Large, deepwater oil discoveries in the Gulf of Mexico the past decade have nearly doubled the contribution associated gas makes to total U.S. gas reserves, according to a Natural Gas Supply Association analysis of U.S. Energy Information Administration (EIA) data.
NGSA said oil and gas producers shifted resources to emphasize natural gas exploration in the 1990s. It said data show about 40% of U.S. drilling rigs were searching for natural gas in mid-1991, but the proportion had risen to 60% by mid-1996.
Philip Budzik, NGSA's director of regulatory affairs and technical analysis, said, "Common sense would suggest that this shift should have resulted in fewer oil and proportionally fewer associated gas discoveries. In fact, the opposite is true. The proportion of associated gas discoveries to total gas discoveries has risen from about 8% in the late 1980s to 15% in 1995."
Budzik said the rising ratio of associated gas reserves is a direct result of the discovery of large associated oil and gas deposits in the deepwater Gulf of Mexico.
He explained, "The drilling rig count is heavily skewed toward onshore activities. Many more drilling rigs are required for finding smaller reserves of oil and natural gas that are typically found onshore. Conversely, a much smaller number of offshore deepwater rigs is finding giant oil reservoirs with enormous associated gas reserves."
He said it is important to recognize the tie between associated gas reserves and deepwater exploration in order to understand the growing importance of the deepwater gulf to future U.S. gas production.
Reserve replacement
Separately, an NGSA analysis of EIA reserve replacement data suggests that the largest natural gas producers have increased gas exploration the past decade while smaller producers concentrated increasingly on the management of mature gas fields.
Budzik said the top 30 U.S. gas producers accounted for 79% of the new discoveries in 1995 vs. only 44% in 1986.
NGSA said the rest of the industry is increasingly responsible for the additions to the natural gas reserve base resulting from reserve revisions. In 1986, smaller producers accounted for 36% of the reserve revisions, but by 1995 the figure had climbed to 78%.
Budzik said anecdotal evidence suggests that smaller firms are leaving the exploration business because of the need for large capital investments and the high level of technological sophistication needed.
"Large producers enjoy capital and technology economies of scale, which are best employed in the exploration and development of low-cost gas reserves.
"In contrast, the smaller gas producers can use their lower operating cost structure in conjunction with enhanced recovery techniques to extend the life of existing gas fields, thereby increasing gas reserves through revisions.
"The data suggest that each industry segment is utilizing its unique economic advantage to work within specific exploration and production niches. That should result in the most efficient development and production of the nation's natural gas resources."
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