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U.S. Gas Production: Can We Trust the Projections?

Government (EIA) forecasts suffer in credibility when compared with geologic assessments.
Fortnightly Magazine - August 2001

p.107). However, other forecasters do not specify the gas sources, making it difficult to compare with the EIA data. Will other gas sources offset a possible shortfall in production of conventional onshore lower 48 gas?

According to EIA's documentation, the gas production forecast from unconventional sources - tight sandstone reservoirs, shales, and coal beds - depends on development of new technology that increases well productivity and reduces overall costs of unconventional gas development. However, if the new technologies are not ready or fail to materialize, production is expected to be 4.9 Tcf/yr in 2020, rather than the projected 8.4 Tcf/yr. (Krusskraa, 2001).

Gas from U.S. offshore fields is now produced almost exclusively in the Gulf of Mexico. New deepwater discoveries have prompted a reassessment of the undiscovered resource in the Gulf. 5 However, major new gas fields must be discovered to meet the EIA 6 offshore production forecast (see Figure 3). Otherwise, gas production from the Gulf, including deepwater areas is likely to begin its decline before 2010 (Nehring, 2001).

The Alaska North Slope is offered as an area containing significant new sources of gas, but potential deliverability is limited. Marketing the already identified 35 Tcf of Alaska North Slope gas requires construction of a new pipeline from the North Slope to connect into Canada's gas pipeline network. The largest pipeline under discussion, however, delivers gas at only 1.5 Tcf gas per year (4 billion cubic feet per day).

The EIA base case gas production forecast for 2020 is implausible. If forecast levels are not likely to be realized, decisions based on forecasts must be modified. Concern for adequate gas supplies should be broadened to include all of North America, as gas suppliers will initially try increasing imports to make up for shortfalls in U.S. production. Imports of liquefied gas (LNG) also have limited deliverability. If existing U.S. LNG receiving terminals are all re-commissioned and expanded to maximum capacity, they could accommodate only 1.3 Tcf gas per year.

Policy Implications: Rethinking Fuel Supplies

Policies encouraging gas use as a base load fuel for power generation should be rethought. In the past, gas powered generators were typically serviced on an interruptible basis so that residential heating customers received priority service. However, base load plants cannot be supplied with gas on an interruptible basis without leading to electricity blackouts or brownouts. Furthermore, deregulation allows power plants and other industrial customers to contract directly with gas suppliers, bypassing the local distribution companies (LDCs), so the LDCs have no authority to curtail gas deliveries to industrial users in favor of their residential customers. Gas-fired plants currently account for more than 90 percent of the capacity of new power plants scheduled for construction, so the consequences of a gas production shortfall could be costly.

Decision-makers might be better informed if EIA presented forecasts as scenarios, with full documentation provided for each of the scenarios. Less emphasis might be attached to a 'base case.' Scenario analysis should encompass a broad range of extreme but plausible boundary conditions, so that the decision-maker could develop contingency strategies if such conditions