Natural gas is expected to play a strategic role in the United States' future energy plans, but low oil and gas prices are hindering the development of gas reserves, two consulting companies say.
Arthur Andersen & Co. and Cambridge Energy Research Associates released their annual report, "Natural Gas Trends," which emphasized how the natural gas industry has shifted its operations from a long-term to a short-term basis."The rapid growth of various forms of spot and transmission markets means a risky transition period in which the entire industry is heavily dependent on short-term supply arrangements," said James Newcomb, natural gas coordinator for Cambridge Energy.
"The industry's commercial relationships today are, in some ways, built on a foundation of sand. While distributors will be looking for security of supply, producers will be looking for secure markets and higher prices. This would leave buyers exposed to price volatility," Newcomb said.
Arthur Andersen partner Everett S. Gibbs said gas reserves must be developed before they are available for consumers. The Department of Energy has reported nearly 1,100 trillion cubic feet of gas is accessible in the lower 48 states.
The Natural Gas Trends report said the oil price collapse has taken its toll on natural gas reserves. In 1987, only 10.7 TCF of reserves were added, replacing less than 70 percent of the gas used that year. That compared to 14.8 TCF of reserves added during 1986.
Gas well completions for 1987 were 7,200, a 45 percent drop compared with 13,100 gas well completions during 1985. Completions for 1988 are expected to hover at about 7,000 wells.
"Most in the industry agree that in order to sustain current levels of production, drilling activity must recover to some level considerably above the 1986-1988 lows," the study said.
Natural gas has been touted by many industry spokesman as the fuel of the future because of the environmental benefits it offers in the way of elimininating problems such as pollution, acid rain and global warming.
President-elect George Bush and some congressional members have said natural gas promises to become a major component of energy supplies. But study organizers said there is no timetable for this.
"It is a little difficult to see natural gas policies coming to the forefront when you have the deficit and defense issues," also pressuring the administration and Congress, Gibbs said.