Report: U.S. gas reserves more than originally thought
fwbusinesspress.com
BY JOHN-LAURENT TRONCHE
June 29, 2009
A recent report suggests the United States’ natural gas reserves are about 39 percent more than originally estimated two years ago. That fact pleases some industry experts who say the report validates their claim that there is enough natural gas to supply a huge increase in demand, but that demand needs to come soon to help prices rebound.
The Potential Gas Committee issued a report June 18 indicating the United States has a total resource base of 1,836 trillion cubic feet of natural gas, about 515 Tcf more than the organization’s 2006 estimates of 1,320.9 Tcf of total potential resources.
The massive increase in just two years comes not from a sudden manifestation of new gas, but rather a reevaluation of shale gas plays in the Appalachian Basin and elsewhere, according to the report. New plays such as the Marcellus and Haynesville shales – whose true sizes were unknown years ago – have changed the landscape of natural gas in the U.S.
“Our knowledge of the geological endowment of technically recoverable gas continues to improve with each assessment,” said John B. Curtis, a professor of geology and geological engineering at the Colorado School of Mines and director of the Potential Gas Agency at the school, which guides and assists the Potential Gas Committee. “Furthermore, new and advanced exploration, well drilling and completion technologies are allowing us increasingly better access to domestic gas resources – especially ‘unconventional’
gas – which, not all that long ago, were considered impractical or uneconomical to pursue.
“Consequently,” he added, “our present assessment demonstrates an exceptionally strong and optimistic gas supply picture for the nation.”
The Gulf Coast remains the nation’s “richest resource area,” according to the report. But the largest increases in the assessment came from shale gas plays in the Appalachian, Arkoma and Fort Worth basins, among others.
The report states that shale gas is growing in importance due to the fact that of the total potential resources, shale gas accounts for 616 Tcf, or 33 percent.
The report is good news for the industry and current and potential users of natural gas, said Ed Ireland, director of the Barnett Shale Energy Education Council.
“The good news is that it should provide confidence to natural gas users that the supply is going to be there and I think that’s very important,” he said. “For an electricity producing plant to make the decision to burn natural gas instead of coal, they’ve got to know the supply will be there. In the past companies have built coal-fired because they felt like there was enough coal to justify it and that’s true. Natural gas they saw as a declining resource and they weren’t confident to build a natural gas-fired plant.”
The report also helps the industry by making natural gas more marketable, he said.
“If you look at the demand for natural gas, it comes from feedstock uses, home heating and electricity production. Feedstock and home heating grow slowly, related to population growth,” Ireland said. But the Potential Gas Committee’s reassessment also could persuade the transportation industry of the fuel’s potential.
Energy industry veteran T. Boone Pickens, a proponent of natural gas as a transportation fuel, said the report “substantiates what I’ve been saying for years: there’s plenty of natural gas in the U.S.”
“Legislation like H.R. 1835 – The NAT GAS Act – provides the incentives and long-term stability to make the move from imported oil, diesel and gasoline to domestic natural gas, enabling major corporations, municipalities operating fleets, and individual owner-operators the option to
buy American at the pump,” Pickens said in a statement.
He also said the 2,074 Tcf of future supply cited in the study is the equivalent of almost 350 billion barrels of oil, “about the same as Saudi Arabia’s oil reserves.”
Although many industry experts agree the report is good news, they also say demand must increase for those potential reserves to become actual supply.
“In order for these shale resources to be produced the price is going to have to be higher because the cost of producing shale gas is higher,” Ireland said. “There needs to be more demand in the future. The demand needs to increase faster than it has in the past for these shales to be produced.”
Quicksilver Resources Inc.’s Rick Buterbaugh agrees.
“You certainly need an up-tick in demand through a combination of economic conditions and power usage,” said Buterbaugh, vice president of investor relations and corporate planning for the Fort Worth-based exploration and production company. “As far as just any slight increase to electricity generation through natural gas, [that] will have a significant impact on demand for the product.”
Natural gas continues to trade at uneconomic prices, and futures continue to drop as weak demand pushes U.S. supply to record highs. Natural gas traded at $3.80 per million British thermal units at time of publication.
Natural gas between $5 and $6 tends to be regarded as a break-even range for natural gas producers. Shales become increasingly uneconomical at gas of less than $5, while prices at more than $7 are preferred for growth. |
