LNG terminal plans proliferate in Baja California, EcoAmericas [April 2002]
"... [O]ur gas-related drilling boom ... was real and ... came to an end last August  when gas prices collapsed. By the bottom of its collapse, gas drilling had fallen by 45%. Most gas analysts and many industry executives think that gas supplies will fall by 2% to 4% this year, even though gas drilling fell by 45%. They are making the classic mistake of ... misunderstanding depletion, which caused the supply flatness in the first place, despite a drilling boom.International Workshop on Oil Depletion, Uppsala, Sweden by Matthew R. Simmons, Simmons & Company International [May 23, 2002]
Methane Madness: A Natural Gas Primer. "In 2000 the wellhead price of natural gas skyrocketed 400%. This was the sharpest energy price increase the nation had ever seen, outdoing even the oil spikes of the 1970s. The price hikes hit hard, hammering homeowners, business, and industry, contributing to rolling blackouts in California, weighing on the stock market, and unleashing a frenzy of new drilling. It was, one expert wrote, a "train wreck." So what comes next?
Natural Gas industry organizations and governments project unfettered production growth into the foreseeable future. Even a few technology gurus at MIT seem to be mesmerized by the reports: "There may be enough natural gas on earth to meet our energy needs for thousands of years. The trick is to ferry it across continents without blowing up." Can this optimism be substantiated by the reality of market trends and available geological data? Here you can view projections by GRI (now GTI) that might persuade us to think that we have nothing to worry about.
Here are some of GRI's projections, a short lesson in the "Law" of Supply and Demand [Click on images for detailed views]
Merchant electrical generators are building or proposing gas-fired power plants that will only create ever greater dependency on a dwindling resource. There are presently more than 200 power plants scheduled to come on-line in the US, most of them are fueled by natural gas (Oil & Gas Journal, p. 70, Feb. 12, 2001) (for example, the controversial 600 mw plant proposed on Metcalf Road in Silicon Valley.)
Read more details from GRI's Baseline on Natural Gas and the role of natural gas in the California Energy Crisis. Did the price of natural gas in late 2000 and early 2001 have anything to do with the price of electricity in California?
In a story dated August 07, 2001, Associated Press business writer Brad Foss noted that "Last year there were 16,000 new gas wells drilled, up nearly 60 percent from 10,400 drilled in 1999. But output only rose about 2 percent over the same period, according to estimates from the Energy Department. The industry is on pace to add 24,000 wells by the end of the year, with only a marginal uptick expected in production."
In June 1999, Oil & Gas Journal described how the Texas gas industry, which produces one-third of the nation's gas, had to drill 6,400 new wells that year to keep production from plummeting. Just the previous year, only 4,000 wells had to be drilled to keep production steady.
More about Natural Gas
EIA’s Natural Gas Outlook Through 2025 by Guy F. Caruso, Administrator, Energy Information Administration, Oil & Money 2003, London, Enland [November 5, 2003]
Behind the Blackout from ASPO Newsletter #34, story 254 [October 2003]
FTW: What's the most important thing you want the American people to know about Black Thursday?
Natural Gas: “Magic Pudding” or Depleting Resource [November 2002]
This paper elaborates on the serious oil shortages Australia faces and the limited scope for natural gas based fuels to substitute for petrol and diesel in the context of an approaching world decline in oil production.
Canadian Gas, Our Ace in the Hole?. "In the United States the demand for natural gas is projected to rise substantially in the coming years, as it is the environmentally preferred fossil fuel and therefore the fossil fuel of choice for new electric power plants... If lower-48 State proved gas reserves are reported to the Department of Energy with reasonable accuracy, ... it will not be possible to increase domestic gas production sufficiently to meet projected additional demand, especially with the addition of the new gas fired power plants...." by Joseph P. Riva [April 2002]
North American Conventional Gas Supply Shortfall Seen "Conventional natural gas supplies will not be enough to meet the North American market's demand for gas over the next decade...." [April 26, 2002]
"30 TCF By 2010? Can North America Meet Its Gas Requirement?" The Energy Forum, New York, Matthew R. Simmons [April 3, 2001]
North American gas production flat, despite drilling boom -- El Paso Corp's CEO. [March 26, 2001]
The first LNG Terminal to be built in 20 years. "...[T]he North Carolina Council of State authorized the North Carolina Ports Authority to enter into an agreement with El Paso Merchant Energy Company of Houston, Texas to construct a liquefied natural gas (LNG) terminal, storage tank facility, re-gasification plant, and pipeline on tiny Radio Island between Beaufort and Morehead City." If the USA had sufficient domestic natural gas to meet its needs, these companies wouldn't be taking such risks. [March 6, 2001]
US Natural Gas Supply Update by Jean Laherrere [February 12, 2001]
Natural-Gas Producers Report a Continuing Decline in Output. "About 20 large natural-gas producers, accounting for close to 40% of domestic production, have so far reported fourth-quarter results. The result: Natural-gas production in the quarter was down 0.8% from the third quarter and off 3.7% from the fourth quarter of 1999, according to figures compiled by Lehman Brothers. Analysts, surprised by the trend, say gas production will need to start growing for prices to return to more traditional levels." Wall Street Journal (subscription required) [2001.01.31]
Gulf of Mexico: Reservoir temperatures, low thermal gradient limit US Gulf's deepwater gas potential. Recent discussions on the future of the US energy economy have been dominated by a single vision - the increase in non-transportation energy demand to be supplied by natural gas. In no end-use sector is this pattern more pronounced than electrical generation. Nearly all (95-98%) of US generating capacity anticipated to be installed by 2010 is projected to be fired by natural gas. [by Richard Nehring January 2001]
Natural Gas in the US: How Far Can Technology Stretch the Resource Base? "We review the theoretical underpinnings of the exponential model, the amount of gas discovered per unit effort, a quantity called yield-per-effort (YPE), and estimate an econometric model that represents the historical determinants of the YPE for nonassociated gas discoveries in the lower 48 states from 1943 to 1991, the entire period for which the requisite data are available." [Cutler J. Cleveland and Robert Kaufmann, Center for Energy & Environmental Studies, Boston University, 2000]
Canadian Gas Supply: Going Up? Or Down? While Canada contains significant natural gas resources, gas supply over the near term will rely heavily on the exploitation of the conventional potential of the Western Canada Sedimentary Basin (WCSB) and the Sable Sub-Basin on the Canadian east coast. There are clear trends suggesting that the gas market is moving from a supply/demand balance controlled by demand to one controlled by supply. Consumption of WCSB gas has been greater than reserve additions for all but one of the last sixteen years. Of necessity, consumption cannot grow (or even be maintained) indefinitely under such a regime. This paper argues that the cessation of ever increasing production from the WCSB is imminent and that a more aggressive approach to exploration and development in the WCSB (particularly in the deeper and more environmentally sensitive areas) together with the exploitation of conventional gas in frontier areas and unconventional resources will be necessary to arrest the projected supply declines. [R.H. Woronuk, GasEnergy Strategies Inc.]
If the U.S. shuts the door on Canadian timber, Canadian officials say they could shut off the natural gas supply. [Sunday, March 18, 2001 by Michael Milstein, The Oregonian]
Natural Gas StatisticsA study of natural gas consumption and reserves was recently made by Dr. Colin Campbell and Jean Laherrere. Their basic data are as follows:
Substituting Natural Gas for OilIf energy consumption were to continue at its present pace and natural gas were to replace oil completely in order to maintain the current level of oil consumption (23 Gb), and if the current consumption of natural gas were to continue unabated (14 Gboe), then global natural gas supplies would be exhausted in 35 years:
If the combined consumption of oil and natural gas were to be reduced to the present level of oil consumption, then natural gas could continue for:
While reserves:production ratios are highly misleading, and these assumptions grossly oversimplify the likely real situation, this calculation gives one an appreciation for the limited time that humanity can postpone the inevitable by substituting natural gas for oil.
Natural gas comes from plant life grown on terra firma, not from the marine algae which has given the world its oil. It is more widely found in nature than is oil, but being a smaller molecule is more mobile, which means it escapes easier from traps, which means that it needs better seals, namely salt or permafrost. When it leaks from a trap it may escape to the atmosphere or it may accumulate somewhere else. Furthermore oil both in source-rock and trap can be cracked to gas with deep burial. Gas contains dissolved liquids which condense at the surface or can be extracted by processing, buth called Natural Gas Liquids. In the USA the factor is 0.014 b/kcf whereas the world average is 0.013 b/kcf.
There is also the issue of how to equate gas with oil. By economic value, 10 Mcf = 1 b oil equivalent. By calories, about 5.5 Mcf = 1 boe.
The available statistics on natural gas are far worse even than for oil. Virtually all the natural gas used to date has been "conventional" gas, which was found in conjunction with oil. Much if not most of the new gas involves "non-conventional" gas, and this has sometimes been found through recent exploration in areas in which oil does not or cannot exist, and sometimes it is presumed to exist in areas which may well be promising but which have not as yet been explored. There is the issue of flaring and reinjection (some of which may be recovered later). There is also the problem of defining reserves, which have to be economic. Furthermore, there are huge deposits around the world which are not economic by virtue of their remote location, so they don't qualify and can be called potential reserves (another vague term).
The two largest resources not yet in production are in the Sahara and Niger Delta. It can be supposed that gas pipelines will be built soon from the Middle East to Europe and the Indian subcontinent, so that production will rise in steps as the linkages are made. If one assumes a 1% increase over the next 5 years followed by a 4% increase thereafter as oil becomes expensive, the midpoint of depletion (more or less the gas "Hubbert Peak") would come around 2018 at about 120 Tcf/annum.
Non-conventional gas is important, although so far it has only been developed in North America.
Three out of four natural gas wells in the USA are drilled specifically for gas. USA reserves are supposed to be about 330 Tcf rising to 500 with better technology. Production could rise to about 5.5 Tcf/a by 2010. It comprises:
Political / Economic Issues
The high mobility of gas gives rise to so called "gas bubbles" when the market is flooded. The USA is consuming its endowment of conventional natural gas and Europe has privatized the gas business which will have the same consequence. Europe can import from the huge reserves of the FSU, and eventually the Middle East and Africa, even Nigeria. But the USA can't: so it will hit the wall sooner. On the other hand, the USA seems well endowed with non-conventional and is more advanced in developing it than anywhere else (the most advanced being coalbed methane), so it offers a future -- at least at a price.
Gas reserves are much more difficult to assess than oil, and much more susceptible to economic factors, the most important of which is transport (pipelines/LNG). The USA is more depleted than anywhere else.
Any proposal to use natural gas as the primary substitute for oil in the transportation sector represents at best a temporary solution, and at worst a distraction of human industrial resources (consuming time and capital, while oil and gas remain economic, to produce a fleet which will then soon become obsolete, rather than using the remaining economic reserves to create a lasting solution), as well as a waste of natural resources of great potential value to future generations.
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