Despite sharply higher gas prices and an apparent struggle to maintain adequate supply levels, gas producers have more than enough reservoir targets and they are continuing to expand the nation’s gas resource base, according to a biennial report released yesterday by the Potential Gas Committee (PGC). However, committee officials warned that some energy policy changes are needed for the industry to continue expanding the resource and to meet burgeoning demand.

“While the report is optimistic, there are some significant challenges,” said the American Gas Association’s (AGA) Chris McGill, referring to needed policy changes that would lift moratoria on offshore drilling and remove land-access restrictions so producers can drill more wells. “The problem is that we can’t wait 10 years to do something about [the current energy crisis].”

The resource has been expanding with each successive report over the past 10 years, PGC said. The current report showed that despite 38 Tcf of production in 1998 and 1999 the size of the gas resource actually increased 4.5% to a total of 1,258 Tcf in the United States at the end of 2000, the equivalent of a 63-year supply of gas. The growth was attributed to a 4% increase in traditional reservoirs and 10% growth in coal-bed methane resources.

Despite sharp production decline rates and rapid reserve depletion in some regions, particularly the Gulf of Mexico, the industry is finding ways to make up for the losses by drilling more wells and by targeting longer-lived resources in other regions, such as the Rocky Mountains, PGC officials said.

The committee estimated that at the end of 2000 there was a 4.4% increase in traditional reservoirs to 936 Tcf of gas and a 9.7% increase in coal-bed methane to a total of 155 Tcf. A regional breakdown shows 259.4 Tcf of potential gas resources in the Gulf of Mexico and Gulf Coast region, 176.6 Tcf in the Rocky Mountain region, 124.4 Tcf in the Midcontinent, 103.9 Tcf in the Atlantic region, 55.1 Tcf in the Pacific and 22.2 Tcf in the North Central region. Those numbers include “probable, possible and speculative” reserves with speculative representing the largest portion of the resource. The Department of Energy estimates there are 167 Tcf of proved reserves, which are reserves that have been discovered and booked by the industry.

“These figures are a testament to the sustainability of future natural gas production at even greater annual rates,” said Roger Cooper, executive vice president of AGA. “That’s great news, since more homes, businesses and power facilities are looking to natural gas because it is cleaner-burning, efficient, reliable and available in abundance here in the United States.”

Cooper also praised the natural gas provisions of the energy bills recently introduced by Sens. Frank Murkowski (R-AK) (S.388, S. 389) and Jeff Bingaman (D-NM) (S.596, S. 597) as well as the Bush Administration’s recent energy policy statements. “All the increases in the world don’t add up to much if we can’t transport those supplies to market,” Cooper said. “It’s vital to gain greater access to our tremendous resource base, expand our pipeline delivery system and support development of energy efficient technologies.”

According to the American Association of Professional Landmen (AAPL), which provided a paper that was included in the PGC report, in the past 20 years access to public lands and waters has become “increasingly difficult and often impossible. Since 1983, access to mineral resources in the West has declined by more than 65%. Less than 17% of the total federal mineral estate is leased today compared with 72% in 1983. Moreover, the public is generally unaware of how such access restrictions affect the market availability and price of oil, gas and petrochemicals and all the products derived from them or dependent upon them,” AAPL said.

AAPL noted that a recent report by the National Petroleum Council showed that 40% (137 Tcf) of the potential natural gas resource in the Rocky Mountain region is closed to exploration or under restrictions. Another 76 Tcf is closed in the offshore areas. Together these resources subject to access restrictions represent a 10-year supply of gas at current production rates, AAPL noted.

“High oil, natural gas and gasoline prices in 2000 and the potential for a nationwide ‘energy crisis’ have drawn considerable public attention to the petroleum industry. It is their responsibility, therefore, to educate both the public and government officials, elected and appointed about the critical issues, including lack of access, that have helped bring about price volatility and shortages,” said AAPL.

Nevertheless, PGC officials agreed that high gas prices are likely to be around for some time even if there is greater access to public lands because a large portion of the remaining gas resource is located in frontier areas with greater risk. “Our view is that the average price of gas is going to go up,” said AGA’s McGill. “That’s not necessarily bad,” he said. “When you start getting higher prices you diversify, you look at LNG, Alaska, etc… We’re just not going to meet [30 Tcf of] demand at $2/MMBtu.”

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