Conventional wisdom has given the Gulf of Mexico a significant edge for several years as most likely to help meet growing U.S. natural gas demand because it is closer and would not require a massive transmission system over great distances. But higher gas prices and increasing demand are challenging that idea. The change was obvious during the Energy Information Administration's recent annual energy outlook conference in Washington. During a session, "The Natural Gas Frontier: 2015 and Beyond," Roland George, a principal of Purvin & Gertz Inc., Calgary, argued that Alaskan North Slope and Mackenzie Delta gas could be developed during the next decade at an average Henry Hub price of less than $3 per million Btu if the most economic transmission route is used. The energy consulting firm prefers a route up the Mackenzie River Valley. But it recognizes that political considerations could lead to construction of a line along the Alaska Highway. It expects both Canadian and Alaskan far northern gas to be developed in either case. Meanwhile, Richard Nehring, president of NRG Associates, Colorado Springs, Colorado, considers the Gulf more over-the-hill than on the rise as a significant future gas producer. He conceded that the Gulf is a world-class gas province, with one-sixth of the nation's total reserves and second in size only to the adjacent onshore Gulf Coast Basin. But Nehring contended that gas reserves in the Gulf are concentrated generally in many large fields instead of a few giants or supergiants. "By 1979, we had made less than half of all the Gulf of Mexico disocveries but 80% of the large finds," he said. "Exploration managers tell me that it's hard to find new prospects in excess of 15 billion cubic feet there. The best we can expect from the Gulf of Mexico is a few more years of gas production growth, followed by several years of declines. The people who should be concerned are those who are investing in gas-fired electrical generation in the U.S. Southeast, since virtually all of it expects to rely on additional Gulf of Mexico gas." Vello A. Kuuskraa, president of Advanced Resources International, said that unconventional gas sources could make an increasingly large contribution. "It's like a stealth bomber in many ways," he maintained. "It crept up on us and now provides about a quarter of our production. But its continued progress depends on additional development of exploration technology." Kuuskraa pointed out that coalbed methane, which currently is produced from six major fields domestically, essentially was not an option 20 years ago. "We are optimistic about the potential for deepwater gas in the Gulf of Mexico," he said. "But we also believe that gas will need to come down from the Arctic, possibly using both proposed routes." James M. Kendell, director of EIA's oil and gas division and moderator of the natural gas session, said that when federal energy forecasters prepared their latest annual energy outlook, a pipeline to move natural gas from the Arctic to the Lower 48 states was not included as an option. "That could change by next year," he added. - Nick Snow
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