Natural gas policy

A National Petroleum Council report on the US gas supply dilemma has been getting a lot of attention recently.

A National Petroleum Council report on the US gas supply dilemma has been getting a lot of attention recently.

NPC-the Energy Secretary's oil and gas advisory committee-issued a study last December urging a government strategy to develop gas supplies (OGJ, Dec. 20, 1999, Newsletter).

The NPC study said gas demand could grow to 29 tcf by 2010 from the current 22 tcf/year.

"This growth will be driven primarily by growth in the economy and the increased reliance on natural gas for electricity generation. Almost 50% of the 7 tcf increase in demand will come from the electricity generation sector. Environmental regulations that favor natural gas usage could drive the demand even higher."

NPC said the US should create an interagency task force to work with the gas industry and other stakeholders to formulate a federal strategy.

It said problems facing the industry include: access to resources and rights of way, continued technological advancements, financial needs for expansion, availability of skilled workers, construction of rigs, and lead times for development.

Resources

The study said gas resource base is adequate to meet demand.

It said the US resource base has increased 23% since NPC's 1992 study (from 1,295 tcf to 1,466 tcf, net of 124 tcf of production).

"However, reaching and producing the resource base is growing more difficult. New production will be from deeper wells, deeper water, and more nonconventional formations. The number of wells drilled each year would need to double, (from 24,000 to 48,000) by 2015 in order to produce the needed volume of gas. Approximately 2,000 new rigs will be required in this time frame."

NPC said, "Opening restricted areas to development could significantly increase US production, particularly beyond 2010, and lower future natural gas prices.

"Most of the access restrictions are due to environmental concerns even though industry has made tremendous improvements in reducing the footprint of exploration, production, and transportation activities."

Reactions

The NPC study languished for months but suddenly seems to be on everyone's radar scope now.

Obstacles to reaching a 30 tcf natural gas market were discussed recently at an American Gas Association conference, two congressional hearings, and a meeting of the Independent Petroleum Association of America.

Richard Farman, Chairman and CEO of Sempra Energy Co., San Diego, told IPAA "the natural gas business is in for a pretty wild ride" if demand grows to 30 tcf. Producers, pipelines, and electric power producers all face challenges.

John Swords, of PricewaterhouseCoopers LLP, told IPAA, "The sources of that natural gas are yet to be found. We would have to ratchet natural gas exploration up to a level not seen in many years."

And the NPC study was one of the key points of a recent Senate energy policy bill drafted.

It would require Energy Sec. Bill Richardson to review the NPC report by June 15, make recommendations to expand the gas infrastructure, and establish an interagency working group to develop gas policy.

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