Alex Mills
By Alex Mills
Just about everybody in the oil and gas industry strongly suspected that 2013 was a very good year. This week the Energy Information Administration (EIA) put the final exclamation point on 2013 when it announced that crude oil proved reserves increased 9 percent and natural gas proved reserves increased 10 percent.
Proved reserves estimated volumes of hydrocarbon resources that analysis of geologic and engineering data demonstrates with reasonable certainty are recoverable under existing economic and operating conditions. Reserves estimates change from year to year as new discoveries are made, existing fields are more thoroughly appraised, existing reserves are produced, and prices and technologies change.
EIA, which is the data collection branch of the U.S. Department of Energy, reported that U.S. proved reserves of crude oil and lease condensate increased for the fifth year in a row in 2013, and exceeded 36 billion barrels for the first time since 1975.
A sharp increase in proved natural gas reserves in 2013 more than offset the significant decline experienced in 2012, and set a new record 354 trillion cubic feet) for U.S. natural gas proved reserves.
An increase in natural gas prices used to characterize existing economic conditions contributed to the reported 2013 increase in proved natural gas reserves. For example, the 12-month, first-of-the-month average spot natural gas price at the Henry Hub increased from $2.75 per million Btu (MMbtu) in 2012 to $3.66 per MMBtu in 2013. Proved natural gas reserves had declined between 2011 and 2012 as the gas price declined (e.g., the 12-month, first-of-the-month average spot natural gas price at the Henry Hub decreased from $4.15 per MMBtu in 2011 to $2.75 per MMBtu in 2012).
North Dakota’s crude oil and lease condensate proved reserves surpassed those of the Federal Gulf of Mexico, ranking it second only to Texas among U.S. states.
The Bakken/Three Forks play (covering portions of North Dakota, Montana, and South Dakota) regained its position as the largest tight oil play in the United States.
Pennsylvania and West Virginia account for 70% of the increase in natural gas proved reserves.
Crude oil prices on the New York Mercantile Exchange for 30-day deliveries closed at $66.81 on Dec. 4. Natural gas price at Henry Hub closed at $3.64 on Dec. 4.
Proved reserves of crude oil and lease condensate increased in Texas and North Dakota, two of the top five largest crude oil and lease condensate states in 2013. In 2013, North Dakota had the largest increase in proved reserves, about 1.9 billion barrels (61% of the nation’s total net increase in 2013).
This increase was driven by continued development in the Williston Basin, site of the Bakken and Three Forks. In 2013, North Dakota’s proved reserves of crude oil and lease condensate exceeded those of the federal offshore Gulf of Mexico, making it the second largest oil reserves state in the United States.
Texas had the second largest increase, about 0.9 billion barrels, which came mostly from the Eagle Ford shale play and other tight formations in the Permian Basin.
Collectively, North Dakota and Texas accounted for 90% of the overall net increase in U.S. proved oil reserves in 2013.
Proved natural gas reserves increased in each of the top five U.S. gas reserves states (Texas, Pennsylvania, Wyoming, Oklahoma, and Colorado) in 2013. Pennsylvania had the largest increase (13.5 Tcf), the result of extensions to fields in the Marcellus shale play. The reserves additions in Texas and Oklahoma also were mostly from extensions in shale natural gas plays, but, in Wyoming and Colorado, positive net revisions to large conventional gas fields (associated with increased prices) added more gas reserves than extensions.
While U.S. oil reserves and production increased in 2013, imports of crude oil declined by nearly 10%. Similarly, U.S. natural gas proved reserves and production increased in 2013, and natural gas imports declined by 8%.
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.
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