Lower prices pull down natural gas reserves in 2012

Energy Information Administration ^ | April 11, 2014 | Energy Information Administration

[thackney]

Lower natural gas prices drove down U.S. proved reserves in 2012, despite notable gains in the Marcellus and Eagle Ford shale gas plays. The decline stopped a 14-year trend of consecutive increases in natural gas reserves, according to newly published estimates in EIA's U.S. Crude Oil and Natural Gas Proved Reserves 2012.

Proved reserves are volumes of natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

Natural gas proved reserves, estimated as wet natural gas that includes natural gas plant liquids, decreased 7% in 2012 to 323 trillion cubic feet (Tcf), as operators revised the proved reserves of their existing natural gas fields downward in response to lower natural gas prices (the natural gas spot price at the Henry Hub dropped below $2.00 per million British thermal units (MMBtu) in April 2012, a relatively low price level not experienced since December 2001).

At the state level, Pennsylvania and West Virginia reported the largest net increases (9.8 Tcf and 4.3 Tcf, respectively) in natural gas proved reserves in 2012, driven by the continued development of the Marcellus Shale play. The Marcellus Shale play became the largest shale play (ranked by proved reserves) in the United States in 2012. Proved reserves in shale gas plays accounted for 40% (129.4 Tcf) of U.S. wet natural gas proved reserves in 2012. However, gains in the Marcellus (10.9 Tcf) and Eagle Ford (7.8 Tcf) shale plays were more than offset by price-driven reductions in more mature shale plays (the Barnett and the Haynesville declined a combined 20.7 Tcf) in 2012.

EIA's estimates of proved reserves at the end of 2012 are based on an annual survey of domestic oil and gas well operators. EIA anticipates that proved natural gas reserves for 2013 will be affected positively by the recovery in natural gas prices from 2012 to 2013. From 2012 to 2013, the average natural gas spot price at the Henry Hub, used to estimate reserves (12-month, first-trading-day-of-the-month price), increased from $2.75 to $3.66 per MMBtu.

[thackney]

[ckilmer]

For the last couple years production and reserves have gone up together.

that’s the first time in several years I’ve seen reserves decline while production increased.

A lot of people will come to the conclusion that the reserve decline had to do with production-—which would be entirely false.

The reserve decline has to do entirely with price—and also federal/state/local regulation. For example likely Marcellus scale natural gas lies under New York State that can’t currently be accessed. As well there’s a lot of federal lands that are not access able to drillers under the current regime.

[thackney]

The drop in reserves is from a lack of new investment by companies producing gas. They spent less on new areas for drilling and leases.

Then 2013 saw the lowest growth in production since 2005, less than 1%.

U.S. Dry Natural Gas Production
http://www.eia.gov/dnav/ng/hist/n9070us2a.htm

Consumption grew by 2% in 2013.

U.S. Natural Gas Total Consumption
http://www.eia.gov/dnav/ng/hist/n9140us2a.htm

Now, if government doesn’t interfere too much, it will be a self-correcting problem. Import Prices from 2012 to 2013 rose 33%. The higher prices are going to fund more investment into US domestic production (and reserves).

Price of U.S. Natural Gas Imports
http://www.eia.gov/dnav/ng/hist/n9100us3a.htm

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