Introduction

Despite the nation's preoccupation with oil, the colorful, turbulent history of coal and the controversy surrounding nuclear energy, neither oil, coal or nuclear is now the dominant U.S. energy source—since the mid-1970's the largest domestic energy source has been natural gas.

In the past year, the nation consumed nearly 80 quads (quadrillion or 10(15) BTUS) of energy with domestically produced natural gas providing approximately 19 quads (19 Tcf). In comparison, domestic oil production was 18 quads (3 billion barrels), coal production was 18 quads (3 billion barrels), coal production was 14 quads (600 million tons) and nuclear production was 14 quads (600 million tons) and nuclear energy in the form of electricity was 3 quads (250 million kilowatt-hours).

Natural gas is an economically preferable substitute for oil and an environmentally more acceptable source than coal or nuclear for many uses, such as industrial heating. Further, increased domestic supplies of natural gas could reduce imports, lessen the U.S. dependence on foreign energy sources, and help the balance of payments.

The current constraint on natural gas usage is no longer stimulating demand but rather obtaining sufficient supply. Even though several early warnings were sounded in the 1960's and early 1970's, predicting curtailments of gas, these warnings were muted by econometric studies that forecast massive additions of natural gas if only prices were slightly increased.

Recent detailed geological studies, declining finding rates and the limited additions of new supplies in response to sharply higher prices corroborate the conclusion that the geological limits of the domestic conventional natural gas resource base are being reached and that future production from this source will decline.

The most promising hope for future additions to natural gas supplies is from the nontraditional sources such as frontier (offshore and arctic) areas, deep drilling, imports, and unconventional gas. This paper will discuss each of these future supply sources.

THE DEMAND FOR ENERGY

Even with conservation and improved end-use efficiencies energy consumption is expected to increase from 78 quads in 1978 to about 100 quads by 1990. The changes in U.S. energy demand by sector, or market, are projected in Fig. 1.

The demand for natural gas is supply limited, with industrial firms deterred from its use by fear of curtailments and electrical utilities deterred by law. Assuming adequate supplies were available, the American Gas Association (AGA) and several demand models project an unconstrained gas demand of 25 to 30 quads project an unconstrained gas demand of 25 to 30 quads (or Tcf). Thus, the critical issue for natural gas is supply and how it can be increased from domestic sources.

ESTIMATING FUTURE SUPPLIES OF NATURAL GAS

Three types of estimating techniques dominate any future projections of natural gas supplies - traditional, advocacy, and disaggregate analysis.

  1. Traditional. The traditional approach to estimating energy supplies relies on econometric models, finding rates and an aggregate resource base, generally the latest official USGS study. The current validity of these techniques, however, is doubtful, given; (a) the fiasco resulting from the use of econometric models for the Project Independence Study in 1975; (b) the dramatic recent changes that have taken place in the estimates of the lower-48 resource place in the estimates of the lower-48 resource

Federal Energy Administration, Project independence Report (Washington, D.C., November 1974). In their $16.50 per barrel (1979$) and accelerated development case, the Project Independence Study Group estimated domestic oil production would increase in 1985 to 18 million barrels per day and domestic natural gas production would be 24 Tcf per year and limited by production would be 24 Tcf per year and limited by demand.

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