That old mother of invention-necessity-has reared its troublesome head again. A US natural gas shortfall projected for 2025 is prodding industry researchers to concoct viable technical solutions to offset it.
Projects were set in motion 3 years ago when the National Petroleum Council-the US secretary of energy’s advisory committee-issued a report on its analysis of the natural gas market and identified several disturbing findings:
Traditional North American producing areas in 2025 will meet only 75% of long-term US gas demand. Residential demand will increase by 26% over its 2003 level, commercial use by 38%, industrial use by 32%, and electric power generation by 102%. At the same time, traditional US and Canadian gas production is declining.
Although the technically recoverable resource base is large, especially in nonconventional categories, without newer technologies production growth won’t match demand growth.
Large new supplies such as LNG and Arctic gas could meet as much as 25% of demand but would cost more, require longer lead times, and face major barriers to development, NPC said.
Price volatility-a fundamental aspect of a free market-will continue, reflecting shifts in the gas supply-demand balance. Eventually demand destruction will begin.
Potential solutions
Certain aspects of the findings can be addressed by technical and political intervention, NPC said. The council estimates that public policy supporting energy efficiency, development of new resources, and flexibility in fuel choice could save as much as $1 trillion in US gas costs during the 20-year period if implemented.
Greater energy efficiency and conservation also will be vital in restraining near and long-term price levels and reducing volatility.
In a presentation in March 2004, Melanie Kenderdine, the Gas Technology Institute’s Washington, DC, vice-president, said gas price increases result from demand growth-largely for electric power generation-the decline in US and Canadian gas production, inadequate transportation infrastructure, technical limitations to producing unconventional reserves economically, and access restrictions.
Granting access to currently barred or inaccessible US resources (excluding national parks and designated wilderness areas) could save $300 billion in gas costs during the period, NPC said. There is an estimated 137 tcf of technically recoverable natural gas in the Rocky Mountain area, and waters off the US East Coast might hold 31 tcf of recoverable gas. Florida’s western offshore area is estimated to hold 24 tcf, and West Coast offshore areas, 21 tcf.
Removing regulatory barriers to long-term transportation and storage contracts could encourage infrastructure investment. An average $8 billion/year would be needed just for pipeline and distribution investment, NPC said, with much of that required for maintaining the reliability of existing infrastructure.
Innovative minds
While the George W. Bush administration is strongly supporting alternative energies such as solar, wind, hydropower, and hydrogen fuel cells for automobiles, such emerging technologies need a long time to achieve economic, efficient commercialization without government subsidies. Those energy systems still have the proverbial bugs to work out.
In the interim, the oil and gas industry is pursuing its next generation of exploration and development technologies.
The Department of Energy estimates that the US has enough recoverable gas to meet more than 55 years of demand at 2006 consumption rates. The country’s challenge is to develop technologies that will enable safe commercialization of gas from ultradeep water and unconventional onshore reserves.
The nonprofit Research Partnership to Supply Energy to America (RPSEA), led by the Gas Technology Institute, was formed 4 years ago for that purpose ([email protected]). RPSEA is a coalition of 84 research universities, federally funded national laboratories, energy producers, service providers, industry associations, financial institutions, and civic organizations. The corporation is developing technologies to further explore and develop the US hydrocarbon resource base while reducing production costs and risks-working out the bugs in other words.
