Secretary of Energy Spencer Abraham on Friday called for a special June meeting of his advisory oil and gas group, the National Petroleum Council (NPC), to focus on natural gas storage and the “looming challenges” facing the United States.

“As you well know, our current stocks of natural gas in underground storage are unusually low due to a combination of cold weather in the Northeast and Mid-Atlantic regions this past winter, and declines in both domestic production and net imports,” he told delegates at the 111th NPC meeting in Washington, DC. “We had 696 Bcf of gas in storage at the end of March, the lowest level since 1976, when the Energy Information Agency began keeping records. By the week of April 11, levels had dropped to 623 Bcf.”

Since that time, Abraham noted that storage had increased, “but it is still only half the level of a year ago, and 42% below the previous five-year average.” He said to reach the “desired storage level of 3 to 3.5 Tcf of natural gas by the end of October, we must inject much more into storage than the usual weekly average of 60 Bcf.”

Industry, said Abraham, has responded to these “worrisome numbers” by increasing injection rates during the relatively low-demand spring season. Injections increased to 72 Bcf for the most recent week on record, he said. However, injection rates are typically lower in mid-summer when power generation demand is strong. A hot summer would put additional pressure on the system to deliver to power generators and injection rates likely would fall even lower. “And we already know that increased depletion rates and less productive new drilling have led to a projected 2% decrease in supply this year.”

The NPC, an 175-member oil and natural gas advisory committee to the Secretary, currently is nearing completion on a new natural gas study, which is scheduled for release by the fourth quarter. Abraham had asked for the study in March 2002, and NPC voted to begin the new study a month later (see Daily GPI, April 11, 2002).

Abraham said the new study addresses resources for capital investment, the role of technology, access to the nation’s resource base, new sources of supply from Alaska and Canada, liquefied natural gas imports and the long-term potential of unconventional resources such as methane gas hydrates.

However, he warned, “we cannot wait until the late fall to take action on the more immediate problems we face.” He said the special June meeting would be structured to “gather information, discuss problems and solutions, and identify those actions” to take immediately to ease short-term gas supply constraints. Ideas and suggestions that emerge from the meeting could be implemented during the critical summer period, he said. Other initiatives would be implemented once the new study is released.

The purpose of the NPC is solely to represent the views of the oil and natural gas industries in advising, informing, and making recommendations to the Secretary, with respect to any matter relating to oil and natural gas, or to the oil and gas industries submitted to it or approved by the Secretary. The NPC does not concern itself with trade practices, nor does it engage in any of the usual trade association activities. It is chaired this year by recently resigned El Paso Corp. CEO William Wise; the incoming chair is Bobby Shackouls, CEO of Burlington Resources Corp. Shackouls will preside over the June meeting, Abraham said.

In its last report to focus on natural gas, submitted to the Energy Secretary in 1999, the council concluded that natural gas demand had the potential to increase to 29 Tcf per year in 2010 and could increase beyond 31 Tcf in 2015. The council also concluded that the resource base exists to support these increases in future demand and that adequate gas supplies can potentially be produced to meet that demand.

However, the 1999 report also recognized that the industry faced “significant challenges that accompany such vigorous market growth,” and would “require strenuous effort by the industry and substantial support on key issues by the government.” It recommended that a natural gas strategy be established at a national level, with an interagency work group on natural gas formed to address the issues associated with meeting the increasing demand.

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