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      SUMMARY OF A WORKSHOP ON
U.S. NATURAL GAS DEMAND,
SUPPLY, AND TECHNOLOGY
       LOOKING TOWARD THE FUTURE
NOTICE: The project that is the subject of this report was approved by the Governing Board
of the National Research Council, whose members are drawn from the councils of the Na-
tional Academy of Sciences, the National Academy of Engineering, and the Institute of Medi-
cine. The members of the committee responsible for the report were chosen for their special
competences and with regard for appropriate balance.
This study was supported by the U.S. Department of Energy, Minerals Management Ser-
vice, and the U.S. Geological Survey. Any opinions, findings, conclusions, or recommenda-
tions expressed in this publication are those of the author(s) and do not necessarily reflect
the views of the organizations or agencies that provided support for the project.
Additional copies of this report are available from the National Academies Press, 500 Fifth
Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the
Washington metropolitan area); Internet, http://www.nap.edu
The National Academy of Engineering was established in 1964, under the charter of the
National Academy of Sciences, as a parallel organization of outstanding engineers. It is au-
tonomous in its administration and in the selection of its members, sharing with the Na-
tional Academy of Sciences the responsibility for advising the federal government. The Na-
tional Academy of Engineering also sponsors engineering programs aimed at meeting
national needs, encourages education and research, and recognizes the superior achieve-
ments of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering.
The Institute of Medicine was established in 1970 by the National Academy of Sciences to
secure the services of eminent members of appropriate professions in the examination of
policy matters pertaining to the health of the public. The Institute acts under the responsibil-
ity given to the National Academy of Sciences by its congressional charter to be an adviser to
the federal government and, upon its own initiative, to identify issues of medical care, re-
search, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine.
The National Research Council was organized by the National Academy of Sciences in 1916
to associate the broad community of science and technology with the Academy’s purposes
of furthering knowledge and advising the federal government. Functioning in accordance
with general policies determined by the Academy, the Council has become the principal
operating agency of both the National Academy of Sciences and the National Academy of
Engineering in providing services to the government, the public, and the scientific and engi-
neering communities. The Council is administered jointly by both Academies and the Insti-
tute of Medicine. Dr. Bruce M. Alberts and Dr. Wm. A. Wulf are chairman and vice chair-
man, respectively, of the National Research Council.
www.national-academies.org
                                               iii
      COMMITTEE ON U.S. NATURAL GAS DEMAND AND
          SUPPLY PROJECTIONS: A WORKSHOP
SCOTT W. TINKER, Chair, The University of Texas at Austin
JOHN B. CURTIS, Colorado School of Mines, Golden
JAMES J. EMME, Anadarko Petroleum Corporation, The Woodlands,
   Texas
VELLO A. KUUSKRAA, Advanced Resources International, Arlington,
   Virginia
DIANNE R. NIELSON, Utah Department of Environmental Quality,
   Salt Lake City
                                  iv
              COMMITTEE ON EARTH RESOURCES
SUSAN M. LANDON, Chair, Thomasson Partner Associates, Denver,
    Colorado
JAMES C. COBB, University of Kentucky, Lexington
VICKI COWART, Consulting Geologist, Denver, Colorado
PATRICK CUMMINS, Western Governors’ Association, Denver,
    Colorado
THOMAS V. FALKIE, Berwind Natural Resources Corporation,
    Philadelphia, Pennsylvania
MURRAY W. HITZMAN, Colorado School of Mines, Golden
MICHAEL L. MENGE, U.S. Senate Committee for Energy and Natural
    Resources (retired), Dover, Arkansas
JOHN N. MURPHY, University of Pittsburgh, Pennsylvania
DONALD L. PAUL, ChevronTexaco Corporation, San Ramon,
    California
MARK C. ROBERTS, Michigan Technological University, Houghton,
    Michigan
JOAQUIN RUIZ, University of Arizona, Tucson
RUSSELL E. STANDS-OVER-BULL, Arrow Creek Resources, Inc.,
    Pryor, Montana
R. BRUCE TIPPIN, North Carolina State University, Asheville
LAWRENCE P. WILDING, Texas A&M University, College Station
P. MICHAEL WRIGHT, Idaho National Engineering and Environmental
    Laboratory, Idaho Falls
                                  v
        BOARD ON EARTH SCIENCES AND RESOURCES
GEORGE M. HORNBERGER, Chair, University of Virginia,
    Charlottesville
JILL BANFIELD, University of California, Berkeley
STEVEN R. BOHLEN, Joint Oceanographic Institutions, Washington,
    D.C.
VICKI COWART, Consulting Geologist, Denver, Colorado
DAVID L. DILCHER, University of Florida, Gainesville
ADAM M. DZIEWONSKI, Harvard University, Cambridge,
    Massachusetts
WILLIAM L. GRAF, University of South Carolina, Columbia
RHEA GRAHAM, New Mexico Interstate Stream Commission,
    Albuquerque
V. RAMA MURTHY, University of Minnesota, Minneapolis
DIANNE R. NIELSON, Utah Department of Environmental Quality,
    Salt Lake City
RAYMOND A. PRICE, Queen’s University, Kingston, Ontario
MARK SCHAEFER, NatureServe, Arlington, Virginia
BILLIE L. TURNER II, Clark University, Worcester, Massachusetts
THOMAS J. WILBANKS, Oak Ridge National Laboratory, Oak Ridge,
    Tennessee
                                  vi
                   Acknowledgments
T
        his workshop summary has been reviewed by individuals chosen
        for their diverse perspectives and technical expertise in accordance
        with procedures approved by the National Research Council’s
(NRC) Report Review Committee. The purpose of this independent re-
view is to provide candid and critical comments that will assist the au-
thors and the NRC in making their published summary as sound as pos-
sible and to ensure that the summary meets institutional standards for
objectivity, evidence, and responsiveness to the study charge. The con-
tent of the review comments and the draft manuscript remain confiden-
tial to protect the integrity of the deliberative process. We wish to thank
the following individuals for their participation in the review of this
summary:
                                    vii
viii                                                ACKNOWLEDGMENTS
C
         ommittee members John Curtis, James Emme, Vello Kuuskraa,
         and Dianne Nielson and National Research Council staff mem-
         bers Tammy Dickinson, Monica Lipscomb, and Karen Imhof were
fundamental in developing the workshop agenda, identifying speakers,
running the workshop, and writing this report. It was a great team effort.
My thanks to each of them.
     For 150 years, U.S. energy consumption trends have led global energy
consumption trends. Those trends indicate that the future of energy is
most likely a hydrogen and solar future utilizing technology that today
may not even exist. As we transition toward the future, a mix of known
energy sources—coal, oil, natural gas, nuclear, hydro, and other
renewables—will be required over the next 100 years to meet global en-
ergy demands. Certainly there is a global supply of coal for the next cen-
tury that can be burned for electricity and gasified for transportation fuel
if policy so directs. Similarly, there is a global supply of cleaner and more
efficient natural gas for the next 100 years, which in addition to being
burned as a direct energy source could provide feedstock for hydrogen if
policy so supports.
     Recognizing that fossil fuels supply 85 percent of the world’s energy
needs today, that the world has been steadily progressing away from solid
and liquid forms of fossil energy toward natural gas, nuclear, and renew-
able energy, and that all fossil fuels are only an energy bridge to the next
century, it is important to determine the best mix of fossil energy sources
for the economy, health, and well-being of our planet during the present
                                     ix
x                                                              PREFACE
SUMMARY 1
1   INTRODUCTION                                              6
    Study and Report, 10
                                xi
xii                                            CONTENTS
REFERENCES 83
APPENDIXES
B     WORKSHOP AGENDA                               93
                             Summary
N
          obel laureate and workshop keynote speaker Richard Smalley
          believes that energy leads the list of humanity’s most important
          issues, which include water, food, the environment, poverty, ter-
rorism and war, disease, education, democracy, and population (Richard
Smalley, Rice University, personal communication, 2003). And although
there is a very predictable and long-term decarbonization of the world’s
energy sources—from coal, to oil, to natural gas, and eventually to hydro-
gen—the United States today, and for the foreseeable future, will remain
dependent on fossil fuels to satisfy on the order of 85 percent of its energy
demand (EIA, 2001a). Because natural gas represents a growing propor-
tion of the global fossil energy mix, accurately projecting natural gas sup-
ply and demand is critical. In this context, according to some workshop
participants, key efforts in achieving the most efficient use of natural gas
resources are (1) creating the proper mix of access and incentives to en-
courage efficient and environmentally sound exploration and production
activities, (2) designing a strategic private-public partnership to foster the
innovative research and technology development that are fundamental to
meet long-term U.S. energy demand, and (3) encouraging the infrastruc-
ture development to create a global natural gas transportation network
that will be required for increased use of natural gas.
    The National Research Council, under the auspices of the Committee
on Earth Resources of the Board on Earth Sciences and Resources, was
requested by the U.S. Department of Energy, the Minerals Management
Service, and the U.S. Geological Survey (USGS) to host a workshop to
address projections for the supply of and demand for natural gas over the
                                      1
2                     U.S. NATURAL GAS DEMAND, SUPPLY, AND TECHNOLOGY
by the industrial sector, its competitive position for new power facilities,
the energy conservation and efficiency response to higher gas prices, price
volatility, and the creation of a global transportation and storage network.
In addition, proposed and pending energy policies, such as the Bush
Administration’s Clear Skies Initiative, and international pressures for
addressing carbon emissions and global climate change will further influ-
ence the demand for and price of natural gas. Consumption of natural gas
is projected by the Energy Information Administration (EIA, 2003a) to
grow from 22.4 trillion cubic feet (Tcf) in 2002 to 27.1 Tcf in 2010 and to
34.9 Tcf in 2025. This rate equates to an average annual increase in natural
gas consumption of 2 percent per year and is faster than the expected
growth in overall primary energy consumption. The bulk of the increase
is from electricity generation as the share of natural gas in this market,
assuming natural gas is available at moderate prices, is expected to in-
crease from 17 percent in 2001 to 29 percent in 2025 (EIA, 2003a).
     Committee members and participants noted that workshop assess-
ments of the future supply of natural gas in North America sent some-
what mixed signals. Some workshop participants believe (1) that the
United States will continue to require increasing amounts of imported
natural gas to meet projected demand; (2) that Canada will increase its
domestic consumption, with little excess export capacity beyond that of
the present day; and (3) that Mexico will most likely remain a net im-
porter of natural gas. LNG imports—and perhaps natural gas hydrates in
the longer term—will most likely be required to augment the North
American natural gas supply. Participants also thought the accuracy of
the supply assessment is limited by (1) perception and understanding of
the origin and occurrence of the resource, (2) the quality and distribution
of available data with which to conduct the estimates, and (3) the meth-
ods used in the assessment. Owing to these variables, a range of assess-
ment values as opposed to a single number could be expected.
     Total assessed gas resources for the United States have been increas-
ing over the past 20 years owing to (1) an improved understanding of the
phenomenon of reserve appreciation or reserve growth whereby gas (and
oil) fields ultimately produce three to nine times the amounts initially
estimated by standard engineering techniques; (2) an understanding of
the potential for new “plays”* ; and (3) an evaluation of the role of current
and advanced technologies in gas exploration and production (Thomas
Ahlbrandt, USGS, personal communication, 2003). A total of 1,289 Tcf of
  *A play is a group of prospects and any related fields having common oil or gas sources,
migration relationships, reservoir formations, seals, and trap types. The prospects thus share
any common elements of geological risks (White, 1992).
4                     U.S. NATURAL GAS DEMAND, SUPPLY, AND TECHNOLOGY
technically recoverable resources has been reported for the United States
by the Energy Information Administration, using predominantly USGS
and Minerals Management Service data, with proven reserves accounting
for 14 percent of the remaining U.S. resource (Mary Hutzler, EIA, per-
sonal communication, 2003). Unconventional natural gas—comprising
tight (low-permeability) sands and carbonates, fractured shale gas, and
coalbed gas—accounts for 34 percent of remaining U.S. resources (Mary
Hutzler, EIA, personal communication, 2003). Controversy exists, how-
ever, as to the size and geological nature of the tight sands gas resource in
the U.S. Rocky Mountains region, where the bulk of the assessed uncon-
ventional gas is thought to reside (Ben Law, Pangea Hydrocarbon Explo-
ration, personal communication, 2003; Keith Shanley, Stone Energy, per-
sonal communication, 2003). The remaining potential global supply of
natural gas is more than 13,000 Tcf according to USGS (2000) assessments.
Undiscovered natural gas is concentrated in the former Soviet Union, the
Middle East, and North Africa. Known reserves account for 35 percent of
the remaining potential supply.
     Workshop discussion focused on ways to meet projected demands
and to counter natural gas price increases and volatility in the United
States, including the need for an educated and trained workforce; access
to off-limits lands; increased natural gas storage capacity; a global trans-
portation infrastructure, especially for offshore production and imports;
more efficient and competitive fiscal and regulatory regimes; and rapid
technological improvements—with emphasis on the development of un-
conventional reservoirs and conventional deepwater and frontier re-
sources. Rapid technological improvements—which in the past two de-
cades have served to create unconventional gas reserves such as tight gas,
shale gas, and coalbed gas—have historically relied on large private-sec-
tor investment. In terms of future unconventional natural gas resources,
workshop participants also discussed the need for investment in research
and development, including a greater proportion of federal investment
than in the past.
     Until pipeline and LNG transportation projects are put in place and
natural gas storage solutions are found, the interplay between factors such
as wellhead price, weather, imports, domestic gas rig activity, deliver-
ability of new wells, and availability and cost of external supplies (i.e.,
pipelines) will continue to result in price and storage volume volatility.
New sources of natural gas from Canada via pipelines and globally via
LNG appear to be competitive in a sustained $3.25 per thousand cubic
feet (Mcf) or greater price environment.
     The workshop was designed to address projections for the supply of
and demand for natural gas over the next 10 to 20 years and methods of
increasing reserves and production. As noted at the workshop, it seems
SUMMARY                                                                  5
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