Long-term natural gas supply projections by both Canada's National Energy Board (NEB) and the U.S. Energy Information Administration (EIA) may be overly optimistic, according to Canadian analyst David Hughes, who believes it will take development of all energy sources, plus demand side management across the board to energize the North American continent going forward.
Hughes, team leader for unconventional gas for the Canadian Gas Potential Committee, said prospects for either Canadian or U.S. production to maintain projected levels are "quite optimistic." In fact, declining Canadian production from conventional sources, plus coalbed methane, balanced against increasing Canadian demand could leave that country with steadily declining supplies available for export, reaching a zero export total in the 2020s, he said.
At the same time, EIA projections of an 8% increase in U.S. production in future years fly in the face of 1.8% annual production declines -- or possibly more, depending on late data revisions -- since 2001.
"We've seen a doubling of the number of wells and falling production" in Canada, and "I don't see how the U.S. can possibly grow production by 8% by 2010," he said.
Canadian production is on a "treadmill," Hughes told the audience attending GasMart 2005 in New Orleans earlier this month. While more wells are being drilled, production per well is declining and that trend is likely to continue. NEB projections also include expansion of development offshore Nova Scotia, but "there have been a whole string of dry holes off Nova Scotia in the deep water. Many producers have let their offshore licenses lapse," he said. And there have been no indications recently of anyone coming up with the $100 million to drill a new hole.
Hughes, who is with the Geological Survey of Canada in the department Natural Resources Canada, noted that another GasMart speaker who was predicting a similar success to that off Nova Scotia if drilling were allowed off the U.S. East Coast, might want to review that so-called "great success." He also doesn't see much help from the Canadian West Coast even if the 30-year drilling moratorium there were to be lifted, saying, "There have been no discovered resources off the West Coast."
Even "assuming the NEB and EIA are correct, their best case still has a shortfall," Hughes said, advising there should be "more realism" in the projections. Nor can the much-vaunted LNG save the situation. It can't be relied on to magically fill a 6-15 Tcf supply shortfall.
"The rest of the world uses 75% of the world's natural gas production; it's going to be a global commodity. Just because you build receiving terminals doesn't mean the LNG will arrive," Hughes said. He pointed out that the upstream liquefaction end of the LNG chain "is the weak link at this point in time. LNG is a very high tech solution, a very expensive solution." To supply U.S. needs and match world demand "would require more than doubling to nearly quadrupling the world's LNG capacity." It would require 240 new 3 Bcf/capacity LNG tankers, 40 new 1 Bcf/d North American receiving terminals, 75 new 200 Bcf/year liquefaction trains and capital investment on the order of $100 billion-plus.
"There is no silver bullet. We will need conservation and efficiency in all sectors, energy diversity, looking at all alternative fuels, clean coal gasification, and renewables such as wind and solar. This would take some of the pressure off gas." Hughes, who has done a analysis of energy demand around the world, including projections of world population, said "a lot of people are scratching around looking for silver bullets. But it's clear is no silver bullet anywhere."
Better use of available energy is a priority. Hughes doesn't think much of the way resources are being allocated, quoting other speakers who have described using natural gas to produce Canadian oilsands as "turning gold into lead," or in electric power generation as "lighting candles with $100 bills."
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