The Energy Information Administration dropped a pre-holidaydowner into U.S. festivities last Wednesday, reporting 1998 U.S.crude oil and natural gas reserve additions chased lower pricesdeep into the minus column.

“Price matters,” EIA said in reporting crude oil reserveadditions went from 125% of production in 1997 to 24% of productionin 1998. The December 1998 price of $8.05 a barrel — a priceequivalent last seen in 1935 — forced massive write-downs and theshutting in of thousands of marginal wells, the Energy Departmentstatistics arm reported. “Only twice in over 100 years have feweroil wells been drilled than in 1998.”

While oil reserves were grabbing the headlines, lower 48 drynatural gas didn’t fare that much better, replacing only 83% ofproduction, down from the previous four years when reserveadditions ranged from 104% to 108% of production. The 1998 dropknocked 2% off proved reserves which went from about 167 Tcf to 164Tcf. EIA noted the decline “offset two-thirds of the gain in theprior 4 years.” Natural gas prices dropped 16% in 1998 from 1997,averaging $1.94/Mcf.

“Even the Gulf of Mexico Federal Offshore proved reserves weredown in 1998 (from 28.5 Tcf to 27 Tcf),” the EIA said, recording a5% decline. “The reserve additions of natural gas were lower in1998 because total discoveries were lower” (11.4 Tcf in 1998 v.15.7 Tcf in 1997). The other component, revisions and adjustments(4.1 Tcf) was about the same as in 1997.”

The agency noted that while exploratory gas well completionsincreased by 7% in 1998, the average of total discoveries perexploratory gas well was 32% less. The only bright spot was coalbedmethane, for which reserves and production continued to grow in1998. Coalbed methane reserves accounted for 7% of 1998’s proveddry gas reserves, while production in 1998 was 6% of the U.S. totaldry gas production.

Natural gas production also was down for the year, totaling 18.7Tcf compared to 19.2 Tcf in 1997.

Natural gas liquids reserves decreased 6% to 7,524 millionbarrels in 1998, but much of that change is attributed to areassessment of Alaska reserves.

Ellen Beswick

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