A newly released Gas Research Institute study examining theshift in perceptions of the U.S. gas resource base, titled”Changing Perceptions Of Remaining U.S. Conventional GasResources,” discusses how the move – from the shortage mentality ofthe 1970s to today’s view that gas is abundantly available – hasresulted from an interplay of factors. Factors discussed includeincreased exploration success rates in frontier plays, improved gaswell recoveries and continued reserve appreciation activity inexisting fields. GRI, with Energy and Environmental Analysis Inc.of Arlington, VA, developed the study.

One of the most notable observations comes from an analysis ofthe discoveries in the deep-water Gulf of Mexico, which concludesthat 9.7 billion barrels of liquids and 40.1 Tcf of gas havealready been found in the deep-water play. Such a level ofconfirmed discoveries is beginning to challenge the lower range oftotal deep-water potential envisioned as recently as 1995. Aprojection at the field level for 85 deep-water fields currentlyproducing or scheduled to go online in the near future indicatesthat production of 1.6 million barrels per day of oil and more than5 Bcf/d of gas can be expected. Comparison to newly constructeddeep-water pipeline capacity confirms this interim assessment.

“The deep-water Gulf of Mexico is a prime example of aturnaround in resource perceptions,” said John Cochener, GRIproject manager. “As the 1990s have progressed, the Gulf has movedfrom being regarded as a ‘dead sea,’ with a limited future, topotentially one of the most prolific domestic supply areas.Technology has been the facilitator, allowing industry to extendits reach much further out into the deeper waters.

“Over the course of a decade, the pendulum has shifted to arecognition of gas resource abundance, contingent on investedeffort. The fact that discoveries have converged so rapidly on thelower end of the deep-water resource estimate is good news for gassupply. This progress implies that the unfolding trend hasconsiderable life remaining. Surprisingly, the growth in theoffshore resource base has occurred in an environment where gasprices, in real terms, are less than half the level that existed inthe 1980s. Technology is obviously substituting for price.”

Resource perceptions are influenced by the methodology used toassess new fields and can have a significant impact on whetherfinal resource assessments are overly optimistic or undulypessimistic. GRI’s analysis includes a discussion of the pros andcons of five diverse new field assessment methods including: (1)extrapolation of historical trends, (2) a real or volumetric yield,(3) material balance, (4) play analysis, and (5) direct subjectiveassessment. In practice, assessments are often based on severalapproaches, depending on the amount and quality of data for a givenarea, play, or depth interval.

Perceptions can mask underlying trends. One misconceptionregarding reserve growth (the growth of proven reserves in existingfields) is the exclusive tie to “old” fields. However,decade-by-decade analysis since the 1940s shows that U.S. reservegrowth is distributed across all field-discovery periods. Such auniform distribution implies a continuation of the trend inexpansion of existing proven reserves.

The GRI study identifies a number of other factors contributingto the growing optimism about the U.S. resource base, including:

*Shelf areas in the shallow Gulf of Mexico waters have excellentpotential for both reserve growth and exploration at greaterdrilling depths, particularly the sub-salt intervals that had beenoverlooked before the availability of new seismic explorationtechnologies.

*The lower-48 states contain extensive volumes of largelyunexplored sedimentary strata at drilling depths greater than15,000 feet. Advances in exploration and drilling technologies havemade previously hard-to-reach deep gas drilling more economicdespite relatively flat gas prices.

*Statistics show that gas-well recompletion activity in the Gulfwaters has grown from one-fourth of completions in previous decadesto nearly one-half today. Recompletion in an existing well bore isone of the lowest-cost methods for adding reserves to existingfields.

The report can be ordered directly from the GRI DocumentFulfillment Center, 1510 Hubbard Drive, Batavia, IL 60510, or fax,630-406-5995. The report is $25 for GRI members and $35 fornonmembers, plus shipping and handling.

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