Bloomberg News

U.S. Natural Gas Resources Bigger Than Estimated, Analyst Says

October 08, 2012

The U.S. has almost three times as much recoverable natural gas as the government estimates, enough to place it third in the world, a Canadian analyst said.

Data from more than 24,000 recently drilled wells show the U.S. has 890 trillion cubic feet equivalent of recoverable natural gas, said Manuj Nikhanj, head of energy research at brokerage ITG Investment Technology Group Inc. (ITG:US) in Calgary. The Energy Information Administration estimated proved reserves of 317.6 trillion in 2010, a record high.

“As the years go on, the U.S. will revise their numbers upward, there’s no doubt in my mind,” Nikhanj said.

Nikhanj’s estimate would move the U.S. up from fifth on BP Plc (BP/)’s list of countries with the world’s largest gas reserves, behind Russia and Iran and ahead of Qatar and Turkmenistan. BP’s Statistical Review of World Energy estimated U.S. gas reserves at 299.8 trillion cubic feet at the end of 2011.

In Pennsylvania’s Marcellus shale, ITG calculated reserves per well at two to three times the EIA estimates, Nikhanj said. The EIA also “grossly understated” resources in the Eagle Ford and Permian basins in Texas and the Bakken formation in North Dakota, Nikhanj said.

Rising shale output has helped increase the amount of gas in storage to a record seasonal high of 3.653 trillion cubic feet. In March the storage amount was 60 percent above the five- year average.

Nikhanj also said the Energy Department understated U.S. oil reserves at 25.2 billion barrels. He estimated 30 billion and BP 30.9 billion. About 90 percent of the oil can be extracted profitably with prices at $100 a barrel and more than half the gas is profitable at $4 per million British thermal units, he said.

Crude oil for November delivery settled at $89.88 a barrel Oct. 5 on the New York Mercantile Exchange. Natural gas settled at $3.396 per million Btu.

Nikhanj predicted U.S. gas production will reach 76.5 billion cubic feet a day in 2025, up 17 percent from 65.2 billion last year. He said oil production excluding Alaska will reach 10 million barrels a day in 2025, nearly double the 2011 average of 5.09 million. Most of the increase will come from the Bakken, Eagle Ford and Permian basins, he said.

U.S. total oil production reached a 15-year high of 6.52 million barrels a day in the week ended Sept. 28, the Energy Department reported.

To contact the reporter on this story: Edward Welsch in Calgary at ewelsch1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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