The Distribution of the World's
Natural Gas Reserves and Resources
Joseph P. Riva, Jr.*
December 14, 1995
The yearly world demand for natural gas is 75 trillion cubic feet and rising. The global market for gas is much smaller than for oil because gas transport is costly and difficult. Only about 16 percent of global gas production is internationally traded, with less than 4 percent of the trade accounted for by liquefied natural gas. However, in spite of the high cost of gas transportation and the remote location of potential future supply regions, increasing international trade in natural gas is expected. Global gas reserves are abundant, but unevenly distributed. The industrialized countries are the major gas importers, but the major gas supplies are located in the Former Soviet Union and the Middle East. Thus, similar to world oil, the expanded use of natural gas by Europe and Japan will become increasingly dependent on the world's most unstable regions. Canada provides most of the natural gas imports to the United States, and Mexico also could become a significant gas source. In addition, the U.S. imports LNG from Algeria.
Some have suggested that Congress consider options to encourage increased domestic gas exploration and development, such as reestablishing the tax credits on unconventional gas resources and/or allowing the expensing of geological and geophysical exploration costs. Of particular interest is lifting the moratoria on offshore gas exploration and development because of the large gas fields (with potentially high productive capacity) that are projected to occur in some of these frontier areas. However, great controversy, reflecting differing societal values, surrounds such proposals, with opponents citing "corporate welfare" in the form of tax reform and potential environmental damage in expanded offshore drilling.
World natural gas consumption, some 75 trillion cubic feet (tcf) in 1994, is rising faster than that of any other fossil fuel. About two-thirds of the increase in gas demand is in the industrial and power generation sectors, while the remaining one-third is in space heating of buildings and homes. Recent technological improvements in the design, efficiency, and operation of combined cycle gas turbines have tilted the economics of power generation in favor of natural gas. Gas fuelled power plants have lower capital costs, may be built faster, are more efficient, and emit less air pollutants than other fossil fuel based power plants. Consequently, a major share of new power generation capacity is based on natural gas.
Origin of Natural Gas Accumulations
The decomposition of organic material in an oxygen-poor environment, with the aid of anaerobic bacteria, results in the formation of methane. Since organic matter is ubiquitous in the younger sediments of the earth, so is methane. If all of the existing methane could be collected, it could provide most of the world's energy for hundreds of years. Unfortunately, most is too diffuse to be commercially recovered. Natural gas, a hydrocarbon mixture consisting primarily of methane and ethane, is derived from both land plant and marine organic matter. Over geologic time, almost all natural gas reaches the earth's surface and is lost to the atmosphere. When its upward migration is interrupted by a geologic trap (an upwardly convex permeable reservoir rock sealed above by impermeable cap rock) commercial quantities of gas can accumulate. This gas is termed nonassociated gas. Commercial amounts of gas also can accumulate as a gas cap above an oil pool or, if reservoir pressure is sufficiently high, dissolved in the oil. Such natural gas is termed associated gas.1
Natural gas generation and migration occurs over an extensive vertical zone that includes shallow biogenic gas, intermediate dissolved gas of the oil window, and deep thermal gas. The production of biogenic methane requires anaerobic microbial activity, and is confined to poorly drained swamps, some lake bottoms, and marine environments below the zone of active sulfate reduction. Gas of predominantly biogenic origin constitutes more than 20 percent of global gas reserves. 2 The mature stage of petroleum generation occurs at depths between about 6,500 and 16,000 feet, depending upon the geothermal gradient. At these temperatures and pressures the full range of hydrocarbons are produced within the oil window and significant amounts of thermal methane gas often are generated along with the oil. Below about 9,500 feet, primarily wet gas that contains liquid hydrocarbons is formed. In the postmature stage, beneath about 16,000 feet, oil is no longer stable and the main hydrocarbon product is thermal methane gas that is a product of the cracking of the existing liquid hydrocarbons.
Gas displays an initial low concentration and high dispersibility, making adequate seals very important to conventional gas accumulation. Due to differences in the physical properties of gas and oil, similarly sized oil traps contain more recoverable energy (on a Btu basis) than gas traps, although more than three-quarters of the in-place gas often can be recovered. Less than one percent of the gas fields of the world are of giant size, originally containing at least 3 trillion cubic feet of recoverable gas. These fields, however, along with the associated gas in giant oil fields, account for about 80 percent of the world's proved and produced gas reserves.9' Oil is derived mainly from marine or lacustrian source rocks, but, since gas can be derived from land plants as well, all source rocks have the potential for gas generation. Many large gas accumulations appear to be associated with the coal deposits.
Unconventional Gas Accumulations
The boundary between conventional gas and unconventional gas resources is not well defined, because they result from a continuum of geologic conditions. Coal seam, shale, and tight gas occur in rocks of low permeability and require special treatment for recovery. The process by which vegetation is converted to coal over geologic time generates large amounts of natural gas. Much of this gas becomes concentrated as conventional gas deposits in permeable sediments adjacent to the coal, but some gas remains in the coal as unconventional 11continuous" gas deposits. The coal does not form a continuous reservoir over an entire basin, but occurs in individual non-communicating coal seams separated by other strata. Coal seams are compartmentalized gas reservoirs bounded by facies changes or faults and the coal itself yields extremely variable amounts of gas. Coal seams that are deeply buried exhibit significantly reduced permeabilities and, thus, reduced gas recoverability.
Coal seam gas well productivity depends mostly on reservoir pressure and water saturation. Multiwell patterns are necessary to dewater the coal and to establish a favorable pressure gradient. Since the gas is adsorbed on the surface of the coal and trapped by reservoir pressure, initially there is low gas production and high water production. Therefore, an additional expense relates to the disposal of coal bed water, which may be saline, acidic, or alkaline. As production continues, water production declines and gas production increases, before eventually beginning a long decline. In general, however, coal seam gas recovery rates have been low and unpredictable. Average per-well conventional gas production in a mature gas-rich basin is about five times higher than average per-well coal seam gas production. Thus, several times as many wells have to be drilled in coal seams than in conventional gas accumulations to achieve similar gas recovery levels. 4
Large continuous gas accumulations are sometimes present in low permeability (tight) sandstones, siltstones, shales, sandy carbonates, limestones, dolomites, and chalk. Such gas deposits are commonly classified as unconventional because their reservoir characteristics differ from conventional reservoirs and they require stimulation to be produced economically. The tight gas is contained in lenticular or blanket reservoirs that are relatively impermeable and can occur downdip from water-saturated rocks and cut across lithologic boundaries. They often contain a large amount of in-place gas, but exhibit low recovery rates. Gas can be economically recovered from the better quality continuous tight reservoirs by creating downhole fractures with explosives or hydraulic pumping. The nearly vertical fractures provide a pressure sink and channel for the gas, creating a larger collecting area so that the gas recovery is at a faster rate. Sometimes massive hydraulic fracturing is required, using a half million gallons of gelled fluid and a million pounds of sand to keep the fractures open after the fluid as been drained away.
In the United States, unconventional gas accumulations account for about 2 trillion cubic feet (tcf) of gas production per year, some 10 percent of total gas output. In the rest of the world, however, gas is predominantly recovered from conventional accumulations.
World Natural Gas Distribution and Production
The status of world natural gas is shown in tables 1 through 5. As is the case with oil, natural gas is unevenly distributed throughout the world. More than one-third of the world's original gas endowment was in the territory of the Former Soviet Union. The second largest gas resource, located in the Middle East, comprised about 22 percent of the world total. Some 17 percent of the world's original recoverable gas was located North America. However, North America has accounted for more than one-half of the world's gas production, and now contains only 11 percent of the world's remaining gas resources. About 38 percent of the world's remaining gas is in the Former Soviet Union and 25 percent is located in the Middle East. South America, Europe, Africa, and Asia/Oceania are each projected to contain less than 10 percent of the world's remaining natural gas.
Thus, the world distribution of natural gas mirrors that of oil, which might be expected since oil and gas are often generated and reservoired together. However, the Middle East, although containing a very significant amount of gas, does not dominate world gas as it does world oil. The Former USSR holds the dominant natural gas resource. Also, it is the world's leading gas producer, but its output is only slightly higher than that of North America. North America produces a large amount of gas from a relatively small reserve. Its reserves/production (R/P) ratio of 12/1 contrasts with the 80/1 R/P ratio of the Former USSR.
The R/P ratio is a measure of the rate of production of a proved gas reserve. Associated gas is produced along with oil, which can be efficiently recovered at a maximum R/P ratio of about 10/1. Nonassociated gas, which is more volatile than oil, can be produced at faster rates3 sometimes as fast as an R/P ratio of 5/1. Average regional R/P ratios for intensively and efficiently developed natural gas provinces may range between 7/1 and 10/1. In general, the average R/P ratio of a gas province or a country is indicative of its development maturity, for it will consist of a combination of low R/P ratios in older depleting fields and higher R/P ratios in more newly developed fields. Since the larger fields are usually found early in the exploration cycle (because of their large size and anomalous geology), they will dominate and, with depletion, tend to decrease the average R/P ratio. Any gas reserves that remain undeveloped or are not produced efficiently help to increase average R/P ratios. An average R/P ratio much above 12/1 usually indicates a gas province or country in which new significant discoveries are being made and/or one in which gas development is not intensive or production is not optimized.
North America, and particularly the United States (with
an RIP of 9/1), is an intensively developed and mature gas producing region.
Russia, with an R/P of 82/1, contains significantly larger gas reserves than
does the United States, but its gas output is only 10 percent higher.
World Natural Gas Consumption and Trade
The United States consumes about 2.4 tcf more natural gas per year than it produces. Germany imports even more gas than the United States (2.6 tcf per year) and Japan slightly less (2.3 tcf per year). North America is the leading consumer of natural gas, but also is a leading producer. The Former USSR region leads the world in gas production, and is second in consumption. Europe ranks third in natural gas consumption, but has to import 4.1 tcf per year. Asia/Oceania also must import natural gas to satisfy demand. The other regions are relatively minor producers and consumers of gas.
Compared to oil, only moderate amounts of natural gas are traded on world markets. The low density of gas makes it more expensive to transport than oil. A section of pipe in oil service can hold 15 times more energy than when used to transport high pressure gas. Thus, gas pipelines must be of larger diameter to a given energy movement. Compression adds to the disparity between the transportation costs of the two fuels. An oil pumping station uses energy to overcome frictional losses, but a gas line requires a large amount of energy to compress the gas before pipeline friction is even encountered.
Pipeline transportation is not always feasible because of the growing geographic distance between gas reserves and markets. Also, since potential political instabilities may affect long pipeline routes, importing countries may wish to diversify supply sources. While natural gas can be piped in a gaseous state, it needs to be condensed (liquefied) in order that sufficient energy is packaged to be economically transported by ship. A full liquefied natural gas (LNG) chain consists of a liquefaction plant; low temperature, pressurized, transport ships; and a regasification terminal. World LNG trade is currently about 60 million metric tons per year, some 65 percent of which is imported by Japan. Other importers include France, Spain, Korea, Belgium, Taiwan, and Italy. Indonesia accounts f6r 39 percent of LNG exports, with Algeria in second place with 24 percent. Other exporters include Malaysia, Brunei, Australia, Abu Dhabi, and Libya. The United States imports and exports about 1 million metric tons of LNG per year. No grassroots LNG project has been commissioned since 1989 due to intense competition with other fuels, notably oil (the world price of which remains low).
The global market for natural gas is much smaller than for oil because gas transport is difficult and costly, due to a relatively low energy content in relation to volume. Currently, only about 16 percent of global gas production is internationally traded, with less than 4 percent of the trade accounted for by LNG. In spite of the high cost of gas transportation and the remote location of some future supply regions, increasing international trade in natural gas is expected. 5
Global gas reserves are abundant, but of an uneven distribution. The North American market is self sufficient in natural gas, although gas is traded within the region. Canada is expected to remain a net exporter of gas to the United States. Substantial natural gas reserves are located in Europe. The gas trade within the region is extensive, with Norway and the Netherlands the main sources. Europe, however, is and will increasingly become more dependent on gas imported from other regions. Its traditional foreign suppliers, the Former Soviet Union (at 20 percent of demand) and Algeria at (10 percent), are expected to increase their shares of the European gas market. Important gas exporters in the Asia-Pacific region are Indonesia, Malaysia, Brunei, and Australia, the gas being shipped as LNG to Japan, Taiwan, and South Korea. The Middle East is another important supply center for natural gas. Abu Dhabi and Qatar deliver significant volumes of LNG to the Asia-Pacific region and future exports could be sent to Europe and South Asia. Gas demand in Africa, South Asia, and China are met by domestic or regional supplies. Some gas is being traded within South America.
With the industrialized countries the major gas importers, and the major gas supplies located in the Former Soviet Union and the Middle East, the expanded use of natural gas by Europe and Japan will (like world oil utilization) become increasingly dependent on the world's most unstable regions. While Canada provides most of the natural gas imports to the United States and Mexico could become a significant gas source, the U.S. also imports LNG from Algeria. To encourage increased domestic drilling, and, thus, future domestic gas production, some have suggested that Congress consider such possible tax reform measures as reestablishing the tax credits on unconventional gas resources and/or allowing companies to expense geological and geophysical exploration costs. Of particular interest is the lifting of the moratoria on offshore gas exploration and development, because of the large gas fields, with potentially high productive capacity, that are thought to exist in some parts of these frontier areas. However, great controversy, reflecting differing societal values, surrounds the search for and development of gas in these areas, as opponents to drilling cite potential environmental damage and/or "corporate welfare" in the form of tax reform.
|Table 4. Current Regional Natural Gas Status (in tcf)|
|Current Production||Proved Reserves||-
|Undiscovered Resources||Original Gas Endowment||Cumulative Production||