Thanks for the many comments, now let's move on to other topics

There are several topics I'd like to cover in this month's column. But first I wanted to thank our loyal readers for the many letters and e-mail messages we received in response the Californian who accused me of "glossing over" what he called the "real reason" the old and gas industry has a problem attracting college students and professionals with engineering and geoscience backgrounds (see Jan. 2012 OGFJ).

Our West Coast denizen believes that industry consolidation to Houston – which he calls a "dreary," polluted," and "ugly" place to live – is a major factor in keeping engineers and other professionals, particularly young college graduates, from relocating to Texas. Rather than address his point myself, I decided to print his letter and let our readers respond, which they did in huge numbers.

Most took the writer to task for his criticism of Houston, but some agreed with him, at least on some points. I regret that we can't print all the comments we received, but much of the flood of correspondence can be found on our website at www.ogfj.com. I understand that a Texas A&M University blog printed the original letter after someone saw it on our website, and it too was inundated with comments.

Now, I think it's time to move on, so please don't send us any more comments on this issue. We like letters from our readers, but this subject is just about exhausted.

US as gas exporter

Last month, the US Energy Information Administration reduced its gas resource estimate by 345 tcf from last year's projections, but noted that the country will most likely become a net exporter of gas by 2021. The estimated unproved technically recoverable shale gas in the US was lowered to 482 tcf, down from the 2011 estimate of 827 tcf. The decline is mainly due to a decrease in the estimate for the Marcellus shale from 410 tcf to 141 tcf.

The EIA estimates were a result of new data from the US Geological survey that relied on more recent drilling and production data. More information on this decline will be available in the EIA's final energy outlook forecast for 2012 later this spring.

The total volume of technically recoverable gas (not just shale), including proved and unproved reserves, is 2,214 tcf, according to the agency. The EIA says that gas exports will boom over the next 15 years. The US will become a net exporter of LNG by 2016 and a net pipeline exporter by 2025.

Shift to liquids

In its Feb. 6 US Research, Raymond James noted that the growing technology-driven US gas supply has created a glut in the country's natural gas markets, a forecast that RJ has been warning us about since 2007. The report asks the questions: how low can prices go and how long will they stay there?

RJ's analysts have lowered their 2012 forecast price from $3.25/Mcf to $2.50/Mcf. Anticipating that gas supply declines from dry gas basins will be "more than offset" in associated gas volumes from liquids-rich gas and oil plays to the tune of over 2 bcf/d of supply growth in 2013 and beyond, RJ has also lowered its 2013 forecast from $4.00/Mcf to $3.25/Mcf and its long-term US natural gas forecast from $4.50/Mcf to $4.00/Mcf.

The analysts say the shift away from dry natural gas has proven to be "too little, too late." The greater efficiency of modern drilling and completion technology has enabled producers to increase production even with a declining rig count, and the subsequent glut in gas volumes has created a chronic pricing problem.

IPAA addresses tax hikes

The IPAA has been vocal in opposing President Obama's proposed tax increases on US oil and natural gas producers. The organization points out that 95% of US oil and natural gas wells are developed by independent producers – small businesses that employ an average of 12 employees and stand at the heart of America's energy base.

While the President believes his proposed tax hikes target "Big Oil", they instead will burden the countless small businesses responsible for producing 85% of our natural gas and 54% of our oil. Retail gasoline prices are continuing to rise and now average $3.72, according to the EIA.

IPAA Chairman Virginia "Gigi" Lazenby correctly notes, "We have the energy reserves on-hand and at the ready to fuel, power, and light our economy for generations. In fact, we have enough domestic natural gas supplies to meet our nation's needs for greater than 100 years…Producing oil and gas here at home will also help break our deep dependence on foreign nations to meet our nation's energy needs. And it will continue to create thousands of jobs."

Well said.

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