Content Overview of
Potential Supply of Natural Gas in the United States
Report of the Potential Gas Committee (December 31, 2006)

Report of the Potential Gas Committee In effect, the Executive Summary. PGC and the Ultimately Recoverable Resource Among the recurring tables in the PGC report are two that track the historical changes in the PGC's estimates and how our estimates complement the determination of future gas supply and "ultimately recoverable resources." Tables, however, don't reveal tell the whole story of how production, reserves and resources contribute to supply or how and why resource estimates, in particular, change through time. This chapter illustrates those interrelationships in simplified graphical terms. By understanding the time-dynamic nature of resource estimation and how resources are discovered and eventually brought into production, one can better appreciate how the PGC's estimates help to insure that the gas industry will be able to continue producing gas to meet our nation's needs for years to come. This perspective was prepared by PGC President and General Chairman, Darrell Pierce of DCP Midstream LP, Houston. Historical Trends I: Historical Production Trends and Forecast for the Lower 48 States Our comprehensive analysis of historical hydrocarbon production trends in the Lower 48 States has once again been expanded. Among the 93 charts now comprising the Lower 48 States folio, for 1980 to 2006, Mr. Pierce has added fifteen new analyses that depict numbers of exploration and development wells, well success rate, footage drilled, annual costs to drill and equip wells, average first-year daily production added vs new well completions and revenues, historical production revenues and revenue forecast, and a comparison of the Energy Information Administration's dry-gas production forecasts since 2002. In a concluding series of charts, the author's hydrocarbon-supply model offers an intriguing view of the future drilling activity and price trends that would be necessary to meet the EIA's gas-production targets from 2006 to 2030, as outlined in its latest long-range projection, the Annual Energy Outlook 2007. The folio was compiled from data for 1.5 million oil and gas properties contained in the Petroleum Information/Dwights LLC production databases and from other information compiled by EIA and the author. In addition to the summary folio for the Lower 48 States, Mr. Pierce has prepared a folio of similar charts for each of the PGC gas-producing provinces within the eight supply regions delineated by the EIA (approximately equivalent to the PGC's "Areas"). Because of their sheer number, they have been compiled onto a CD-ROM as a companion product to this printed report. Historical Trends II: Monthly Historical Production Trends for the Lower 48 States Mr. Pierce also has prepared a revised folio of 46 charts that illustrate monthly gas-production trends and numbers of producing wells in 42 PGC provinces from 1987 through 2006, together with a summary chart for the Lower 48 States. These graphs clearly reveal those areas that are maintaining recent production levels (11), those areas wherein production is increasing (16) and those that have begun to exhibit chronic decline (15). This folio also has been included on the CD-ROM. Historical Trends III: Historical Gas Well Permitting Trends in the Lower 48 States The PGC premiers a new folio that helps one evaluate and compare the overall health of the gas industry from basin to basin by tracking the number of well permits issued and the number of wells spudded on a monthly basis. Each of the 54 graphs covering the Lower 48 States, eight PGC onshore and offshore supply regions and 45 provinces for the period 2002 to 2006 also depicts the average number of days that elapsed between the dates well permits in a given month were issued and when those wells actually were spudded. By studying the "peaks" and "valleys" in these graphs, readers can, for example, discern areas where exploration is intensifying, the rate of new play development and the effects of various state regulatory practices. Based on factors mentioned in the text, one can begin to discern why drilling is delayed longer in one area vs another. The new analysis was compiled by PGC Observer, Corey Rhoden of HPDI LLC, and Michael Wayne of RigData. Historical Trends IV: Comparative Summary of Natural Gas Activity in the PGC Provinces Complementing the production-trend analyses is an updated and expanded series of tables that give the reader concise "top-ten" rankings of natural gas producers, gas-well and oil-well gas production and number of producing wells among 41 PGC onshore and offshore provinces, including seven provinces not previously ranked. The analysis shows how the rankings for 2005 have changed since 2003. In this edition we've also indicated those producers who have substantial production of coalbed gas and shale gas. Find out who's producing gas in your area and how much. This analysis was compiled by Corey Rhoden. Overview of Natural Gas Resources, Exploration and Production in Canada As North America continues to evolve into a single integrated natural gas market, we must stay abreast of the gas resource and supply situation in our neighbor to the north. This updated overview of Canadian gas analyzes recent production trends in the maturing Western Canadian Sedimentary Basin and features results of a new, remarkably detailed nationwide resource assessment from PGC's counterpart, the Canadian Gas Potential Committee. Also highlighted are stories of recent exploration efforts in the frontier discovery areas of Atlantic Canada and coalbed gas E&P in Alberta and British Columbia. The Canadian update was prepared by PGC Atlantic Area Committee member, Allen Kelley, and one of PGC's Canadian Observers, Lynn Becker. Frontier Gas Resources I: Future Supply Potential of Natural Gas Hydrates Our continuing examination of the future supply potential of natural gas hydrates reviews the science of hydrate occurrence, resources, possible production methods and scenarios, and safety and environmental considerations. Next are reviews of new well test results from Canada's Mackenzie Delta; a new geologic evaluation and test well targeting hydrates in the Eileen Trend at Prudhoe Bay, Alaska; characterization of hydrate occurrences in dry-gas fields near Barrow, Alaska; new drillhole data from offshore Oregon; and research results and new drillhole data from the deepwater Gulf of Mexico. The 2006 update was prepared by PGC Observer, David Morehouse of DOE's Energy Information Administration. Frontier Gas Resources II: Overview of the Global Baseload LNG Industry, 2006 The importance of liquefied natural gas (LNG) as a global commodity can be clearly seen in the growth of international LNG trade in 2006 (7.7 Tcfe total) and in the number of new liquefaction (export) "trains" recently added, planned and under construction in Africa, Asia Pacific and the Middle East (6.7 Tcfe total). Similarly, patterns of increasing LNG import reliance become evident from the geographic distribution of new receiving terminals planned and under construction in Europe, North America and South America (6.6 Tcfe total). U.S. demand and capacity for LNG are increasing, yet imports have fallen in the last two years as a result of higher prices paid for LNG in Europe and Asia. This update was prepared by PGC Observer, Colleen Taylor Sen of the Gas Technology Institute. Frontier Gas Resources III: Deep Drilling for Natural Gas in the United States Approximately 22 percent of potential onshore gas resources and 35 percent of offshore resources lie at drilling depths below 15,000 ft. Relatively few exploration holes have been drilled to that depth or beyond, and even fewer, about 3,200, currently produce commercial volumes of gas. Total U.S. deep-gas production has been declining since 2001. Corey Rhoden of HPDI LLC again presents a concise graphical summary of historical deep-gas production and well counts from 1980 through 2006 for the Lower 48 States and for three onshore supply areas (Gulf Coast, Mid-Continent, Rocky Mountain) and the shallow-water and deepwater Gulf of Mexico. Frontier Gas Resources IV: U.S. Shale-Gas Exploration and Development PGC premiers a timely new addition to its frontier series with this overview of the geology and resource potential of gas shales, which include some of the country's most active natural gas plays. Shale-gas production actually is not new-in fact, the first commercial gas well in the U.S. tapped Devonian shale in New York in 1821. Like coalbed gas, modern high-volume shale-gas development is largely a technology play from which commercial production, aided at first by a federal tax credit, has grown steadily, now nearing 1 Tcf annually. The principal shale-gas systems include the Ohio Shale in the Appalachians, Antrim in Michigan, New Albany in Illinois and Kentucky, Barnett in Texas and the Lewis in New Mexico and Colorado. A number of other emerging and potential plays across the Lower 48 States could add substantially to the resource base. This overview was prepared by Potential Gas Agency Director, Dr. John Curtis, and David Hill of EnCana Oil & Gas. Offshore Perspectives I: Leasing Issues for the Outer Continental Shelf The American Association of Professional Landmen's Subcommittee on Public Land Access provides the first of three discussions focusing on various offshore natural gas issues, which have intensified over the past two years. The first chapter examines Leasing Issues for the Outer Continental Shelf, beginning with overviews of the Minerals Management Service's new five-year leasing program for 2007-2012 and several of the MMS' OCS planning areas proposed to be offered in 21 lease sales, namely Alaska, a particularly controversial area of the Gulf of Mexico, and the Mid-Atlantic. The discussion also examines the Department of Interior's new offshore royalty rate increase and the MMS' new governance efforts for offshore alternative-energy development. Offshore Perspectives II: The Politics of Natural Gas Resource Development on the Outer Continental Shelf Next, Thomas L. Moskitis, Managing Director of External Affairs for the American Gas Association, recounts the drastic impacts high natural gas prices have had on our chemical and fertilizer industries. The situation can be tied directly to offshore access restrictions. A broadly based natural gas consumers' lobby was organized to counter the influence of special-interest groups who have successfully motivated Congress to maintain offshore drilling bans under the misperceptions that offshore drilling poses threats to beaches and tourism and that potential environmental risks outweigh any benefits of offshore energy production. Moskitis presents factual evidence that refutes these arguments. In The Politics of Natural Gas on the Outer Continental Shelf, the author then presents a rare, frank, insider's account of what really transpired in Congress that led to passage of the Gulf of Mexico Energy Security Act of 2006, giving hope that industry will be allowed to explore and develop more of the immense untapped gas resources underlying our continental shelves. Offshore Perspectives III: Examining the Footprint of Offshore Natural Gas Exploration and Development Chris McGill, PGC's long-time representative from the American Gas Association, offers an insightful perspective on the realities-and misconceptions-of developing our offshore natural gas resources. The public generally is unaware of how advanced E&P technologies have made offshore gas development safer, more efficient and less intrusive. This chapter, Examining the Footprint of Offshore Natural Gas Exploration and Development, reprinted from the PGC's 2004 report, has been updated with interesting background notes and recent developments regarding "rigs to reefs," a remarkably successful collaboration among industry, the Gulf Coast states and the federal government. Comparison of Estimates of Recoverable Natural Gas Resources in the United States PGC is but one organization that prepares estimates of the country's natural gas resources. Unfortunately, some people mistakenly attempt to compare various estimates with one another without understanding the respective underlying assumptions and methodologies. Indeed, it is these differences that give us such a seemingly wide range of estimates for the same commodity. In this ongoing series, Dr. John Curtis presents the results of the PGC's new assessment and those of the National Petroleum Council and the EIA and clarifies the issue by contrasting the methodologies behind each. From Reservoir to Burner Tip: A Primer on Natural Gas This installment of PGC's natural gas "primer" features, for the benefit of our less technical readers, a wealth of new and updated information about how natural gas is found and produced, processed, stored, transported, delivered to and ultimately used by consumers. The gas supply outlook section explains how PGC's resource estimates complement proved reserves and production and discusses the nature and limitations of our major sources of supplemental gas supply. Punctuated now with EIA's latest statistics, the primer will give readers a much better appreciation of the magnitude, diversity and complexity of the nation's natural gas infrastructure, which is continually being expanded and improved to help meet America's energy needs. The primer was prepared by Dr. John Curtis and PGC's Editorial Chairman, Stephen Schwochow. NOTE: The following chapters present the fully detailed national, area-by-area, and province-by-province PGC resource estimates, describe the methods that were used to develop them, and document the policies that guided their development. These chapters occupy more than a third of the report. Area Reports     Preface     Atlantic Area     North Central Area     Gulf Coast Area     Mid-Continent Area     Rocky Mountain Area     Pacific Area     Alaska Area Natural Gas Resources in Coalbeds Methodology of the Potential Gas Committee Policy Guidelines and Structure of the Potential Gas Committee Appendix 1. Sources of Information on Natural Gas Composition