Running out of gas: Soaring demand outpaces production
September 29, 2004
 

Energy companies continue to pursue exploration and production. But the amount of natural gas they supply, although substantial, will be woefully inadequate to offset a U.S. production rate that continues to dwindle at an extremely rapid pace.
And events like the freezing cold snap that hit much of the country in December and caused gas prices to spike 50 percent only represent the tip of the iceberg.
This bleak assessment of the disparity between expanding production and shrinking supply comes from Houston energy guru Matthew Simmons. The president of Simmons & Co. International, an energy investment bank, believes the United States faces a serious natural gas crisis that could have a devastating impact on the national economy.
And Simmons is not alone.
In October, the National Petroleum Council (NPC) revised its official natural gas outlook with a 180-degree turn. Four years ago, the council was projecting a bright future for the fuel, with ample supplies and prices averaging under $3 through 2015.
Now the NPC is saying that, "there has been a fundamental shift in natural gas supply/demand balance that has resulted in higher prices and volatility." As a result, the NPC has lowered gas production estimates for North America by 22 percent, or 7.5 trillion cubic feet per year -- more than 16 billion cubic feet a day.
Declining U.S. gas production and growing demand has spurred many producers to explore for gas in other parts of the world. And the need to transport that foreign gas to the United States has spawned proposals for numerous liquefied natural gas (LNG) projects. "LNG has become the 'flavor of the month,'" Simmons says. "It has ended up as a vital component to our gas supply, even though just three or four years ago people would have said that's crazy."
While LNG can add critical incremental supplies of natural gas, it would require 10 billion to 20 billion cubic feet of LNG to fill the gap.