The Math Behind the 100-Year, Natural-Gas Supply Debate
“Coupled with other gas shale plays in North America, the prospects for a reliable supply of natural gas for the next several decades are so substantial thatnationalenergypolicywill eventually adapt to this gas shale bonanza,” he says.
One reason for differing estimates of natural gas reserves is that they can be measured in different ways.
The Potential Gas Committee, the USGS and the EIA estimate "technically recoverable resources," which can be produced using current technology, regardless of the current price of gas. Those estimates change as technology changes, as has been the case in the past four years with fracking.
A more conservative estimate is demanded by the Securities and Exchange Commission,which requires public companies to provide reserves data in their annual reports. So-called “proven reserves” are only those that can be produced profitably at current prices. Those estimates change as prices fluctuate.
Another term, gas “in place,” includes amounts that are not currently recoverable, as was shale gas several years ago. Shale gas that was deemed unrecoverable five years ago, now accounts for over 30 percent of overall U.S. gas production.
A 2011 report by British Petroleum estimated that, by the end of 2010, the United States had “proven” reserves of 272.5 tcf. That represents a 12-year supply, with most energy experts agreeing that “proven reserves” have a 90 percent probability of going to market.
Are Exports the Answer?
“Going to market” with today’s natural gas prices, however, is problematic for many energy companies. The current price of about $2.50 per British Thermal Unit is more than 50 percent off the 2011 peak and just a fraction of the record highs of 2008. Price is important because as the price rises, more reserves can move from the “technically recoverable resource” category into the “proven resource” category.
The number of operating U.S. gas rigs dropped 30 percent last year, from 900 to 600, says IHS' Stark. “For a period of time, this will help bring supplies back in line with demand,” he says.
Consultants like John Harpole, president of Denver-based Mercurator Energy, think the answer to current price woes lies in exports.
While prices here are below $3, prices in Asia are $14-$16 mmBTU, and $12-$14 mmBTU in Europe, says Harpole, formerly vice chairman of the Natural Gas Committee for the Independent Petroleum Association of America. “If we start selling more in worldwide markets, we might see a stronger price at home.”
Stark sees a huge U.S. competitive advantage“with such large volumes of natural gas delivered at a very low price.“
“The price in the rest of the world is more than $10 a unit,” says Stark. “We have a lot of options to make some really prudent decisions to support the U.S. economy. The amount of natural gas in North America is huge gift for us.”
Editor's note: This story has been updated since it was first published on June 15, 2012.
