To All:RAILROAD COMMISSION OF TEXAS
NEWS RELEASE December 17, 1999
TONY GARZA
Commissioner
REACHING TEXAS? FULL POTENTIAL: GARZA HIGHLIGHTS GAS STUDY?S FINDINGS, OPPORTUNITIES FOR NATURAL GAS PRODUCERS
AUSTIN ? Citing the latest report from the National Petroleum Council (NPC), Texas Railroad Commissioner Tony Garza sees an increasing opportunity for Texas producers to help meet the nation?s growing demand for natural gas.
The NPC report, ?Meeting the Challenges of the Nation?s Growing Natural Gas Demand,? recommends the development of a national strategy in order to meet an anticipated 29 TCF annual demand for natural gas by 2010.
?I?ve had the opportunity to review working drafts of the study and confer with National Petroleum Council members concerning their findings,? Garza said. ?The Council?s efforts appear to give the best commentary on the future of the natural gas market.?
The report was presented during the National Petroleum Council?s meeting on Wednesday in Washington, D.C. and will be delivered to the U.S. Department of Energy.
?While our nation?s natural gas resources are clearly adequate to meet demand for many more decades, reaching and producing this gas is growing more difficult. Texas would be well served in positioning itself as a leader in natural gas production. We should actively look for ways to encourage research, development and production of this increasingly important commodity,? Garza said.
A Summary of Conclusions and Recommendations from the National Petroleum Council Report follows this release or can be found on line at rrc.state.tx.us.
Highlights from the National Petroleum Council?s report include:
õ Demand will increase by 32% between 1998 and 2010. The study estimates an increase in demand from 22 TCF annually to 29 TCF by 2010 and to levels exceeding 31 TCF by 2015.
õ Almost 50% of the 7 TCF increase will come from electricity generation.
õ While there?s adequate supply to meet the increasing demand, the study emphasizes that reaching and producing the resource will become more difficult. The number of wells needed to meet the demand will also double from 24,000 to 48,000 by 2015.
õ The NPC calls for increasing research and technology development while also assessing the impact of environmental regulation on natural gas supply and demand.
?With over 57,000 producing gas wells, Texas is the largest producer of natural gas in the U.S. The increasing demands on these wells means we should look at programs and incentives that encourage,? Garza said.
To call attention to the opportunities and challenges that the projected demand will pose on natural gas producers, Garza also recently submitted testimony to the Public Utility Commission on rulemaking for Senate Bill 7, the state?s electric restructuring law.
Garza is Texas? 41st Railroad Commissioner. He serves as 2nd Vice Chairman of the Interstate Oil and Gas Compact Commission (IOGCC), a 37-state organization representing the governors of oil and gas producing states.
Prior to his election, Garza was a partner in the Austin office of Bracewell & Patterson, L.L.P. He also served as Texas? 99th Secretary of State and was a Senior Advisor to Governor George W. Bush.
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National Petroleum Council Report:
Meeting the Challenges of the Nation?s Growing Natural Gas Demand
SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS
(drawn from the Summary Report)
December 15, 1999
ú Natural Gas will continue to make an important contribution to the nation?s energy supply and its environmental goals. To reach the full potential for the use of natural gas, the Council recommends that a national strategy for developing natural gas supply be established at the highest level of the government. The Council also recommends that an interagency work group be established to work with the industry and other stakeholders to formulate the strategy, resolve issues, and help overcome the barriers to meeting future gas demand.
ú The critical factors that impact the industry?s ability to meet the anticipated demand are:
- Access to the resources and rights of way
- Continued technological advancements
- Financial requirements for developing new supply and infrastructure
- Availability of skilled workers
- Expansion of the U.S. drilling fleet
- Lead times for development
- Changing customer needs
ú Natural gas demand is projected in this study to grow from 22 TCF annually to 29 TCF by 2010 and could exceed 31 TCF in 2015. This growth will be driven primarily by growth in the economy and the increased reliance on natural gas for electricity generation. Almost 50% of the 7 TCF increase in demand will come from the electricity generation sector. Additional environmental regulations that favor natural gas usage could drive the demand even higher.
ú The natural gas resource base in North America is adequate to last for many decades. The estimate of the U.S. resource base has increased by 23% since the 1992 Study (from 1,295 TCF to 1,466 TCF, net of 124 TCF of production). However, reaching and producing the resource base is growing more difficult. New production will be from deeper wells, deeper water, and more nonconventional formations. The number of wells drilled each year would need to double (from 24,000 to 48,000) by 2015 in order to produce the needed volume of gas. Approximately 2,000 new rigs will be required in this time frame.
ú Access to the resource base and to the rights of way for infrastructure is a critical factor in meeting the growing demand. Two of the most promising regions for future natural gas supply, the Gulf of Mexico and the Rocky Mountain Region, are subject to significant access restrictions. Opening restricted areas to development could significantly increase U.S. production, particularly beyond 2010, and lower future natural gas prices. Most of the access restrictions are due to environmental concerns even though industry has made tremendous improvements in reducing the footprint of exploration, production, and transportation activities. The Council also recommends that government and industry work together to establish a balanced, long-term approach for responsibly developing the nation?s natural gas resource base.
ú To meet this demand, U.S. production is projected to grow from 19 TCF in 1998 to 25 TCF in 2010 and to approach 27 TCF in 2015. Deepwater Gulf of Mexico and the Rocky Mountain Region offer the highest potential for U.S. supply growth. Canadian imports are projected to grow from 3 TCF in 1998 to almost 4 TCF by 2010 and to 4.5 TCF in 2015.
ú The delivery infrastructure must continue to expand to serve the growing demand. Over 14 million new customers will be added to the delivery system by 2015 and many more will rely on electricity generated by natural gas. Meeting the requirements of the electricity generators on a significantly larger scale will entail significant changes in the delivery system, including changes in operational procedures, communications, tariffs, and contracting.
ú Almost $1.5 trillion (1998$) will be required to fund the industry through 2015. This amount includes over $700 billion for operating expenses and an estimated $781 billion for capital investments. This equates to an average annual increase in capital expenditures from $34 billion per year (1990-1998) to $46 billion per year (1999-2015).
ú Other recommendations for the industry and government include:
- Drive research and technology development at a rapid rate
- Plan for capital, infrastructure, and human resource needs
- Streamline processes that impact natural gas development
- Assess the impact of environmental regulation on natural gas supply and demand
- Design new services to meet changing customer needs
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