Natural Gas Data Needs in a Changing Regulatory Environment (1985) / Chapter Skim
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PRODUCTION AND RESERVES
PRODUCTION AND RESERVES
Pages 61-99
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From page 61... ...
Proved r eserves , as repor ted on Porm EIA- 2 3 and publ i shed by EIA , are • those r eserves of o il and gas wh ich geolog ical and eng ineer ing data demon strate wi th r easonable cer ta inty to be recover able in the futur e unde r exist ing economic and operating cond i t ions• ( Energy Informat ion Admin is trat ion , 19 8 3 )
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From page 62... ...
, a nd may own i n tr astate transmiss ion compan ies , but have v i r tually no inter state gas pipel ine operat ions . The major inter s tate pipel ine com panies and a f f i l iated producer s , of wh ich B IA l is ted 2 0 , are pr imar ily in the bus iness of purchasing , tr anspor ting , and selling natural gas , but have some r eserves and product ion of the ir own .
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From page 63... ...
Many o f the old gas r eserves , i n r egulatory terminology , ar e there for e owned by the ma j or o i l compan ies who are the descendant s o f the compan ies doing the ear ly o i l well dr i l l ing . Independent explor at ion and product ion compan ies have always playe d a role in the industry , but they mult ipl ied in number and activ ity fo l lowing enactment of the NGPA , attracted by the incent ives of h ighe r pr ices for new gas and h igh-cost gas .
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From page 64... ...
Regulat ion and I t s Impact on Producer s Federal r egulation of wellhead pr ices for natural gas sold in inter s tate mar kets beg inn ing i n 1 9 5 4 , and in intrastate mar ke ts beg inn ing in 1978 , has been chronicled br ie fly i n Chapter 2, and in g r eat deta i l i n s ever al other publ icat ions ( e .
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From page 65... ...
Other pr iva te var ious s ector Resource Developmen t Rigs in Operat ion Hughes Too l Ro ta ry Rigs Running -- by Long-ti8e con s i s tent and c r ed i ble source , Company �. Hughes Too l bu t misses cable tool dr ill ing ac t i v i ty , Company r Monthly Energy an impor tan t measur e o f r ecent 0\ 0\ Rev iew r Oil and Gas shallow dr i l l i ng activ ity .
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From page 66... ...
Domestic Well Dr ill ing £2!
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From page 67... ...
Al though nat ional tota ls ar e rel iable , state estimates a r e subject to large saapl ing er ror when fields are smal l and wells are oper ated by sma l l oper a tor s . Year -End Proved AGA Repor t on Selected Field s Conta ins year -end r eserves , reserve s Reserves for bY the Committee on r ev i s ions and add i t ions , and r epor t-year Selected F ield s Natural Gas Reserves o f product ion for hundred s of selected f ie ld s the Amer ican Ga s in selec ted s ta tes and in aggregate for Associat ion ( annual )
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From page 68... ...
May be mistaken for total nat iona l product ion by some r eader s . Annual Quant i ty BIA- 6 2 7 Natural Gas Annual , EIA For a EIA- 6 2 7 sent t o s ta tes , o n voluntar y and Value Annual Energy Rev iew , EIA bas is r no fur ther d isaggregat ion poss ible (cons idered pr imar y source )
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From page 69... ...
Con tracts EIA-7 5 8 Natur a l Ga s Producer/ Data on sales contracts , actual sale s Purchaser Con tracts quan t i t ies , and pr ices are not collected and The i r Potent ial on a regu lar bas i s fro• natura l gas Impacts on the produce r s . Data have been collected Natural Gas Ma r ket , EIA f roa inter state pipel ines and , to a lesser exten t , froa other purchaser s .
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From page 70... ...
s . Energy In format ion Admin istr a t ion PERC Feder a l Energy Regulatory eom.iss ion IOCC I ntersta te O i l Ooapact eo..
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From page 71... ...
The indus try will at mos t seek informat ion to assess the probab i l i ty that a wor thwh ile depos it exists . But i f cos ts r ema in too h igh , even tha t act iv i ty d isappear s .
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From page 72... ...
I f there wer e r easonably good s tatistics on the amount and cost of what has r ecently been found and developed , both publ ic and pr ivate dec is ion maker s would be far better informed than they are now . Data Needs and Assessment of Cur r ent Data Ac t iv i ty In address ing data quest ions related to the cos t per un i t of r eserves added , we will look separ ately a t the • numerator • -- s tatistics r elated to the real outlays on f ind ing , developing , and produc ing nat u r al gas -- and at the •denominator • -- increments to r eserves of assoc iated and non-assoc iated gas and na tural gas l iqu ids .
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From page 73... ...
S tatistics on Investment : Money Expend i tures The pr imary source o f data on expend itures for oil and gas explor a t ion , development , and product ion used to be from Par ts I and I I o f the Joint Assoc iat ion Survey of the Amer ican Petroleum Ins t i tute , the Inde pendent Pe troleum Assoc iation of Amer ica , and the Mid-continent Oi l and Gas Assoc iat ion ( see , e .
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From page 74... ...
Sta t i s t ic s on Add i t ions to Natural Gas Reserve Pr ior to 1 98 0 , the s ta t i s t ics on g as r eserve were developed j o intly by the Amer ican Gas Associat ion (AGA) , the Amer ican Petroleum Ins t i tute (API )
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From page 75... ...
For example , there i s no sound bas i s for determin ing what effec t the HGPA , or the i ncr eases i n pr ice in r ecent year s , have had on d iscover ies of natural gas . Na tur al gas reserves are an underground inventory , expens ive to prov ide and to hold .
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From page 76... ...
EXPLORATION AND DEVELOPMENT Dec i s ions and Data Uses Federal and State Dec i s ions Leas ing Federal and S tate Lands for Development When federal or s tate lands ar e involved , governments have an interest s imilar to p r ivate land owner s in that they des ire to lease the lands for mineral ( includ ing oil and gas ) explor at ion and development .
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From page 77... ...
Fo r example , s ince a major c r iter ion i s to r ece ive adequate compensation for the publ ic ' s r esources , DOl cons ider s the cur rent and futur e gas s upply and demand s i tuat ion be fore leas ing areas that are expected to have gas . I t may also be useful , in some s i tuat ions , to have .or e detai led data on the gas product ion and tr anspor tation sys tems of an area .
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From page 78... ...
A mar ket assess men t requ ires such information as cur rent and future gas pr ices , ava il a b i l i ty of pipel ine capac i ty serv ing the area of interes t , and the demand for natur al gas in those mar kets that can be r eached by pipel ine s serv ing the a r ea . Data Needs And Assessment of CU r r ent Da ta Ac tivity In address ing data needs , i t is useful to cons ider the three cate g or ies of informat ion : dr ill ing activ ity , pr oduct ion levels , and costs .
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From page 79... ...
More d i saggregated product ion data are ava i lable , a t a cost , from the large compu ter ized data bases -- the Pe troleum Data System , Dw ight ' s , or the Petroleum Informat ion Cor porat ion . Thus , h ighly disaggr egated pr oduct ion data a r e ava i lable , a lthough in pr act ice they may not be ava i lable to some interes ted people , e .
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From page 80... ...
in it ial gas-in-place e stimates -- commi ttee on Statistics in Dr i l l ing of the Amer ican Assoc iat ion of Petroleum Geolog ists , (3) dr ill ing costs -- Jo int Assoc iation Survey , and (4)
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From page 81... ...
: The • • concept of productive capac i ty r epresents potential • product ion rathe r than immed iate or ins tantaneous production or o pen f low potent ial and is an estimate of the max imum r a te of product ion wh ich can be obta ined a t any t ime and from t ime to t ime dur ing the heat ing s eason of the s ubject year , es timated to extend abou t 9 0 days from January 1 , w i thou t regard to l imi tations of mar kets , transpor tat ion and process ing f ac i l i t ies . Be for e the API and AGA publ i shed these data , the National Petroleum Co unc i l ( NPC)
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From page 82... ...
Often the contract has a buyer r ight-of- f i r s t-refusal prov i s ion permitt ing the or ig inal purchaser to match a h igher pr ice of fered by a new potential purchaser . Is sues concern ing the impac t of chang ing federal leg i slation on natural gas wellhead contracts and the overall structure of natural ga s markets have already r ece ived cons iderable attent ion ( Broadman , 19 8 4 J Broadman and Montgomery , 1 9 8 3 J Comptroller General of the Un i ted States , 1 98 3 J In te r state Na tural Ga s Assoc iat ion of Amer ica , 1 98 3 , 1 9 8 4 J Mul holland , 1 9 7 9 J O ' Ne i l l e t al .
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From page 83... ...
control over wellhead pr ices? Bow h igh are the bar r ier s to entry into a f ield mar ket by new producer s or pipel ines?
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From page 84... ...
The new survey for m proposed by EIA to captur e producer , pipel ine , a nd d istr ibut ion company sales to user s would not capture producer sales to pipel ines , nor would r eg ional or NGPA category breakdowns o f the survey data b e poss ible . As d iscussed i n the next chapter , n o com prehens ive actual volume or pr ice data are collected from purchaser s ( inte rstate and intrastate p ipel ines or user s )
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From page 85... ...
Unde r normal compe t i t ive cond i t ions , as f inanc ial mar kets show , a shor t-term contrac t is an imper fec t subs t i tute for a s l ightly longer one , and so on a long the chain . For example , if ther e i s a shor t- term shor tage and spot pr ices r ise sharply , buyer s cur ta i l purchases as far as poss ible and t ry to s ign up s uppl ies over longer per iods .
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From page 86... ...
Given our con s istency and s tab i l i ty argument in Chapter 3 for keeping data programs in e i ther the pr ivate sector or public sector , and g iven that the pr i vate sector i s accustomed t o developing pr ice , demand , and inventory data on mar kets , the bes t long-term location for shor t-term mar ketplace data i s the pr ivate sector . However , by the t ime pr ivate serv ices have developed the ir data prog r ams , valuable data on the dynamics of the trans ition w i l l have been missed .
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From page 87... ...
to prepar e annual estimates of natural gas production capac i ty for the succeed ing sever a l year s , us ing the same de f in i t ions as in the pr ev ious Amer ican Gas Assoc iat ion/Amer ican Petroleum Ins t i tute annuals . If the NPC i s unwill ing to under take th i s task , the EIA should dev ise a plan to mee t the object ives of providing data on add i t ional gas production tha t could r eplace oil impor t s whose supply was reduced or thr eatened or could mee t a shor t term demand surge and tha t would a id pr ivate-sector dec i s ion maker s on product ion and Pipel ine investment .
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From page 88... ...
The i r est imates become impor tant informat ion to other buyer s and seller s . When , as a t the end of 1 9 8 4 , there a r e few long-term con tracts be ing s igned , tha t is i tsel f a s ig n i f icant fact , under l in ing the bas ic uncer ta inty on both s ides of the mar ket about the future cour se of pr ices .
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From page 89... ...
for categor y I and II oper ator s who operate in tha t f ield and r epor t both product ion and r eserves data . Then , us ing annual production data for tha t f ield obta ined from data bases such as PDS , Dw ight ' s , or Pe troleum In format ion , Inc .
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From page 90... ...
For the sample o f f ields , ca tegory I and I I operator s would be r equired t o submit r eserves and product ion data . ' E i ther all or a sample of category I I I opera tor s would be asked to r epor t product ion data only for that sample of fields and reserves data only i f they had i t in the i r book s .
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From page 91... ...
I f one suspected such an ag r eement one would seek ev idence o f i t , bu t th is is outs ide a prog r am o f s ta t i s t ical data . Th e natural g as mar ket i s i n cons ider able f lux today and may be mov ing towa r d a condi t ion s imilar to tha t of electr ic power , wh ich may be •whee led , • i .
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From page 92... ...
Cu r r ent-Year Sales Co ncentrat ion of new contract sales , by year , would a t f ir s t seem the bes t measur e of cur r en t sales , provided one could col lec t and tabu l a te them . Un for tuna tely , mar ket-share number s r e fer r ing to 1 or 2 yea r s ar e cho ices open to pipel ines , who ar e not compel led to buy ever y year what they sell that year : they can over buy or underbuy to minimize cos ts .
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From page 93... ...
Even when an uncomm i t ted r eserve is a r eal asset , i t i s i n large par t an acc ident , a concess ion t o the fact that f ind ing and developing r eserves i s a process impe r fectly synchron ized w i th sell ing and produc ing those r eserves . Ideal ly , a company would appra ise i t s probable r eserves and ar range t o sell them the day a fter the wells and above-g round fac i l i t ies wer e comple ted .
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From page 94... ...
Thus i f ther e were thr ee f i rms of equal s ize , each would have 3 3 percent of the mar ket . The squar e of .
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From page 95... ...
As der egulat ion proceeds , pr ice data w i l l become u se ful . When seller s , whether produce r s or pipel ines , a r e f r ee to charge whateve r they wish , the pa tter n w i l l be useful for s tudy ing compe t i t ion , and the i r pr ices should be open to scrut iny , i f one w i shes to keep data on compe t i t ion up to da te .
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From page 96... ...
Amer ican Petroleum Ins t i tute 1 98 3 Mar ket Shares and Ind iv idual CompanY Da ta for u.s. Energy Mar kets : 1 9 5 0 -1 9 8 2 .
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From page 97... ...
C . : Inter state Natural Gas Assoc iat ion of Amer ica .
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From page 98... ...
( DOE/EIA-0330 ) Energy Informat ion Adm inistration .
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From page 99... ...
The largest 2 0 i n te r s tate pipel ines tr anspor t abou t 9 0 percent o f the g a s i n the inte r s tate market 1 another 8 0 or s o inter s tate pipe l in e s t r anspor t t h e r ema ining 1 0 percen t . Intr astate pipel ines a l s o vary cons ider ably in s i z e w i th a few very large ( and gener ally h ighly d ive r s i f ied )
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