Natural gas leads oil by a wide margin in domestic reserves replacement, and reserves replacement from new fields is disappointing, to say the least, according to the latest report from the U.S. Energy Information Administration (EIA). In 2004, the industry replaced 71% of crude oil production by reserve additions. That's up from 58% last year and is certainly better than 24% in 1998. But still, it's the third-worst showing in the last 10 years. Dry gas production replaced by reserve additions was 118% in 2004, up from 111% in 2003 and tying with 2002. Last year's replacement rate ends a trend of continuous decline seen during the previous four years, according to the EIA. The report contains few if any surprises for producers who have struggled to squeeze more resources out of existing fields. Total discoveries (attributable to field extensions, new-field discoveries, and new reservoir discoveries in old fields) were down for oil and up for gas. However, reserve additions from just new fields are the smallest that they have been for both gas and oil for at least the last 10 years. New-field discoveries of natural gas were 759 billion cubic feet, 38% less than in 2003 and 59% less than the 10-year average. For oil, new-field discoveries accounted for 33 million barrels, almost all of this from Gulf of Mexico federal waters. "This was the lowest volume of new-field discoveries in 12 years, 95% less than the new-field discoveries of 2003, and only 8% of the prior 10-year average (of 422 million barrels)," the EIA reports. For more on this, see the November issue of Oil and Gas Investor. For a subscription, call 713-993-9320, ext. 126.
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