The U.S. surplus of natural gas deliverability is gone, and several years of supply/demand balance are possible, says the American Gas Association.
The surplus is disappearing because demand has been rising since 1986 and U.S. productive capacity has fallen because fewer wells are being drilled, AGA said.
Estimates of the size of the surplus, which has been in existence since 1980, are extremely sensitive to assumed demand in 1990.
Operators have begun to drill more gas wells because gas is becoming easier to sell. Further gas well drilling increases are expected.
AGA estimates that incremental supplies of as much as 1.35-2.1 tcf/year of gas could be made available within 1-3 years if needed. That gas is available from uncommitted, nonproducing reserves, Canadian producers, accelerated infill drilling, and imports of liquefied natural gas.
AGA's analysis does not include an estimated 33.4 tcf of nonproducing proved reserves evident in Energy Information Administration statistics or Canadian gas under contract but not taken.
1990 ESTIMATE
AGA expects U.S. production to be 16.8-17.3 tcf/year in 1989 and 1990, with about 82% nonassociated gas.
Domestic production depends on the number of wells producing, new wells completed, and old wells abandoned.
The number of producing nonassociated gas wells is estimated at 267,000 in 1990, up from about 170,000 in 1979. The number of wells increased through 1984 and has grown at a reduced rate since 1985.
Based on data for 1977-79, when there was little or no unused production, the average nonassociated gas well's delivery capacity declines 5%/year, AGA said. Production will average 54.64 MMcf/well this year, down from 96.06 MMcf/well in 1979.
With fewer wells being drilled, the decline in production per gas well is a major factor in 1988-90.
Total gas production, including associated gas, will decline from about 20.558 tcf in 1985 to about 17.616 tcf in 1990. That will shrink the surplus, which amounted to 4.2 tcf during 1985, to essentially zero this year, AGA reckons.
Claims, especially one by Interstate Oil Compact Commission in 1984, have been made of major losses in production capability.
However, Energy Information Administration figures show that the capacity to produce gas nationally has been demonstrated at 88-90% of the 1980 level, AGA said (Table 1). That capacity was demonstrated during the peak months of production in 1988 and first half 1989.
"At worst, a decline of 10-12% (from 1980 peak production) might be indicated. At best, there has been no loss in production capability at all," AGA said.
SUPPLY SOURCES
Gas well completions are climbing, and other sources could provide large gas supplies in 1-3 years, AGA said.
Based on trends in the first 7 months of 1989, AGA estimates that producers completed 8,840 gas wells last year and will complete 10,040 in 1990. Completions in 1986-88 were 7,560-7,890 wells/year.
Uncommitted, nonproducing gas reserves and accelerated infill drilling could provide a combined 290-850 bcf/year of gas within 1 year and 600 bcf to 1.4 tcf within 3 years.
More Canadian gas and LNG could be brought on in the same time frame (Table 2).
The 12 Canada-U.S. entry points are being used at about 70% of capacity.
LNG regasification capacities are 365 bcf/year at Cove Point, Md., 255 bcf/year at Lake Charles, La., 118 bcf/year at Elba Island, Ga., and 104 bcf/year at Everett, Mass. This capacity is severely underutilized.
Major spot price swings have occurred, so far more characteristic of selling the available gas rather than customers bidding for limited gas supplies. During future heating seasons, significant spot price volatility should be expected, AGA said.
Dual fuel capable customers are likely to switch to less expensive fuels when severe weather causes sharp increases in gas demand. That could prolong the relative supply/demand balance for several years.
The spring-summer decline in gas prices has averaged 35% for 3 years.
In 1989 prices rose noticeably during periods when consumption was more than 30% below the January peak because of record injections into storage of more than 300 bcf/month.
This pattern may well be repeated, AGA said.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.