A two-year trend of rising proved reserves of oil and natural gas in the United States hit a snag in 2019 as prices declined, according to the Energy Information Administration (EIA).
Proved reserves of oil increased 367 million bbl in 2019, while proved reserves of lease condensate produced from gas wells dropped 313 million bbl, according to EIA. This yielded a net gain of 54 million bbl of proved reserves of crude and lease condensate to 47.1 billion bbl at year-end 2019, which is at the record level set in 2018. U.S. oil and condensate production increased 12.7% from 2018 to 2019.
Alaska producers reported the largest net increase, adding 259 million bbl of proved reserves of oil and lease condensate in 2019, while producers in New Mexico saw the second-largest net increase of 226 million bbl. Texas rounded out the Top 3 with a 179 million bbl gain, with extensions and discoveries in the Permian Basin of southeastern New Mexico and West Texas contributing the most, according to EIA. Colorado recorded the biggest decline in proved reserves of crude and condensate, falling 154 million bbl in 2019.
Meanwhile, the annual average spot price for a barrel of West Texas Intermediate oil at Cushing, OK, decreased 15.1% in 2019, to $55.77/bbl from $65.66 in 2018.
“Spot market prices are not necessarily the prices used by operators in their reserve estimates for EIA because actual prices received by operators depend on their particular contractual arrangements, location, hydrocarbon quality and other factors,” EIA said. “However, spot prices do provide a benchmark or trend indicator.”
EIA collects independently developed estimates of proved reserves from a sample of operators of U.S. oil and natural gas fields with its Form EIA-23L. The agency uses the sample to further estimate the portion of proved reserves from operators that do not report.
Responses were received from 372 of 412 sampled operators, which provided coverage of about 90% of proved reserves of oil and natural gas at the national level.
As for natural gas, proved reserves decreased 1.9% year/year in 2019 to 494.9 Tcf from 504.5 Tcf. This is the first annual decrease in proved gas reserve in the United States since 2015, but reserves remain at their second highest level ever, the agency said. Total U.S. gas production increased 9.8% year/year.
Lower 48 basins fared better. Proved gas reserves from unconventional U.S. plays increased to 71% at year-end 2019 from 68% in 2018. The largest net gain by volume in 2019 occurred in Ohio, which grew by 10.4 Tcf. The EIA said the increase was driven by continuing development of the Utica/Point Pleasant shale play in the Appalachian Basin.
The largest net decrease in proved gas reserves in 2019 was in Texas, which was down 12 Tcf in the period. The EIA said net downward revisions of reserves in the Eagle Ford and Barnett shales contributed the most to the annual drop. Declines in the Haynesville Shale also contributed to the steep decreases in Texas.
Natural gas prices, meanwhile, also recorded a steep decline in 2019, according to EIA. The agency said the annual average spot gas price at benchmark Henry Hub decreased from 2018 by 21.5%, from $3.35/MMBtu to $2.63, according to EIA.
Natural Gas Prices: [NGI’s natural gas price indexes have included trade data from both price reporters and the Intercontinental Exchange (ICE) since 2008]
Citing the Covid-19 pandemic and its impact on the oil and gas industry, EIA said it expects operators to revise down their proved reserves in 2020. During the last week of 2019, 805 rotary rigs were operating in the United States. By Nov. 20, 2020, the number of rigs operating in the United States had declined to 310, off 61%.
“As a result, EIA expects operators to report significantly fewer additions of proved reserves from extensions and discoveries in the 2020 reserves report.”
In the Short-Term Energy Outlook published Tuesday, EIA estimated that U.S. oil production fell in 2020 from 2019 to 11.3 million b/d from 12.2 million b/d. The agency expects annual average production to decline to 11.1 million b/d in 2021 before rising to 11.5 million b/d in 2022.
Dry natural gas production in 2020 averaged 90.8 Bcf/d, down 2.5% from 2019 levels. Output is likely to decline to an average 88.2 Bcf/d in 2021, before rising to 89.7 Bcf/d in 2022, EIA said.
Henry Hub natural gas spot prices averaged $2.03/Mcf in 2020. EIA expects Henry Hub prices will rise to an annual average of $3.01 in 2021, limiting use for power generation amid reduced production. EIA is forecasting 2022 prices to average of $3.27.
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