OUTLOOK ’10: US natgas is abundant but may be restricted

24 December 2009 22:00  [Source: ICIS news]

Natgas availability will be restrictedWASHINGTON (ICIS news)--The US has record-high resources of natural gas, enough to meet domestic consumption for a century - but while those supplies are technically accessible, they might remain beyond reach for political reasons.

The country’s petrochemical producers and downstream chemical makers are heavily dependent on natgas as a feedstock and as a fuel for power and heat production, so they and other manufacturers worry that political and environmental constraints could mean gas starvation despite the new abundance of supply.

The American Gas Association (AGA) recently cited data from the Potential Gas Committee (PGC) indicating that the nation has a total available supply of 2,074,000bn cubic feet (bcf) of natural gas.

The US consumes about 22,000 bcf annually.

The Potential Gas Committee, a non-profit research organisation based at the Colorado School of Mines in Golden, Colorado, said the new supply data on natural gas marks the highest resource evaluation in the committee’s 44-year history.

AGA and the committee said that much of the increase in US gas resources is due almost wholly to the availability of new technologies and drilling techniques that enable recovery of shale gas

Horizontal drilling and hydraulic fracturing have advanced in recent years to develop shale gas reserves - gas deposits locked in deep rock formations - that previously were unrecoverable or too costly to bring to the surface.

The lower 48 states have a wide distribution of shale reserves - known as plays - containing vast resources of natural gas, according to the US Department of Energy.

There might be still more conventional natural gas resources in US outer continental shelf (OCS) regions that have not been surveyed in 30 years.

But whether these technically recoverable gas resources are onshore or offshore, getting them to market will be a challenge.

Although a nearly 30-year congressional moratorium on drilling in some 85% of US OCS regions was allowed to expire in September 2008, there has been little progress in opening those offshore regions to exploration and development.

Energy industry leaders and some members of Congress contend that the Obama administration has been dragging its feet in developing a new five-year offshore oil and gas development programme and may further restrict OCS access with policies favouring marine ecosystems and set-asides for development of renewable energy undertakings such as offshore wind farms and wave-action power generation.

Development of abundant onshore resources in shale gas also is threatened by legislation pending in Congress that would put severe limits on hydraulic fracturing, the high-pressure process that is essential to shale gas production.

That legislation - which contends that hydraulic fracturing (“fracking”) threatens drinking water supplies - would shift government control of fracking from state regulators to the federal Environmental Protection Agency (EPA) and a far more stringent permitting process.

Energy industry officials argue that such a shift would essentially close off development of shale gas reserves.

That prospect and ongoing delays in authorising renewed offshore energy development worry petrochemical and chemical sector officials.

Charlie Drevna, president of the National Petrochemical & Refiners Association (NPRA), noted that “while our proven natural gas reserves are growing, these resources have no value whatsoever if politically based, artificial prohibitions on exploration and development continue”.

“Every component of our domestic energy production is critical,” Drevna added.

“American consumers are best served by the broadest, most diverse energy portfolio possible, and the best way to achieve that is to encourage production and increased supply within our own borders,” he said.

While Congress and the administration with one hand impose restrictions on gas exploration and development, industry officials charge that the other hand creates policies that will drive gas demand and prices ever higher.

“The possibility of greenhouse gas regulation also has significant energy and feedstock demand implications,” Drevna said, “as electricity generations would be forced to switch from using coal to natural gas as a fuel.”

The American Chemistry Council (ACC) said it shares that concern.

“We must stress the importance of balancing calls to legislate more demand for natural gas with steps that will create a long-term, sustainable, affordable, adequate and accessible supply of natural gas,” said ACC spokeswoman Jennifer Scott.

“As the largest industrial user of natural gas, the chemical industry makes critical decisions on where to invest in future production largely based on our confidence in long-term US energy and feedstock supplies,” she added.

She said the council has long supported a comprehensive approach to US energy policy that “includes efficiency and conservation, energy diversity and expanded domestic energy supply”.

“Congress should avoid picking winners and losers in the marketplace,” Scott said.

“For example, climate policies that induce utilities to switch their electricity generation from coal to natural gas have the potential to do just that,” she noted.

Congress may act on climate change legislation and possible restrictions on shale gas fracking early in the new year.

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