by Jean Laherrere
February 12, 2001
In the February issue of Offshore magazine is an article of Richard Nehring on US gas potential untitled "Reservoir temperatures, low thermal gradient limit US Gulf's deepwater gas potential"
Richard Nehring has his own US database in his company NRG Associates and is the best expert in the US reserves and one of the best for the world. He wrote in 1980 a book with Hubbert "World petroleum availability 1980-2000" found at
http://www.wws.princeton.edu/scgi-bin/byteserv.prl/~ota/disk3/1980/8023/8023.PDF
following his 1978 world's assessment for the Rand Corporation.
His 1978 world's oil ultimate is 1700-2300 Gb, which is a very good assessment in my opinion. However in 1979 he diminished it to 1600-2000 Gb.
His forecast for the free world (outside communist countries) in 2000 was 40-62 Mb/d (52,4 in 1979) compared to 40-48 for BP, 60 for Exxon and 70-90 Mb/d in 1995 for DOE/EIA.
In 1999 the world outside FSU, East Europe and China is
OGJ: 64,7-7,3-3,2= 54 Mb/d for crude
and World Oil: 74,1-7,9-3,2= 63 Mb/d for liquids.
It means that Nehring-Hubbert were right as Exxon, and that BP was far too
low and DOE/EIA far too high.
As Nehring has the experience, the data, he can be trusted now, when BP and DOE/EIA could not be trusted in the past and now.
In his Jan. 2001 article in Offshore Nehring studies the GOM and contrary to USGS he gives the proved but also the proved plus probable (by growing the proved by about 30% after few years, completely different from the 2000 USGS lower 48 reserve growth).
In the same issue of Offshore J.Dodson gives the oil and gas production of the Gulf from 1975 to 2000, with the breakdown for water of less than 1000 ft and more than 1000 ft.
Figure 1: US Gulf of Mexico oil and gas production from J.Dodson
Nehring’s forecast for the deepwater Gulf gas production from his estimated resource of 56 Tcf (current discoveries = 27 Tcf) is a peak in 2008 at 3 Tcf/a.
He described the difference between the shelf with about 65% of gas of the oil and gas reserves, with the deepwater where gas represents only 30% of the oil and gas reserves. There is less gas in the deepwater because the low thermal gradient giving low temperatures.
Figure 2: US deepwater GOM: natural gas production from known and future discoveries up to 2010 from R.Nehring
But the report from GRI (now Gas Technology Institute) "The long term trends in US gas supply and prices" (see in Oil and Gas Journal January 22, 2001 the article of J.C.Cocheter) and on the following graph where the Gulf of Mexico gas production shows a continuous decline of the shelf since its peak of 1970, the rise of the deepwater since 1990 and the arrival of a bursting ultra-deep. The GRI deepwater peaking around 2005 is in line with Nehring but not this new concept of ultra-deep, contrary to the finding that deeper the water, less is gas.
Figure 3: GoM production from GRI
Cocheter gives the breakdown by areas for 2015:
| figure 7 production Tcf | 1998 |
2015 |
|
Lower 48 |
19 |
27,8 |
| West | 0.3 |
0.4 |
| Rocky Mtns | 2.9 |
4.9 |
| Permian | 4.3 |
4.8 |
| S.Texas/louisiana | 5.1 |
5.7 |
| GOM | 4.9 |
8.1 |
| East | 1.5 |
4 |
|
Alaska |
0.5 |
0.7 |
|
Canada |
5.6 |
7.7 |
| BC | 0.6 |
1.1 |
| Alta Sask Manitoba | 5 |
6 |
| Eastern Canada | 0 |
0.6 |
The USDOE (AEO 2001) and GRI forecasts for US gas production are a drastic break with the trend of the past 10 years production.
Nehring said that the anticipated supply in 2010 would be short by 3-4 Tcf.
I believe that Nehring is right in forecasting the supply but that the NPC/GRI/DOE are wrong in forecasting the demand as the high price of gas will reduce the consumption and increase the arrival of NGL from outside the lower 48 (Indonesia, Middle East, even from Alaska by LNG or gas pipeline). The forecast of Nehring of 20 Tcf instead of 23 Tcf in 2010 is better in trend with the past than the forecast from GRI and DOE and furthermore it is based on better data and better experience of forecasting.
Figure 4: US gas production and forecasts from GRI and EIA
For the whole US gas demand from 22 Tcf in 1998 to the forecasted 29 Tcf in 2010 by the National Petroleum Council, coming mainly from the GOM, the Rocky Mountains and Canada,
Another intriguing forecast from the GRI is that the gas price will decline in the future, being less than 2 1998$/Mbtu in 2010
| year | 1985 |
1990 |
1995 |
2000 |
2005 |
2010 |
2015 |
| average price $1998/Mbtu | 3.48 |
1.98 |
1.51 |
2.23 |
2.01 |
1.97 |
1.94 |
| consumption Tcf | 17.3 |
18.8 |
21.5 |
22.4 |
25.7 |
28.6 |
32.7 |
| prod. Lower 48 Tcf | 15.9 |
16.4 |
17.6 |
18.9 |
21.3 |
23.9 |
27.9 |
| prod. Alaska Tcf | 0.4 |
0.4 |
0.5 |
0.5 |
0.6 |
0.7 |
0.7 |
| prod US | 16.3 |
16.8 |
18.1 |
19.4 |
21.9 |
24.6 |
28.6 |
| LNG | 0 |
0.1 |
0 |
0.1 |
0.1 |
0.1 |
0.1 |
| imports pipeline | 0.9 |
1.4 |
3.3 |
3.5 |
4.5 |
4.8 |
4.8 |
| exports pipeline | 0 |
0 |
0.6 |
0.6 |
0.9 |
0.9 |
0.9 |
| storage withdrawal | 0.2 |
-0.5 |
0.4 |
0.1 |
0 |
0 |
0 |
The USDOE AEO 2001 forecasts a small increase from 2.08 $/kcf to 2.69 1999$/kcf in 2010 and 3.13 in 2020.
Everyone knows that forecasting prices is a difficult task and very few people in 1999 have predicted the world’s oil price rise and the drastic US gas price in 2000. It is surprising to see in January 2001 a forecast for gas price with a 95% confidence interval (only one chance out of 20 to be wrong) giving the gas spot price at mid 2001 between 3.8 and 5.1 $/kcf and at mid 2002 between 3.3 and 5 $/kcf. It is a big gamble!
Figure 5: DOE forecast on gas price for 2001 and 2002
The present black outs in California are a good proof that it is not possible to have cheap supply and security of the supply, as cheap prices lead to no investment and decline in supply. Most of people want to have the cake and eat the cake. The only solution to have the necessary supply is to accept higher prices than in the past where gasoline was cheaper than bottled water.