David Hughes
David Hughes with Geological Survey of Canada addresses ASPO USA Peak Oil Conference at Boston University.

The Unsettling Future of Natural Gas

Presentation by David Hughes, Geological Survey of Canada to ASPO USA Peak Oil Conference at Boston University

By EV World

As natural gas reserves onshore in North America – and that includes the United States and Canada – become increasingly scarce, the pressure to build liquified natural gas or LNG terminals is increasing. For energy cornucopians, this isn't a problem; there is lots of natural gas around the world. We simply need to put it on tankers and import it from abroad.

But David Hughes, with the Geological Survey of Canada, has a less optimistic view of natural gas. In the case of LNG, he pointed out during the ASPO USA 2006 peak oil conference in Boston last month that it takes 15-30% of the energy in natural gas to move by LNG tanker, when you take into account the energy costs of liquefaction, transportation and gasification.

"LGN is also subject to geopolitics," he noted. "Three-quarters of what's left of the world's gas in the former Soviet Union and the Middle East."

Since 1965, natural gas has been the fastest growing fuel sources, growing by 300 percent, supplanted only in the last four years by coal, a far dirtier and more carbon-intensive fuel. He pointed out that the IEA's median case growth rate projection for energy is an 60 percent increase by 2030, with the non-ODEC countries experiencing the fastest growth (57%) during the that period.

"Gas will be the second fastest growing fuel source, growing by 92 percent through 2030."

"North America produced and consumed about 30 percent of the world's gas," he stated, explaining that the production and consumption of natural gas is more balanced than in the case of oil because it is more difficult to transport and store.

"If we look at world gas reserves, we can see that the good news is there's lots of gas in the world. The bad news is, it's not in North America. Only about four percent of the world's reported gas reserves are in North America."

Michael Rodgers and David Hughes Q&A Session

Video of follow-up audience Q&A session featuring Michael Rogers with PFC Energy and David Hughes with the Geological Survey of Canada.

Even more troubling, he stated that if we look at the ratio of reserves to production rates, North America has only ten years of production left, Europe as about 20, and the world as a whole, a little over 60 years.

Citing projections by Colin Campbell, Hughes said that the growth in natural gas production will not be able to keep pace with the decline in petroleum reserves; and that Campbell sees a natural gas production plateau in the world around 2025 with decline starting to occur sometime around 2045.

He told the audience of about 500 at Boston University that Canadian natural gas production peaked in 2002 and that it has just about 9 years of gas remaining based on current production rates, which slightly worse than the US, which has ten years.

"Mexico has about ten years," he said, but that it will continue to be a net importer of natural gas from the USA. "North America, as a whole, has about ten years of remaining gas."

He highlighted what he calls "Canada's production treadmill". Despite drilling 16,000 gas wells in 2005, the country was only able to slightly replace the gas it was consuming internally and exporting to the United States. In only two years since 1996 has Canada's gas industry been able to produce more gas than it consumed.

The Canadian government's National Energy Board forecast in 2003 that production will continue along its current plateau until around 2007 to 2009, at which point it will begin to decline.

"We are drilling more and more low-productivity coal bed methane wells," Hughes noted in explaining some of the assumptions behind the NEB's forecast, which thought productivity would remain relatively high. Canada's gas well drilling efforts in 1998 yielded 600 mcf. It was down to less than 300 mcf in 2004.

"We have to drill about three coal bed methane wells to equal one average, conventional well," he said.

The picture he painted is of a nation and industry running (drilling) harder and harder just to stay in place in terms of annual natural gas production, or what he calls "decline/stagnation".

"We're able to keep production flat only because of record drilling." He observed that when Canada's gas production peaked in 2001-2002 time frame, industry was drilling 10,000 new wells a year.

"We're now drilling 16,000 and keeping production more or less flat. If we ever stop drilling production can be expected to decline radically."

Be sure to listen to Hughes entire presentation by using either of the two MP3 Players found in the right-hand column of this page. You may download the file from www.evworld.com/evworld_audio/aspo06_dhughes.mp3. He has much more to say about both the Canada and the United States. Please note that the MP3 audio is different from the above video.

EVWORLD Future In Motion Podcast

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Times Article Viewed: 5994
Published: 24-Nov-2006


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