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The natural gas resource base in North America is vast and diverse. This statement, while simple, is actually poorly understood and often misinterpreted when quantified. Estimates of the natural gas resource
base made at one time are often a better measure of how the resource base has changed over time than an absolute value. Clearly, the North American resource base is capable of sustaining consumption well into the 21st century and beyond.
Virtually all of the natural gas consumed in the United States in produced in North America. Most (87 percent) is produced in the United States. Canada provides most of the remainder (about 97 percent of U.S. imports, or about 3Tcf in 1998). Mexico's large natural gas resource base and its high production capability make it a potential gas supply source. This diversity, both in terms of the supply source and geographic distribution, adds strength to the flexible, economic and reliable nature of natural gas in today's energy mix.
Note: All Tcf have been converted to quads to ease comparison
Although the gas resource base is often characterized as "finite," estimates of its size continue to grow. Because experts' ability to evaluate and measure the gas resource base is imprecise, characterization of this resource base as "finite" can be misleading. As the tools and technologies used in the evaluation process improve, resource base estimates of virtually all estimators have increased over time. For example, at year-end 1998, the Potential Gas Committee (PGC) estimated the United States' future supply of natural gas at 1,241 quads, which is more than 60 years of supply at current domestic production rates. However, PGC has made detailed resource evaluations every two years for more than 30 years based on the input of hundreds of petroleum geologists and engineers. Curiously, its 1998 estimate exceeds its 1990 estimate (1,207 quads) by 34 quads even though more than 149 quads was produced from the total resource base over that timeframe. In other words, the future supply estimate for 1998 was more than 15 percent larger than the estimate made in 1990 even though significant production had occurred.
PGC is not alone in expanding its estimate of the gas resource base. The National Petroleum Council released a major report in December 1999 with heavy involvement by natural gas producers, pipelines, distribution companies and the federal government. The report notes that in comparison with its 1992 study, "Taking into account the 124 Tcf [128 quads] that has been produced in the lower 48 states since then, the estimate of the resource base has increased 23 percent since the last study. The increase is largely due to technology breakthroughs that have opened new frontiers such as the Deepwater Gulf of Mexico and have provided improved information and better tools for evaluating — and more fully recovering — resources."
The accelerated projection requires 20 percent more gas than does the current projection, most of which can be supplied through expanded domestic production. Total consumption in the accelerated scenario is projected to reach 35 quads by 2020 compared with 29 quads under the current projection. Of the 35 quad total, 29.5-or 84 percent-is supplied through domestic U.S. production. This share is little different than that of today's 85 percent.
Domestic natural gas production has grown 23 percent from the demand-constrained level of 16.1 quads in 1986 to more than 19.8 quads in 1997. A significant portion of that new production is accounted for by resource environments not even on the production radar screen in the 1980s, such as deepwater (water depths greater than 1,000 feet) in the Gulf of Mexico. These new production trends, which include incremental additions from coalbed methane as well as deeper onshore production in traditional producing areas like the Rocky Mountains, are highly dependent on continued advances in drilling and production technologies and are expected to gain productivity momentum during the study period.
Sustaining growth in annual natural gas reserve additions to meet the growing appetite for clean fuels is an economic challenge as well as a technology challenge for the 21st century. Continued growth in natural gas reserves will likely occur as existing deepwater discoveries further develop and the information regarding the nature of those reservoirs is refined. In fact, it is likely that entirely new deepwater fields will be discovered and brought online within the study period. Extending resource life in existing fields both onshore and in the shallow water environments of the Gulf of Mexico also will present technological challenges but, based on recent resource enhancement history, are attainable.
Canada will remain the primary source of imported natural gas. Production of natural gas in Canada is currently just under 6.2 quads annually, about half of which is exported to the United States. With a resource base estimated at more than 618 quads, the Canadian resource life index is more than 100 years at current production levels.
Under the accelerated scenario, imports from Canada are projected to increase from about 3.1 quads annually in 1998 to approximately 5.2 quads by 2020. Thus, the share of the overall U.S. supply mix attributable to Canada increases slightly-from roughly 13 percent of the total to 16 percent.
To meet the required levels of production necessary to satisfy demand growth in both Canada and the United States, the Canadian producing community will face challenges similar to those faced by U.S. producers. Technological advances will be needed to complete drilling projects in hostile environments, rig activity will need to increase, and exploration initiatives in frontier as well as established areas must gain momentum.
Liquefied natural gas will play an increasing, yet still modest, role. LNG is a significant factor in the world energy market. Natural gas in Africa, the Middle East, Australia, Indonesia and the United States is liquefied, transported by ship, re-gasified and distributed in Pacific Rim countries, Europe and the United States. Currently, there are four major LNG import facilities in the United States, operating well below capacity.
While the high levels of LNG imports projected by energy forecasters in the 1970s have not materialized, this does not reflect failed LNG technology or economics. Rather, it is a testament to the strength of the U.S. supply response to the removal of artificially low regulated prices.
The accelerated projection assumes the full operation of all existing U.S. terminals, but no construction of new facilities. Existing facilities account for roughly 1 quad of gas supply in 2020.
Alaskan natural gas, including more than 35 Tcf of previously discovered gas resources and vastly more potential, offers additional supply insurance to the lower 48 states. Alaskan natural gas, similar to foreign LNG, offers major gas supply potential but remains largely untapped due to an inability to compete with lower 48 and Canadian supplies. The economics of transporting a portion of those supplies southward are changing, however, as the natural gas infrastructure from Canada grows toward Alaska. Alaska currently exports about .07 quads annually in the form of LNG to Pacific Rim nations and consumes more than .46 quads annually. Additional resource potential exists onshore and offshore in Alaska, including a speculative but significant undeveloped potential from coalbed methane.
"New sources" of supply such as coalbed methane are contributing to the gas mix today while methane hydrates and other options offer promise for tomorrow. Vast quantities of methane gas are locked in coal seams, but this gas was not economically recoverable until recently. In fact, coalbed methane was not even included in PGC's resource base assessments before 1988. However, we have now discovered ways to efficiently access this gas, and 6 percent of U.S. gas production now comes from coalbed methane. Methane hydrates is another potentially huge resource that is not currently economically recoverable (see "Getting Methane Out of Bed").
Meeting the demand level of the accelerated projection will require a continuation of the invention and innovation experienced by the industry in recent years. Although significant advances in exploration and production technology will be required to meet the demand levels of the accelerated projection, these advances should be viewed as a continuation of the current trend. Recent advances in computer technology have yielded breakthroughs in data processing, integration and imaging, which in turn have vastly improved reservoir modeling.
Advances in drilling technology have been equally impressive. Wells are routinely drilled today to depths of more than 17,000 feet-depths considered radical in 1980. Drilling in 600 feet of water was "routine" in 1980. Today, a depth of 2,000 feet is not unusual. Further, while vertical was the only direction to drill 20 years ago, horizontal drilling is now commonplace and effective.
Continued advances will be required as resource exploration and development onshore in deeper geologic zones under extreme temperature and pressure conditions are mirrored in hostile deepwater environments offshore. Innovations in the design, materials and fabrication of these systems will be required to ensure adequate future natural gas supplies. If the development in the past 30 years of petroleum exploration and development in North America are any indication, the industry will continue to create innovative technology developments for oil and gas extraction.
Note: All Tcf have been converted to quads to ease comparisons.
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Getting Methane Out Of Bed
Coalbed methane offers a perfect illustration of how technological advances can dramatically alter the size of the natural gas resource base.
Methane, the chief component of natural gas, adheres to the inner surface of coal. For years, coal-mine operators have "produced" methane-not as fuel but to get rid of it because it poses a safety problem in the mines. While the methane in coal beds was recognized as a possible source of gas supply, it could not be recovered and added to the nation's natural gas supply using existing technologies. So coalbed methane was classified as an "unconventional" source of gas supply.
Then, technological improvements in the early 1980s made recovery of the nation's vast quantities of coalbed methane possible. Within a few years, coalbed methane was removed from the "unconventional" category and reclassified as a mainstream source of gas supply by the energy experts who tabulate the size of the nation's gas resource base. Today, coalbed methane makes up 6 percent of U.S. gas production.
In the future, this same story may be repeated for methane hydrates, which consist of methane molecules, water and small amounts of other gases in a crystalline ice-like substance. The hydrates are found in permafrost areas and in ocean sediments when certain pressure and temperature conditions are present. Worldwide, methane hydrates offer a potential gas resource that is estimated at millions of Tcf/quads. The technological hurdles associated with extracting methane from hydrates are now being investigated.
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