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Observations about natural gas and observations

April 5, 2012

If you follow energy news at all, and have not lived in a cave the last year or so, it is inevitable that you have heard about natural gas produced from shale and how the abundant supply of such gas in the United States will allow us to drastically reduce foreign fuel imports, transition the nation’s fleet of coal-fired generating plants and provide transportation fuel.  Moreover, it will do so for estimates that range from 100 to 200 years.  Really.

This story seemed to me to offer a good study in how to engage in creative observation.  Suppose you’ve heard that domestic natural gas production reached an all-time high in 2011.  Let’s start by building some context for that.  What has been the history of natural gas production in the United States?  There might be many places one could go look for this but I like the Energy Information Administration (EIA).  Their website is easy to navigate and, with respect to historical quantity information, probably as accurate as one can get, at least on a national level.  So, here’s what I found when I went looking:

Okay, now I know that, yes, the production was an all-time high.  What I did not know before looking, however, is that it is not that much higher than it was in 1973.  But it occurs to me that how much we are producing might not be the whole story.  What is involved in that production?  There might be many ways of looking at this, such as total production cost per cubic foot or total acreage of land involved (including under the sea).  I couldn’t readily find this information so I settled for number of wells required to produce the volume reported, deciding this was a decent surrogate for cost and effort.  Here’s what I found; again, from EIA:

Now, this data series doesn’t start until the end of the 1980’s but one thing jumps out even so: in 2010, it took 85% more wells to produce just 27% more natural gas than in 1989.  It would be nice to find cost data, as well as information on the material resources required for these wells.

Feeling a bit more grounded in the past and the present, I then went looking for context on the future.  Any projection is wrong, just as any forecast is wrong.  And it is reasonable to believe that the paradigms and assumptions of the organization making the projection or forecast will influence that forecast if only by influencing what it notices and what it does not.  That being said, I decided to stick with EIA for now; good additions would be to check projections from both the producing organizations and from their opponents.  In a February 13, 2012 analysis, EIA stated:

“The U.S. Energy Information Administration’s Annual Energy Outlook 2012(Early Release) estimates that the United States possessed 2,214 trillion cubic feet (Tcf) of technically recoverable natural gas resources as of January 1, 2010. Natural gas from proven and unproven shale resources accounts for 542 Tcf of this resource estimate. Many shale formations, especially the Marcellus, are so large that only small portions of the entire formations have been intensively production-tested. Consequently, the estimate of technically recoverable resources is highly uncertain, and is regularly updated as more information is gained through drilling and production. At the 2010 rate of U.S. consumption (about 24.1 Tcf per year), 2,214 Tcf of natural gas is enough to supply over 90 years of use.”  (emphasis mine)

This projection requires further context, however, because of the link between 2010 and the projected years’ of supply.  What was 2010 consumption and its historical context?  EIA gave me a long history:

Yet one more observation seemed necessary to me at this point: how much of the 2010 consumption was for electricity production?  Many electric utilities are forecasting adding natural-gas fired generation in the near future and, indeed, the 2010 installed base (again, per EIA) is 467,214 megawatts, about 40 percent of total generating capacity.  In 2010, that installed capacity ran, on average, only about 25 percent of the time.  So, how much natural gas did that require?  EIA reports electric generation required 7,387,184 Mcf in 2010.  In other words, just a little less than a third of the natural gas consumed.  This left me with an obvious question: what if that use doubled?  Or tripled?  What happens to the 90 years then?

So, in observing natural gas production, I looked backward (at time series), I looked around (at cost and effort associated with that production) and I looked forward, but with context there as well.  And this observing left me, as good observation often does, with more questions than answers.  Any situation or topic on which we might want to focus these days, is part of a complicated and complex web of interrelationships.  These interrelationships make observation difficult at best and conclusions next to impossible.  The implications of this I leave to another day and another blog post.  Just let it sit with you for now.

And one final observation on domestic oil, made in reaction to reports that the United States is producing “more oil than ever” and ought to think about joining OPEC.  Really.  As the EIA chart shows, the United States is currently producing somewhere the level of oil that it produced in 1950-51.  The peak was around 1970 and we are not even close.  Perhaps that’s just too far back for journalists and others to look.


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