Socrates did not say “an unexamined energy industry is not worthrunning.” But he might as well have. As long as there is gas andoil in the ground, it seems, there will be those willing to poreover statistics and share their findings.

Last week the American Gas Foundation (AGF), the NationalPetroleum Council (NPC) and Duff & Phelps Credit Rating allweighed in with industry reports. The AGF, not surprisingly, saysgas demand will grow, not only from power generation but especiallyfrom developing technologies, such as gas-powered fuel cells andmicroturbines. The NPC would have us know that growing demand willbe tough for producers to meet, especially if the governmentdoesn’t open up more areas to exploration, particularly the RockyMountain region. And Duff & Phelps, in a less ambitiouspronouncement, sends word that offshore drilling activity and rigrates are rising.

Looking at the downstream first, the AGF-sponsored studysuggests the hoopla over conventional gas-fired power generationhas overshadowed a gas market set to crop up literally in our ownbackyards.

According to the study, titled “Fueling the Future: Natural Gas& New Technologies for A Cleaner 21st Century,” newtechnologies may grow gas consumption by almost 60% over currentlevels, from 22 quadrillion BTUs (quads) in 1998 to 35 quads by2020 if domestic policies encourage greater gas use. On-site powergeneration using gas fuel cells and microturbines is among manytechnologies holding significant potential for the gas industry,according to the study.

“Our study is the first to forecast this level of growth by2000,” said study co-author and former deputy U.S. secretary ofenergy William Martin. “But what makes our study truly unique iswhere and how we see the growth occurring – primarily through theuse of new technologies.”

Besides the promise of distributed generation, the reportforecasts growth in the industrial market as a result ofimprovements in high-efficiency industrial gas equipment, whichshould attract plant operators to natural gas from other fuels. Thestudy says gas cooling and dehumidification systems will drivedemand in the commercial market, including hospitals andrestaurants. The use of gas-powered fleet vehicles, such as transitbuses, will continue to expand in urban areas with air qualityconcerns.

The study was done by Washington Policy Analysis with aneditorial review board that included scientists representing theMassachusetts Institute of Technology and the World ResourcesInstitute.

The NPC upstream study, initiated by a request from theSecretary of Energy in May 1998, generated a scenario for demandgrowth to 29 Tcf in 2010 and 31 Tcf by 2015, said Thomas B. Nusz,chair of the NPC Supply Task Group and a vice president withBurlington Resources. The 7 Tcf demand increase by 2010 breaks outas 47% for power generation, 23% for industrial use, 19% forresidential and 11% for commercial.

However, there are a number of factors the NPC says could swingdemand growth in either direction. For instance, if the projectedresource base turns out to be smaller by 250 Tcf, annual demandcould be lessened by nearly 1.5 Tcf in 2010. If the resource baseis larger by 250 Tcf, annual demand could be nearly 2 Tcf greaterthan forecasted. Other factors influencing demand growth to alesser extent are upstream technology advances, oil prices, growthin the nation’s gross domestic product and access granted forexploration and production activities.

The NPC assumes GDP will grow at 2.5% per year and oil priceswill average $18.50/b. The group expects 140 GW of new powergeneration will come on line by 2015; no new nuclear facilitieswill be built; 30 GW of nuclear capacity will come up forre-licensing, of which 15 GW will retire; and coal-fired generatingcapacity utilization will increase from 64% to 75%. Further,despite record LNG importation of late and plans to reopenmothballed terminals, the NPC predicts no new LNG facilities willbe built during the period examined by the study.

Gulf of Mexico gas production, deep-water and Continental Shelf,is projected by the NPC to grow to more than 7 Tcf in 2015 fromcurrent production of around 5.5 Tcf. The Shelf’s share of that isprojected to decline by about 3% per year. The percentage of Lower48 production from the Rockies is expected to remain flat at around15% until 2008, stepping up to more than 16% by 2015 at more than 4Tcf, the majority coming from the Foreland Rockies.

Most of the burden for growing production will fall on thesmallest independent producers, 54%. The majors are expected tochip in about 27%, and large independents are predicted to take upthe slack, 19%, the NPC study says.

Rig fleets, both onshore and off will need to grow. Onshore rigattrition and demand growth is expected to create a need for 1,950new rigs by 2015 to bring the total to about 2,250. Offshore, 72new rigs are expected after accounting for attrition and demandgrowth to create a fleet of about 190 in 2010, compared to acurrent fleet of around 280. Rig demand projections don’t includerigs already on order.

Speaking of rigs, offshore rig utilization is on the rise,according to Duff & Phelps. The firm says operating rates haveincreased steadily over the past 12 months as drilling day ratesfor a shallow water jack-up rig have risen from a low of $22,000 tocurrent levels of around $50,000. Offshore rig utilization also hassteadily increased from a low of 72% during the summer of 1999, to81% in February 2000.

As of Friday, the Baker Hughes Rotary Rig Count stood at 1,310for North America, up 449 from a year ago. In the United States,the count is 773, up 242 from a year ago. Of the U.S. rigs, 620 arepursuing gas, up from 200 a year ago.

Joe Fisher, Houston

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.