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IHS Global Insight Perspective
The Potential Gas Committee (PGC) will today release a report outlining its view that aggregate natural gas reserves in the United States could be in the order of nearly 2,100 trillion cubic feet—sufficient for 100 hundred years of production at current rates of output.
The latest reserve estimate, which includes proven, probable, possible, and speculative resources, represents a 35% increase relative to the PGC's previous figures in a report issued in 2006. A small fraction of this estimate is in the form of proven conventional gas, with the vast remainder mostly in the form of unconventional gas—a category that includes coalbed methane (CBM), shale gas, and tight sands.
Despite the substantial improvement in the gas reserves picture, there is no guarantee that the resource base's potential will be realised; federal and state governments will need to work with industry to support growth. If this happens, there could be widespread and far-reaching implications for the country's energy landscape.
Estimates of natural gas reserves in the United States continue their steady trajectory upwards, according to figures expected to be released today by the Potential Gas Committee (PGC), the Wall Street Journal reports. The PGC report is expected to reveal that reserve estimates for natural gas rose over 35% compared to its last study in 2006. The figures, which include proven, probable, possible, and speculative reserves, take the estimated aggregate to a massive 2,074 trillion cubic feet (tcf)—equivalent to around a century of production at current rates of output. If even remotely accurate, the implications for the United States' energy picture could be wide-ranging. The PGC is an independent non-profit organisation staffed by gas industry experts working on a pro bono basis, and is considered by many to be an authority on the country's natural gas reserves. Established in 1964 to gain a clearer understanding of how large these gas reserves might be, the PGC employs geologists and engineers based across seven geographic regions in the United States, each of whom is responsible for preparing resource estimates of the geological provinces under their purview.
Of the 2,074-tcf figure, only around 237 tcf is in the form of proven conventional natural gas. Much of the latest jump in reserves has been attributed to a much better understanding of the country's unconventional gas potential, thanks to increased industry activity and expertise. Unconventional gas includes tight sands, coalbed methane (CBM), and shale gas. Advances in well completion technology, as well as in directional drilling, have allowed producers to access these abundant resources with greater productivity and more cheaply than in the past. Aided by higher oil and gas prices in recent years, unconventional gas production has registered remarkable growth. By the turn of the next decade, unconventional gas output from gas shales and tight sands could account for as much as two-thirds of aggregate U.S. gas output—up from around 40% today. Important geological provinces include the Barnett Shale in northern Texas, the Fayetteville Shale in Arkansas, the Woodford Shale in Oklahoma, the Marcellus Shale spread across West Virginia, Pennsylvania, and New York, the Utica Shale under New York and the Canadian province of Quebec, and the Haynesville Shale in north-west Louisiana. Apart from the sheer size of this reserve base, perhaps its most significant advantages are that these are all located within the continental United States itself, close to existing and extensive natural gas pipeline infrastructure, and, crucially, not far from large consuming markets.
Outlook and Implications
Over 2,000 tcf of natural gas would go a long way towards helping remould the United States' energy landscape. This brings with it the prospect of an increase in cleaner-burning gas-fired power generation, at the expense of dirtier coal. Some would like to see gas used as a fuel for personal transportation. Greater reserves could support this possibility. Gas could even be used to help bridge the gap towards a future with far greater emphasis on renewable energy. Concentrated solar plants (CSP), which use mirror-focused light from the sun to vaporise water into steam to turn a power-generating turbine, could, for example, be fairly easily adapted to burn natural gas at night—thus offsetting the greatest disadvantage of current renewable power; that is, its inherent variability. The possibilities are legion.
Unfortunately, the presence of abundant hydrocarbons is no guarantee that they will be produced. To realise unconventional gas production growth, the U.S. federal government—as well as state legislatures—will need to play a much more active role with industry to streamline environmental rules, regulations, and leasing practices. A lenient fiscal regime, or at least one not overly burdensome, would also help encourage exploration and production. None of these outcomes is a given, however. Lawmakers might, for example, be tempted to impose heavier royalties on unconventional gas to prop up creaking state budgets, thus cutting off its head before the industry has a chance to grow. Environmental considerations could also limit production; a bill in Congress is currently attempting to boost regulation of hydraulic fracturing, a crucial activity which—if curtailed—will significantly harm the prospects for growth in unconventional gas production (see Related Articles). The possibility of energy industry tax break cancellations, as tabled by the administration of President Barack Obama, could also limit growth. On the other hand, Obama has shown himself to be a pragmatist, and there is no reason at this time to suppose he will not be receptive to supporting unconventional gas. With energy security always high on the agenda of American politics, and with greenhouse gas (GHG) reductions an increasingly important policy goal, it would be the height of folly not to exploit domestic reserves so large.
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