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AGA: Changing U.S. Gas Resources, Politics Impede Production Growth

Despite recent record gas prices and strong gas-directed drilling, the changing composition of domestic natural gas supply in the United States and the politics that continue to impede exploration and development will limit the ability of the gas industry to meet growing demand in the future, the American Gas Association (AGA) warned in a new study. AGA believes that if the status quo is preserved, U.S. gas production will remain at about 19 Tcf, no higher, for the next five to 15 years.

The reasons include the changing nature of the domestic gas resource, with a greater percentage of U.S. gas production coming from unconventional reservoirs, AGA said in its paper titled "Evaluating U.S. Natural Gas Production." Unconventional wells may produce 100 Mcf/d in contrast to conventional wells that may produce 1 MMcf/d on average. However, an unconventional well will produce for 20 years while a more traditional reservoir may be exhausted in six to10 years.

"This is the natural gas equivalent of the tortoise and the hare," said AGA's Chris McGill, managing director of policy analysis. "Traditional producing reservoirs in areas like the Gulf of Mexico often yield large volumes of natural gas quickly, but many are maturing rapidly and need to be replaced. Most of the wells drilled today produce small amounts of natural gas slowly and from less conventional reservoirs.

"Policymakers must understand that it is going to take many more of both types to keep natural gas production at current rates and thus satisfy American's growing demand for this clean domestic source of energy," said McGill.

AGA said about 35% of current daily gas production is coming from unconventional resources, such as tight sands, shales and coal seams. "Much of the future optimism for onshore gas production in North America is focused on coal seam plays like those developing in the intermountain West, Midcontinent and Western Canada," AGA noted. In contrast, a U.S. gas reserves report by the Energy Information Administration in 1995 made no mention of reserves and production attributable to natural gas from coal seams.

With a larger percentage of lower yield but longer-lived gas wells in production, even record numbers of annual well completions only keep up with the annual declines in more traditional producing wells and production remains flat, AGA noted.

"For natural gas production to significantly grow in the Lower 48 states, new areas with resource potential will need to be developed. Currently many of those potentially hydrocarbon rich locations are restricted from access by congressional moratoria established more than 25 years ago."

For more from the AGA study, go to http://www.aga.org/

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