The U.S. Natural Gas Supply Picture

• Official Proved Reserves - Proved reserves are estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. According to the Energy Information Administration’s (EIA) 2006 Report on Natural Gas Proved Reserves, the U.S. has 220 Trillion cubic feet of proved reserves remaining as of 12/31/06. The 2007 Report will not be available until November 2008. These reports are based on Form EIA-23 Annual Survey of Domestic Oil and Gas Reserves submitted by oil and gas producers in the U.S. They are required to submit changes to their oil and gas reserves and provide an estimate of production for the reporting year. In the 2006 Report, they reported production of 19.4 Trillion cubic feet of natural gas production. At first glance you might say this is only a 11 year reserve life. However, reported changes or additions to reserves due to improved reservoir performance, new field or reservoir discoveries and extensions to old fields added 26.5 trillion cubic feet in 2006 or 137% of production. Taking into account production proved reserves actually increased from 213 Tcf at the end of 2005 to 220 Tcf as of 12/31/06.

• Potential Natural Gas Reserves – There are currently three estimates of  Natural Gas Resources technically recoverable in the United States. The first, compiled by the EIA as of January 1, 2000 is 1,191 trillion cubic feet (Tcf). The second estimate of 1,779 Tcf was compiled by the National Petroleum Council (NPC) in 1999. The third estimate of 1,321 Tcf was prepared by the Potential Gas Committee in 2006. The Potential Gas committee (PGC) has been preparing estimates for the past 42 years. Just last month, the media reported on a fourth study released by the American Clean Skies Foundation (ACSF) and Navigant Consulting (NCI) that indicated the United States has 2,247 Tcf of natural gas resources or enough to last more than 100 years.They claim that the EIA and others have historically underestimated the potential of unconventional natural gas from three sources: tight sands, coalbed methane and gas from shale formations.

• Commentary -  It is difficult to get a definitive answer to the question of how much natural gas exists in the U.S. We have a wide range of resource estimates from 1,191 Tcf to 2,247 Tcf. As to which estimate is more accurate I am biased in that I was a member of the Potential Gas Committee from 1979 to 1991. The PGC Report is published every two years and I suspect that their estimates will increase with their 2008 Report primarily due to the gas shale development in the past few years. The extent of the rapid build-up in natural gas production from shale formations has not been fully captured by many reserve estimators. I believe that the United States has substantial natural gas to fuel its future for many years to come and enough potential for expanded use of natural gas even as a transportation fuel.