 2001, The North American Gas Industry: The Challenge of Growth, June 22, 2001 presentation at the IPAA’s Mid-year meeting. (http://www.ipaa.org/press/presentations.asp#Annual2001) Energy Information Administration, 2001, Presentation to the Committee on Resource Evaluation of AAPG, Dec. 10, 2001, Office of Oil and Gas, Reserves and Production Division. (also 2001 Energy Outlook and Projections to 2025 at http://www.eia.gov/) Mineral Management Service (MMS), 2000, Geological and Geophysical Studies- National Assessment: Outer Continental Shelf Petroleum Assessment. (http://www.mms.gov/revaldiv/Redpublications.htm) National Petroleum Council, 1999, Meeting the Challenges of the Nation’s Growing Natural Gas Demand, 3-vol. report. (http://www.npc.org/) United States Geological Survey, 1995, National Assessment of the United States Oil and Gas Resources, DDS-30, 35, and 36. (also http://energy.cr.usgs.gov/oilgas/noga/) United States Geological Survey, 1998, The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska, Open File Report 98-34 (2-disc set).
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Figure
1. Amounts in TCF (trillions of cubic feet) of natural gas resources,
reserves, and supply as reported by National Petroleum Council (1999).
Figure
2. Capacity utilization of natural gas production plotted against
twelve-month price volatility in recent years.
Figure
3. Mean technically recoverable volumes of oil and gas in United States
subject to complete or partial restrictions.
