[BETA] Fortnightly

 

There will be ample U.S. natural gas supplies to support a 30 Tcf market by 2010.

Recently, we have had a great deal of positive information about the outlook for ample U.S. natural gas supplies to support a much more aggressive marketing effort and greater reliance on natural gas in energy and environmental policy decisions. As shown in Table 1, which updates a similar Table I published in the Nov. 15, 2000 issue of ¹, 2000 was a banner year in natural gas reserve replacements, and 2001 promises to be equally good.

The Energy Information Administration (EIA) requires a great deal of lead-time to collect the data for its annual report on "U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves." The report for 2000 became available in March 2002, although it has a publication date of December 2001. ² I have made my usual calculations from these and other more recent EIA data ³ and, as can be seen, 2000 probably set a record with 131 percent of natural gas reserve replacement. If a new category in the EIA 2000 annual report "Net of Sales and Acquisitions" is added, the reserve replacement increases to 152 percent. A substantial uptick should have been anticipated because the average active gas rig count for 2000 was 720, by far the highest since 1990. Gas well completions of 15,600 in 2000 were the highest since 1984. However, it must be noted that there is no direct correlation between these measures of drilling activity and reserve replacement. As shown in Table 1, since 1990 annual gas wells completed per rig have varied from 20.0 to 27.5, and total additions per well from 1.4 to 2.3 billion cubic feet (Bcf).

An important question is what this portends for 2001 when the active rig count was an astounding 939-roughly double the 1990/2000 average. The number of gas wells drilled was an equally astounding 21,200, the highest since the EIA began to report these data in 1973. ³ The previous record was 20,200 in 1981.This high level of drilling activity in 2000 and 2001 was in response to the fly-up in composite spot natural gas wellhead prices beginning in the spring of 2000 from their annual average 1990-1999 level of $1.40-2.40/million Btu to nearly $9.00 in January 2001. ⁴ The unusually high prices did not abate until mid-2001. ⁴ Henry Hub (NYMEX) prices used to be about 20 cents/MMBtu higher than composite wellhead prices, but have veered from that somewhat during the turbulent gas market of the past two years. Even at the lowest total additions/well since 1990 of 1.4 Bcf, 21,200 gas well completions would still generate a prediction of nearly 30 trillion cubic feet for 2001, or a reserve replacement of about 150 percent.

The longer-term outlook is equally positive. U.S. proved reserves of dry natural gas increased from 167 Tcf in 1999 to 177 Tcf in 2000,2 and promise to increase again in 2001. Moreover, the most recent (1/1/98) estimates of the remaining U.S. lower 48 natural gas resource base using a 2015