A veteran natural gas reserve and production expert has issued abearish warning to natural gas market observers: 1998 total reserveadditions could jump as much as 3 Tcf from 1997’s figure to between22 and 23 Tcf. That would be well above the range of 14.9 to 20.2Tcf over the last nine years. With 1998 production estimated atabout 19 Tcf the forecast adds up to reserve additions exceedingproduction by 116% to 121%.

Henry R. Linden, former head of the Gas Research Institute andcurrently director of the Energy & Power Center at IllinoisInstitute of Technology, said he realizes “such a prediction isrisky so close to the release of official data by the EnergyInformation Administration.” EIA’s annual report, usually publishedin September, now appears headed for release in early November.

Linden bases his calculations on active gas rigs, gas rigproductivity and gas well completions. “The average active gas rigcount in 1998 was 560 — only four less than the count in 1997when we replaced 104% of reserves. The reason is that the drillingslump hit U.S. gas exploration and development activity relativelylate in 1998, in contrast with the collapse in oil drillingactivity.” While working oil rigs went from 380 to 155 by the endof 1998, the count of gas rigs in service remained high, between549 and 609 through September, and dropped only to 491 by the endof 1998.

“Unlike the oil rig count, it has now fully recovered to closeto 600 according to Baker Hughes, Inc.,” Linden said. “In addition,gas rig productivity remained at a relatively high 21.6 wells/rigin 1998 and the number of gas well completions was 12,106 — thehighest since 1985.”

Multiplying completions by the 1.9 Bcf of average additions perwell between 1990 and 1997 results in about 23 Tcf. With per welladditions at the 1997 level of 1.8 Bcf the total comes to 22 Tcf.

“Even with a substantial margin for error, this would beadequate to replace 1998 dry gas production of about 19 Tcf.”

Earlier this year the American Gas Association said 1998 reserveadditions could come in anywhere between 84% and 117% of the 19 Tcfof production. AGA’s estimates are based on the top-30 reserveholders. The wide range is because it is not known if those top-30companies, which added7.8 Tcf, represent 35% or as much as 49% ofthe market. Chris McGill, AGA’s director of gas supply andtransportation, said he personally expected reserve numbers to comein closer to the lower end of the range.

“I wouldn’t expect reserve replacement to be far aboveproduction,” McGill said. He also noted that reserve additions haveoutpaced production for the last four years, chalking up 19.7 Tcfor 108% of production in 1994; 19.3 Tcf (107%) in 1995; 20.2 Tcf(107%) in 1996 and 20 Tcf (104%) in 1997.

Whatever the 1998 reserve numbers are, they won’t necessarilyhave an impact on current production. “There’s a disconnect betweenreserve additions and production,” McGill said, because for avariety of reasons production usually doesn’t come on lineimmediately. Another reason for believing reserve totals may belower: “the industry is different [today]. They operate more on a’just in time’ basis. There’s no reason to build up largereserves.”

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