Yesterday the Energy Information Administration (EIA) released their 2015 Annual Energy Outlook that forecasts U.S. demand for natural gas to increase by as much as 42% from 2014’s 26 TCF/year to 37 TCF/year by 2040. That translates to 101 BCF/d and is predicated on long term supplies of relatively cheap gas! Can the U.S. produce that much gas over the long term? Last week a group that is little known outside the natural gas industry – the Potential Gas Committee (PGC) provided an answer to that question when they announced their latest estimate of economically recoverable natural gas resources in the U.S. Today we analyze the impact of the latest PGC estimate and its long-term implications for the natural gas industry.
On April 8, 2015 a biennial natural gas industry event took place that didn’t get much press coverage outside the industry, and what it did get was kind of muted. It shouldn’t have been muted. The event was the press conference announcing the new Potential Gas Committee estimate of US recoverable natural gas resources. The Committee, or PGC, is a large group of industry volunteer experts who gather for a couple of years at the Colorado School of Mines in Golden Colorado, analyzing and evaluating the ability of all the producing regions of the nation to give up economically recoverable natural gas. This is the number that gets added to the Energy Information Administration’s (EIA) evaluation of proved reserves (the gas supply they’re really sure about), to arrive at a total resource ultimately available to the market.
The headline last week was that the PGC estimate of economically recoverable reserves had gone up 5.5 percent since the last estimate two years ago in 2012. Whoopee. Not a very big number. But we have to look at the absolute numbers, and see what they’ve done since shale development came to the front of the class in 2008, to understand that we have something pretty profound going on here. Figure 1 depicts the sum of the PGC estimate and EIA’s proved-reserve estimate in trillion cubic feet (TCF), for each study year since 1990. Shale is set out in green, in order to show its importance to this newfound abundance. Conventional gas estimates are in light blue and the EIA proved reserves are gray.