The Rocky Mountain region is poised to become the center of U.S. onshore gas production, says a longtime oilman who has been active in both the energy industry and the political arena.
The reserves are there, Rutt Bridges told a gathering in Denver earlier this year, but the big question hovers: Is the price right?
“A lot of it here is unconventional gas,” Bridges said of the region’s assets. “It is only with high prices that production of it will be driven.
“We know where those reserves are,” he added. “The real question is, can we develop them economically?”
Bridges, who has spent 30 years in the geophysics industry, made his remarks as the kickoff speaker at the annual 3-D Seismic Symposium, held earlier this year in Denver and sponsored by the Rocky Mountain Association of Geologists and Denver Geological Society.
He’s chairman of Transform Software and Services Inc. and Quest Venture Capital, and he foresees great opportunities and challenges ahead in the Rocky Mountain region.
According to the U.S. Department of Energy, the Rockies will become the leading onshore gas producer in the next few years, he noted.
About 41 percent of the remaining gas reserves in the United States are located in the Rockies, he said. Meanwhile, there have been declines in reserves on the Gulf Coast.
“There are a lot of shortages in natural gas, and we have seen a boom in the Rockies,” Bridges said. “The question is, Is this temporary or a new reality?”
Development of the resources in the Rocky Mountain West also will demand an “increased sensitivity to the local communities we impact,” he said. Getting permission to drill in the Rockies is a challenge because “ranchers vote and rigs don’t.”
Bridges noted a huge spike in natural gas pricing in 2000, which has eased off to about $7 per mcf now.
“Around 2000, natural gas dried up so we put more rigs to work,” he said. “By January 2003, we had more than doubled the rig count, but actually saw a decline in production. That’s an interesting phenomenon – we’re steadily losing ground despite all the additional investment.
“By 2012 we will have depleted half the gas reserves we had in 2000,” he noted. “Imports will likely double in that period to meet U.S. demand.”
“A lot of it here is unconventional gas. It is only with high prices that production of it will be driven,” he said.
“We know where those reserves are,” he said. “The real question is can we develop them economically?”
World Demands and Trends
Expanding his comments, Bridges said that technology will continue to play a major role in the industry’s ability to remain competitive “but it will take sustained higher prices to meet America and the world’s demand for energy.”
He noted a huge change in technology in recent years.
“Things that were available only to bigger companies now are available to everyone,” he said. “The field is flatter now.”
With more powerful computer software and inexpensive computers, small companies can compete with majors in the industry now, he said.
“Unfortunately, one of the fastest growing challenges today isn’t technology but people who can effectively use technology,” Bridges said, noting that many of the best and brightest college graduates have headed off to other industries due to years of low oil and gas prices.
“Too many of us gray hairs are planning to head for the golf course, trout stream or the beach.”
Bridges also said he expects to see more energy conservation efforts over time. Wind energy at $5 per mcf is very competitive to natural gas.
“It will be a growth business,” he said, “but it takes over a year now to get wind turbines. That’s a long lead time, but it will come online.”
About 6 percent of the U.S. will be using wind for electricity by the year 2020, he said. “It will displace some natural gas.”
Another factor that will drive higher oil prices in the coming years is the politically instability of oil source countries.
“At times world events and regional crises will temporarily drive prices far higher,” he said. “Reserves of resources are strongly dependent on prices, and increasingly we are running out of the cheap stuff.”
Bridges, past president of the Society of Exploration Geophysicists and one of the pioneers in the use of workstations and personal computers in seismic processing and exploration, is an active participant in public policy who was once a candidate for governor of Colorado.
“As an industry, we haven’t been great at predicting production declines,” Bridges said. “Experts scoffed when M. King Hubbert projected in 1956 that lower 48 oil production would peak in 1970, but he hit it on the nose. Major oil companies, with access to the world’s best technology, predicted that North Sea production wouldn’t peak until 2010. It actually peaked in 1999.”
About half of current world oil production comes from 116 giant fields, he reminded the audience, and all but four of those were found more than 25 years ago.
“The other half of current production comes from more than 4,000 smaller fields,” he said, “and half of the total remaining worldwide oil reserves are in 53 super-giant fields, mostly in the Middle East.
“Today we import over 65 percent (of oil) and imports are growing faster than ever.”
He cited the developments that are becoming increasingly aware to U.S. leaders as well as the general public: World markets are driving oil prices, with China and India leading the way in growing oil consumption.