U.S. Natural Gas Resource Base Grows, Keeping Prices Low

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Despite 44 trillion cubic feet (Tcf) of production over the past two years, the U.S. natural gas resource base continues to grow substantially, according to a report last week from the Potential Gas Committee (PGC) (Golden, Colorado), a gas industry organization affiliated with the Colorado School of Mines.

Unlike oil prices, natural gas prices have been stable and low, and are expected to remain that way until at least the end of next year, added Christopher McGill, managing director for policy analysis at the American Gas Association (AGA) (Washington, D.C.). McGill and Dr. John B. Curtis of the PGC spoke at a Washington, D.C., press conference on April 27.

The PGC estimates that U.S. natural gas resources totaled 1,898 Tcf at the end of 2010, a 61.4-Tcf increase over yearend 2008 estimates. The organization estimates U.S. gas resources every other year. The increase from 2008 levels was 3.3%.

"Our knowledge of the geological endowment of technically recoverable gas continues to improve with each assessment," said Curtis, a professor of geology and geological engineering at the Colorado School of Mines. Curtis also is director of the Potential Gas Agency, which provides guidance and technical assistance to the PGC. "Furthermore, new and advanced exploration, well drilling, completion and stimulation 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."

The PGC's yearend 2010 assessment reaffirms the view that "abundant, recoverable natural gas resources exist within our borders, both onshore and offshore, and in all types of reservoirs--from conventional, 'tight' formations and shales, to coals," continued Curtis.

The yearend 2010 estimate included 1,739 Tcf of gas resources in "traditional" reservoirs--conventional, shale, tight formations and carbonates--as well as 159 Tcf of coal bed methane reservoirs. Since the PGC's assessment of yearend 2008 resources, sharp gains in "conventional" resources have been somewhat offset by a decline in estimated coal bed methane resources. Both coal-bed and conventional categories of gas resources include "probable" resources (from proven fields), "possible" resources (from new fields) and "speculative" resources (defined as on the frontier).

The PGC's estimate continued to show an increase in shale gas resources, although the increase from 2008 to 2010 was not nearly as dramatic as the jump from the 2006 to the 2008 reports. Estimated of shale gas tripled from 2006 to 2008, but in the most recent PGC estimate, shale gas resources rose about 11%, to 686.6 Tcf. Prior to 2006, the PGC assessed, but did not break out separately, its estimates of shale gas resources.

Click on the image at right to see the PGC's estimate of U.S. shale gas resources from 2006 to 2010.

The Gulf Coast contains about 29% of the U.S. natural gas resources, according to the PGC report, followed by the Atlantic and Rocky Mountain regions (both 20%) and the Mid-Continent area (16%).

Click on the image at left to see the regional distribution of U.S. gas resources assessed by the PGC.

The PGC's assessment assumes neither a time schedule nor a specific market price for the discovery and production of future gas supply, cautioned Curtis. "Assessments of the Potential Gas Committee are 'baseline estimates' in that they attempt to provide a reasonable appraisal of what we consider to be the 'technically recoverable' gas resource potential of the United States," he said.

At the Washington press conference, Curtis and AGA's McGill also noted that the U.S. has at least 273 Tcf of proven dry-gas reserves, according to the most recent estimate from the U.S. Energy Information Administration (EIA) (Washington, D.C.), the statistical and analytic branch of the U.S. Department of Energy (DoE). EIA's estimates of proven dry-gas reserves have risen annually in recent years. The EIA estimate was for yearend 2009.

Click the icon at right to see EIA's estimate of proven dry-gas reserves.

In contrast to oil prices, natural gas prices have remained low and are expected to stay low, in large part because of technological advances that have made it easier and cheaper to locate and extract gas, McGill said.

Click on the images at left to see recent prices for oil and natural gas, and a projection of natural gas prices through yearend 2012 according to natural gas futures contracts on the New York Mercantile Exchange (NYMEX).

AGA's McGill cited EIA projections that shale gas could account for 45% of U.S. gas supply by 2035, up from 14% in 2009. Increasing production from shale gas reservoirs could virtually eliminate gas imports, which accounted for 11% of all gas consumption in 2009, according to EIA.

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